The pursuit of short-term monetary gain has contributed significantly to the climate and biodiversity crises that we’re experiencing today. But as we cast around for solutions, it’s increasingly clear that finance can – and should – be leveraged for a more sustainable future.
At GLF–Luxembourg Finance for Nature: the 6th GLF Investment Case Symposium, held on 7 March 2023 in Luxembourg and online, attendees were asked to consider the role that money might play in the fight for nature – and how to make that happen.
“Climate change and biodiversity loss pose an existential threat to humanity,” said Vivienne Yeda, the director general of the East African Development Bank, in the symposium’s opening plenary. “We must attend to this looming catastrophe with extreme urgency and resolve. Greenwashing, ‘green wishing’, and other ‘fig leaves’ will not solve the problem.”
This set a theme that wove throughout the day: that the time for paying lip service to environmentalism is over, and being ‘seen to be green’ is not enough. Multiple speakers emphasized that now is the time to find real solutions to the issues we’re facing: something that’s only going to happen if every sector – including finance – makes genuine change.
While this year’s Investment Case focused on finance for nature, the need for greater inclusivity echoed through many of the talks. “Let’s start by listening to the needs and challenges of the most vulnerable,” said Joëlle Welfring, Luxembourg’s minister for the environment, climate, and sustainable development, at the start of the day. “Let’s work on the barriers to mobilizing sustainable private sector financing. Let’s make sure we don’t neglect gender equality, women’s empowerment, youth participation, and respect for Indigenous Peoples and human rights in our approaches.”
This came alongside calls to close the gap between those who have financing and those who actually need it. For example, said Aldo Soto, the managing director and co-founder of Amazonia Impact Ventures, “Indigenous Peoples receive less than 1 percent of climate finance, even though many studies have demonstrated that the most effective way to protect biodiversity is by securing Indigenous lands.”
Since the last GLF Investment Case, held in November 2021 alongside that year’s UN Climate Change Conference (COP26), global interest in nature-based solutions (NbS) – actions that sustainably manage, restore and protect natural features and processes while leveraging them to tackle socio-environmental challenges such as climate change and biodiversity loss – has grown considerably. According to the latest United Nations Environment Programme (UNEP) State of Finance for Nature report, nature-based solutions currently attract USD 154 billion per year – less than half of what’s needed by 2025, and only a third of that required by 2030 if we’re to meet global climate and biodiversity targets.
What’s more, public funds make up 83 percent of this financing, and only 17 percent comes from private accounts. This is simply not enough: as Yuriko Backes, Luxembourg’s minister of finance, said, “what is also clear is that transitioning to net zero [cutting greenhouse gas emissions to as close to zero as possible] and achieving our SDGs [Sustainable Development Goals] will not be possible through public investment alone.”
The question of how public and private finance might best work together for nature yielded various answers and approaches. Many speakers, such as Maria Elena Acevedo, a representative of the Central Bank of Paraguay, promoted positive reinforcement and shared principles over regulation and legislation. Others outlined traditional blended finance approaches, whereby public sector funding is used to catalyze raising money from the private sector.
The symposium also prompted questions about where private finance is directed, with a growing call to move beyond a focus on innovation and instead commit real money to scale up solutions that have been shown to work. This notion was amplified by Eliane Ubalijoro, the incoming CEO of the Centre for International Forestry Research and World Agroforestry (CIFOR-ICRAF) and director general of ICRAF, who highlighted the critical need to secure corporate finance to ensure scalability in nature-based investments.
But as Marie-Aude Even, a senior technical specialist at the International Fund for Agricultural Development (IFAD), put it, “you don’t just scale an approach: you scale a process – and an ecosystem, facilities, and capacities.” Encouraging and securing more private investment in nature, particularly for scaling NbS, requires enabling conditions and reduced risk. This includes elements such as clarity over voluntary carbon markets, the possibility of dedicated asset classes for NbS, and an integrated approach to investing in restoration that accounts for all last-mile risk factors.
Impact also remains difficult to discern in many investment arenas. As Lennart Duschinger, a sustainable finance advisor at the Luxembourg Ministry of Finance, explained, a lack of reliable sustainability data makes it difficult for investors to assess the sustainability performance of assets, hinders the development of green finance products, and limits regulators’ ability to steer the financial sector towards sustainability.
“Most impacts are invisible because we don’t measure and report on them,” he said. “This results in a disconnect between the financial sector and real-world impacts on the economy and society. Only what gets measured gets managed.”
Other speakers expressed uncertainty about whether nature should be on the spreadsheet at all. “Many Indigenous leaders, many communities, will not wish to monetize nature,” said Galina Angarova, the executive director of Indigenous nonprofit Cultural Survival. Instead, she said, we need to shift from “extractive practices and mindsets to regenerative [ones]. As Albert Einstein once said, we cannot solve problems with the same level of thinking that we used to create these problems, by continually putting financial value on our natural world.”
Though presenters were not unanimous in their appraisal of particular approaches to shifting the dial on money and nature, the event clearly highlighted our global community’s current position at a sustainable finance ‘tipping point’ that requires substantial shifts from business-as-usual.
“It’s time for action,” said Ubalijoro during her closing statement. “It’s time for system change, and it’s time to push investment into innovative solutions developed for countries that need it – and by those impacted by these crises.”