Financing nature and biodiversity – Lanka Business Online

2021, a pivotal year for people and the planet.

Greece, Turkey and California were on fire in forest fires caused by the heatwave, Canada was caught in a dome of heat and a year of rain fell in Germany, Belgium, China and Sudan within days, devastating communities with flooding in its wake. The message is clear, we are in a planetary emergency.

And 2021 is crucial because it is also the year of important global conferences on climate change and biodiversity. Widely seen as the last chance for world leaders to engage in the climate action and biodiversity conservation we desperately need before we reach the 2030 deadline, the decisions made at these conferences and the actions who will follow will definitively decide the future of our planet.

A global movement for radical climate action if needed

At the recently concluded high-level event at the United Nations General Assembly which outlined transformative actions and funding to reverse biodiversity loss by 2030, stressed that the protection, conservation, restoration of biodiversity and sustainable use can be positive for nature and offer multiple co-benefits for the environment, climate and sustainable development as a whole. The current COP15 of the Convention on Biological Diversity will see the adoption of the post-2020 global biodiversity framework – a strategic vision and a global roadmap for the conservation, protection, restoration and sustainable management of biodiversity and ecosystems for the next decade – is a promising sign of a global movement pushing for radical action if needed.

The response to our planetary emergency and our economic growth lies largely in nature and biodiversity, in an immediate, sustained and transformative change in our societies and our lifestyles; but above all, in our political, economic and financial infrastructures. The choices made at this point as we recover from the COVID-19 economic downturn and the critical climate outcomes will determine development and fiscal policies for the next decade and the future of our planet. Yet, even today, investments in nature and biodiversity are rare.

The world hasn’t learned its lessons yet

The 2021 iteration of the United Nations Development Program’s (BIOFIN) Biodiversity Funding Initiative’s Little Book of Investing in Nature reports that current annual funding for biodiversity conservation still produces a deficit of financing of biodiversity from 598 to 824 billion USD per year by 2030. Although COVID-19 has markedly reinforced the need to finance actions that improve the resilience of ecosystems and fill gaps in areas such as food security, climate action, water security, human health and increased resilience to disaster risk, it is evident that the world has not yet learned its lessons.

According to a study by the World Economic Forum, half of the gross world product depends heavily or moderately on nature. Agriculture, construction, food and drink are the main sectors dependent on nature and generate 8 trillion dollars in gross added value. Yet there appears to be a lack of understanding that our biodiversity underpins our global economic systems and our climate solutions.

The 2021 United Nations Environment Program (UNEP) State of Finances for Nature report found that investments in nature-based solutions will need to triple by 2030 and quadruple by 2050 if we want to try to solve the planetary problem. emergency. A shift towards green development is the only sustainable growth path for our societies and economies, and green finance is at its heart.

Investing and financing nature is the way to go

So what is green finance? A relatively new concept in Sri Lanka, green finance refers to any structured finance activity geared towards an environmental result. UNEP defines it as an increasing level of financial flows (including banking, microcredit, insurance and investment) from the public, private and non-profit sectors to better manage environmental and social risks, seize opportunities that bring both rate of return and environmental benefits, and provide greater accountability. For our societies and economies to thrive, we also need the natural systems we depend on to thrive. And investing and financing nature is the way to go.

This is also true in Sri Lanka. As a country heavily dependent on nature and biodiversity, both socially and economically, the cost of de-prioritizing investments in this country is high. Although Sri Lanka has always pursued low-carbon development and balanced the achievement of high levels of human development with the lowest per capita emission rates, recent policy inconsistencies and structural problems have limited the sustainability of the country. According to the financial needs assessment conducted under the BIOFIN program, Sri Lanka will need a total of LKR 31 billion (USD 250 million) for the period 2018-2024 to meet the country’s critical biodiversity targets. .

Biodiversity Financing Initiative (BIOFIN)

Currently, the BIOFIN program, a collaborative global partnership managed by UNDP, is working to close this funding gap. The program follows four approaches; generate new income; increase the efficiency of existing resources; realign existing resources; and avoid future expenses.

Through this program, a Biodiversity Financing Plan was formulated, made up of 16 financial solutions that fall within each of these four strategic approaches. Sri Lanka is currently experimenting with three of these solutions.

  1. Payment for ecosystem services that generate new income, where mini hydropower plants invest part of their profits in the conservation of their watershed.
  2. A Sustainable Tourism Certification Program, which is a future cost avoidance strategy in collaboration with key government partners like the Sri Lanka Tourism Development Authority (SLTDA) and a host of private sector partners, including hotels, to have a positive impact on the environment through tourism operations or reduce their negative effects. impacts significantly.
  3. In partnership with the Central Bank of Sri Lanka (CBSL), a finance program that aims to integrate sustainable finance initiatives and promote sustainable investments in the financial landscape of the island. This helps realign existing resources and encourage sustainable and green activities at all levels of society.

A push towards green development

Going deeper into the third solution, for example, if a business owner seeks a loan to finance their operations, the bank could offer lower interest rates if they change their business plan to have no impact on their business. environment or if it works to preserve the environment.

Currently, the program, together with CBSL, has developed a roadmap for sustainable financing in Sri Lanka, established a knowledge sharing platform through the Sustainable Banking Initiative which advances the principles and implementation sustainable banking, compiled case studies and developed an online course. .

At least six banks in the country have voluntarily launched sustainable financing activities so far, and coupled with this momentum, the BIOFIN program hopes to engage more small banks in Sri Lanka to develop similar financing products. Additionally, as a national effort, the program is developing the sustainable finance taxonomy with CBSL with the aim of contributing to the country’s wider political push towards green development.

Yet Sri Lanka needs more. As a country highly vulnerable to the impacts of climate change, now subject to severe budget restrictions due to our two-year fight against COVID-19, funding for Sri Lanka’s environment and biodiversity is not close enough to meet the biodiversity targets. While there is no formal evidence, given the pace of climate change and its impacts, we can infer that our adaptation costs are also increasing disproportionately to our adaptation finances.

We have not yet fully understood the value of nature and biodiversity, and it is high time that we fight for better moving forward because our resilience lies in our biodiversity and our nature.

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