Asith costa, via Wikimedia Commons
Putting a price on our natural world may seem impossible. But nature underpins economic prosperity and livelihoods all over the globe: it buffers us from storms, regulates the rainfall that waters our crops, increases our food yields and helps curb our carbon emissions. Estimates put the value of such ecosystem services at $150 trillion per year, or 1.5 times the global GDP, yet it’s dramatically undervalued by governments, investors and businesses. This irreplaceable economic resource is in trouble. Biodiversity losses are costing the world an estimated 10% of its economic output every year.
Despite the value that nature brings to society, it is often perceived to be worth more destroyed than it is standing. Take the DRC, home to the world’s second largest rainforest, and one of the poorest countries in the world. The amount of carbon the DRCs rainforest stores is double the world’s current emissions. Yet due to a lack of support to keep the forest standing, the government has been threatening to develop recently-identified oil and gas fields in the tropical forest in exchange for quick money. These fields are valued around $650 billion—nearly 60 times the country’s annual budget.
Over the next year, nature will be in the spotlight at key international moments such as G20 and the UN Climate Summits, as nations grapple with how to put a price tag on the natural world that could help us save it. In 2022, world leaders signed a historic deal for nature that committed to dedicating hundreds of billions of dollars for nature.
‘”Our climate targets hang in the balance, and how we approach nature could be the thing that tips them over the edge,” said Dr. Vera Songwe, the chair and founder of the Liquidity and Sustainability Facility and a nonresident senior fellow at the Brookings Institute. “We’re currently losing the battle on restoring and conserving ecosystems. The $200 billion for nature by 2030 that leaders signed up to in 2022 could be the thing that turns this around.”
At the UN Biodiversity Summit, or COP16, in Colombia, which starts October 21, countries will start to hammer out the details of this agreement. Here’s a look at some of the key financial issues on the table.
What’s been committed?
While the world allocates some money toward protecting nature, much more financing is needed to truly protect our natural resources. The Paulson Institute calculated the nature financing gap—the difference between what we currently spend and the number needed to truly strengthen and protect the world’s ecosystems—to be around $700billion per year.
It may seem hard to imagine raising that amount at a time when governments are struggling with debt and growing conflicts and crises. But much of this amount can be reached by shifting money already in the system away from activities that damage nature. The deal for nature signed in 2022 committed to moving $500 billion in subsidies and raising $200billion in new money by 2030. Just $30 billion of this is supposed to come from new government spending.
A new fund for tropical forests
At the UN Climate Summit in 2023, Brazil introduced the idea of a new fund for tropical forests that could see countries rewarded for reducing deforestation rates, or keeping them below certain levels. Since then, G20 Environment Ministers have pledged support for the idea, and Brazil is set to officially launch the fund at COP30 next year. The aim is to raise $125 billion dollars through the fund, which could make a significant dent in the finance gap. However, bringing in investment will require strong governance that can ensure the risks for investors are low, and that the money is accessible and flowing to Indigenous people and local communities.
Some of the concerns raised by experts are that there is no obvious incentive or reward for investors to input into the fund. Brazil wants to push for resource-intensive sectors, such as oil and gas to pay in, but campaigners are concerned about greenwashing and the fund becoming another type of offsetting scheme.
President Lula of Brazil is one of the only global leaders set to do a speech at COP16 this month, which could hint at progress being made on the fund ahead of the Climate Summit COP30 being held in the Brazilian Amazon region of Belém next year.
Tackling debt and nature together
A recent study found that nearly 70 countries at risk of sovereign debt distress also hold 22% of priority biodiversity areas. A staggering 82% of those areas, the study found, are unprotected. Debt swaps for nature offer a way for countries to restructure or cancel portions of debt in exchange for biodiversity protection. They’ve grown in popularity in recent years, with both Gabon and Ecuador striking record breaking deals of $500 million and $650 million respectively.
But critics of swaps suggest that they do little to address the larger burden that these countries face.
“Biodiversity is really cheap. This means a little bit of debt swapped goes a really long way to fund new natural protected areas, but it doesn’t go very far on the debt,” Dr Rebecca Ray from Boston University’s Global Development Policy Centre told Carbon Brief earlier this year. “And so it’s not the most efficient way to discharge debt.”
There is no obvious diplomatic moment for discussing the role of debt swaps. But with the IMF and World Bank Annual Meeting falling at the same time as the Biodiversity Summit, and tension growing around the need for financial system reform, it’s likely debt swaps will take the centre stage at some point in Colombia—especially since the country is in talks with Germany over a swap that could help the country raise $40 billion for its energy transition.
The bioeconomy
The phrase “bioeconomy” refers to the use of natural resources for economic growth, which could be anything from monetising the genetic data that underpins vaccines, payments for ecosystem services, or creating fuel from biological waste. The idea of a bioeconomy offers a way to think about creating growth opportunities out of nature’s sustainable use or protection.
Take genetic data. Most of the medicines we rely upon and cosmetics we use come from the genetic information of plants. Each medicine discovered in tropical forests is worth $194 million to a pharmaceutical company—but these companies are under no obligation to pay for that data.
In order to scale the bioeconomy, countries at the table in Colombia agree on a better set of principles to underpin what a good bioeconomy initiative might look like. This can help to rule out things like bioenergy from deforestation. At this year’s UN Biodiversity Summit COP16, negotiators will turn to deciding tough details such as who should pay for genetic data, how much they should pay, and how we mandate it. And ahead of the G20 this year in Rio, a set of bioeconomy principles have been outlined and are due to be adopted at the meeting in November. Nature advocates hope that these principles will kick start discussions around how richer countries can invest in the bioeconomy.
The role of business
Despite many businesses making commitments to protect nature, some $5 trillion dollars worth of nature-related risk is still not being recognised when investors are making decisions about which companies to invest in. Experts say that a crucial first step in fixing this is mandating transparency and reporting from companies and investors on where money is flowing, and how damaging to nature that finance is. As part of the deal for nature, all companies should be disclosing their impacts on nature by 2030 and looking to shift money into more nature-positive businesses.
‘We don’t have the time to see a couple of millions deployed here and there,” Songwe said. “We need countries focused on that big target at COP16 and delivering it quickly. Speed is of the essence.”
