Nature-based solutions receive only 37% of the financing needed to reach global climate goals

*This article was originally published on November 20th, 2023, and updated with new data on February 13th, 2024, following the release of the UNEP State of Finance for Nature 2023 report. The update reflects a change in the percentage of public finance allocated to Nature-based Solutions, increasing from 31% to 37%.

We need nature-based solutions (NbS) to provide up to a third of the mitigation required by 2030 in order to keep the goals of the Paris Agreement in reach. However, in 2022 they received roughly $200 billion a year, – up from $154 billion in 2021. While this represents an increase of 11%, it is still only a third (37%) of what’s needed by 2030 to achieve global climate and biodiversity goals.

But how do we get to these numbers, and what exactly do they mean?

When Nature4Climate (N4C) launched the ‘Forgotten Solution’ campaign in 2017, our message was clear. Nature-based climate solutions can provide 30% of the climate solution by 2030, but they receive around 3% of public climate finance.

As time marched on, subsequent scientific research has reinforced the mitigation potential of nature-based solutions. On the finance side, things have changed, both because of increasing awareness and support for NbS, but also as a result of more and better data becoming available.

BETTER ANALYSIS

Things have come a long way since 2017. The original 3% figure (3.7%) was based on CPI’s annual Landscape of Climate Finance report, and specifically its tracking of public finance related to the AFOLU sector.

Since then, more detailed analysis has become available. In short, there are a number of reports from the past year that speak to this issue. The first is UNEP’s State of Finance for Nature Report, which is in its third year with the latest issue released in December 2023.

The second is CPI’s Landscape of Climate Finance for Agriculture, Forestry, Other Land Uses, and Fisheries (CPI AFOLU 2022), which was released in November 2022 with “preliminary findings”. This report has been followed by a more in depth report – Landscape of Climate Finance for Agrifood Systems – which expands the scope to include the downstream agro-industry (think food waste and low carbon diets). CPI’s Global Landscape of Climate Finance Report 2023 also includes new date for the AFOLU Sector (CPI 2023). [1]

So a jump from 3% to 37% is good news, right? Well, not necessarily. While it’s certainly clear that investment in nature-related projects is increasing, there’s more to these numbers than first meets the eye. For those wanting to learn more about these figures, and the data and assumptions behind them, read on…

CRUNCHING THE NUMBERS

All these reports emphasize that nature is significantly underfunded and that investment must significantly increase to meet global climate and biodiversity goals. This is particularly startling when you consider that the world is spending at least $1.7 trillion of public money a year, equivalent to roughly 2% of global GDP, on subsidies that are driving the destruction of ecosystems and species extinction. And, according to UNEP’s latest report, annual finance flows from public and private sources that have a direct negative impact on nature are estimated at almost $7 trillion per year. This is more than 35 times the amount of finance flowing into nature-positive investments; reducing these flows represents “the single most impactful action to reduce and halt nature loss.” [2]

However, beyond high-level agreement on the fact that nature-based solutions are significantly underfunded, the reports are actually quite different in their scope and findings.

Key findings of UNEP 2023 Report:

• The total annual finance flows to nature-based solutions in 2022 were roughly US$200 billion, just over a third, or 37%, of the $582 billion required by 2030. 
• NbS finance has increased by 11 per cent since the 2022 report 
• Governments continue to lead, providing 82 per cent (US$165 billion) of total NbS finance flows. Private finance for nature-based solutions remains modest at US$35 billion (18 percent of total NbS finance flows). Over half is channelled through biodiversity offsets and sustainable supply chains.

Key findings of CPI AFOLU 2022 & CPI 2023 Reports [3]:

CPI AFOLU 2022

• Between 2013 and 2020, climate finance to agriculture, forestry, other land uses, and fisheries (AFOLU) followed a mostly positive trend. However, it recorded a 20% drop between the period 2017/18 and 2019/20, with the latter annual average reaching US$ 16.3 billion. This represents only 2.5% of total climate finance tracked, indicating that AFOLU sectors are underfunded in comparison to other sectors.
• AFOLU sectors require a nearly 26-fold increase in annual funding, i.e., USD 423 billion annually by 2030 (compared with the annual average of USD 16.3 billion in 2019/20) in order to shift to a low-carbon and climate resilient trajectory.

CPI 2023

• AFOLU is estimated to have the largest mitigation potential, at an average of 14.5 GtCO2e by 2030 (IPCC, 2022a), yet the sector received minimal finance in 2021/2022 (USD 7 billion in mitigation and a further USD 29 billion for dual benefits).
• AFOLU received only 0.6% of mitigation finance in 2021/2022
• AFOLU received 3% of mitigation finance and dual benefit finance, combined, in 2021/2022
• Climate finance (mitigation, dual benefit and adaptation) to AFOLU rebounded in 2021/22 to $43 billion, representing 3.3% of overall climate finance.

WHY THE DIFFERENCE?

At first glance, there appears to be a big discrepancy between these numbers. So what’s going on? First, the scope between the reports is different. Tracking finance for “nature-based solutions” writ large, versus finance related to the AFOLU sector specifically means looking at different data. UNEP doesn’t limit its scope to climate finance, but tracks finance for any nature-based solution that relates to the climate crisis, land degradation and biodiversity loss. CPI tracks mitigation and adaptation finance specifically.[3] Yes, there are overlaps; but the latter is by definition looking through a narrower window.

WHY HAS N4C CHOSEN THE NUMBER IT HAS?

Both reports make incredibly valuable contributions to our understanding of nature-positive finance flows. We have chosen UNEP’s number because it most closely tracks finance flows covering the pathways outlined in our groundbreaking naturebase platform. However, we acknowledge this isn’t perfect, as UNEP’s report has a broader scope (nature-based solutions) than our work, which focuses on natural climate solutions (NCS). It’s a compromise, and there is need for more research that specifically tracks NCS finance.

However, we believe UNEP’s number, along with other data such as from Global Canopy’s Deforestation Action Tracker,[4] gives a strong indication of just how imbalanced finance is at the moment and why we need to massively accelerate efforts to shift flows away from activities that cause harm to nature toward solutions that call on nature’s ability to provide a stable climate, a home to critical biodiversity and socio, cultural and economic benefits to millions of people, including Indigenous communities, around the world.

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[1] The 2021 Financing Nature: Closing the Biodiversity Funding Gap by the Paulson Institute, The Nature Conservancy and the Cornell Atkinson Center for Sustainability is also still quoted often. This report determines that, in 2019, the total global annual flow of funds toward biodiversity protection amounted to approximately US$ 124–143 billion per year against an estimated annual need of US$ 722–967 billion to halt the decline in global biodiversity between now and 2030. Taken together, these figures reveal a Biodiversity Financing Gap of US$ 598–824 billion per year. The gap includes financial flows that need to be reduced during this period, which is why the number is higher the UNEP’s.

[2] State of Finance for Nature 2023

[3] CPI’s working definition of climate finance is aligned with the recommended operational definition of the UNFCCC Standing Committee on Finance – methodology document found here.

[4] Funded by N4C, Global Canopy’s Deforestation Action Tracker monitors financial institutions with significant climate commitments