Public development banks will be critical to global efforts to ‘build back better’. They should complement their climate investments with nature-based goals.
Last week’s Finance in Common Summit marked the first time that leaders of the world’s 450 public development banks (PDBs) had come together to discuss how to reorient investments toward sustainable development. Given the current global economic uncertainty and compounding environmental threats, the gathering came at a critical moment. It was a welcome opportunity to consider how public financial institutions can help steer funding toward conservation and sustainable use of natural resources—thus opening up an asset class that supports both people and the planet.
The summit was also a chance to underscore the vital importance of a healthy environment as a basis to fulfil the United Nations Sustainable Development Goals (SDGs), the Paris climate agreement and a new, ambitious framework under the UN Convention on Biological Diversity. More immediately, PDBs will be critical to global efforts to build back better from the Covid-19 pandemic and its economic fallout.
A recent report by the Finance for Biodiversity initiative underlined the urgent need to address the shortcomings of G20 governments’ Covid-19 economic stimulus packages and concluded that the current recovery path risks was reinforcing negative environmental trends. But the report also highlighted the opportunity to act decisively to prevent irreversible damage to nature that will long outlast the pandemic.
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To change course, we need to put nature at the heart of economic planning, strategies and decision-making. The ecosystem services provided by nature are essential to meeting 80 per cent of the SDG targets, while nature-based solutions represent 30 per cent of the path to achieving the Paris agreement goal of limiting global warming to below two degrees Celsius relative to pre-industrial levels. Conserving nature is also essential to prevent pandemics from recurring.
PDBs thus have a great opportunity to complement their climate investments by making explicit nature-based goals and targets a fundamental part of their efforts to support sustainable development. After all, unlike private banks, many PDBs have just one shareholder: governments.
At the same time, PDBs must avoid financing the problem as well as the solution. According to the Organisation for Economic Co-operation and Development, today’s biodiversity-positive investments globally amount to only a fraction of the spending on activities with high negative effects. We cannot overstate the potential impact of public financial institutions ending their support for fossil-fuel projects and for schemes that lead to deforestation or natural destruction. A long-overdue investment shift in support of the transition to a nature-positive economy and nature-based solutions to climate change would shape the development of industries, energy, transport, services and consumption for decades to come.
Although estimates of the financing needed to protect biodiversity vary depending on the assumptions, methodologies and scenarios used, ranging from lower to higher three-digit billion figures, they all point to a significant and persistent gap in this decade. Against this backdrop, sustainable investing means recognising opportunities to invest in nature and committing to closing this gap.
Such an investment emphasis could pay large dividends. Recent studies have found that protecting more nature would yield benefits that exceed costs by at least five to one and would support 30 million jobs in ecotourism and sustainable fishing. And with over half of world gross domestic product dependent on nature, investing in green projects is essential for global economic growth. A transition to a nature-positive economy could generate up to $10.1 trillion in annual business value and create 395 million jobs by 2030.
Acting now to support nature conservation, restoration and sustainable use is a winning proposition and governments can set the stage for the investments needed to enable this shift. As providers of $2.3 trillion of annual financing—representing 10 per cent of total global investment—PDBs have a crucial role to play in supporting public policies and mobilising both public and private resources at scale to put the world on a sustainable path.
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The Finance in Common Summit was an important step in the run-up to next year’s COP26 climate conference in Glasgow, Scotland, and the COP15 biodiversity meeting in Kunming, China. We were very happy to see PDBs commit in their common summit declaration last week to support climate action, the SDGs and protection of biodiversity. That’s why the UN Convention on Biological Diversity / COP15 decided to support the event. We will be keenly watching the PDBs’ implementation of these commitments, and the evolution of their approaches to investment and risk management.
We look forward over the coming months to working with both public and private funding institutions toward common goals and the adoption of an ambitious post-2020 global biodiversity framework. By charting a path toward a more sustainable economic future, the world can realise the Convention on Biological Diversity’s 2050 vision of ‘living in harmony with nature’.
Republication forbidden—copyright Project Syndicate 2020: ‘How public development banks can help nature’