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Assessing finance for nature-based solutions to climate change

Explore this assessment of funding for nature-based solutions aimed at developing countries, using data from the Organisation for Economic Co-operation and Development, and learn about the extent to which this funding is being used effectively.
Multiple Authors
Mangroves next to some water
Photo:Steven Lutz, GRID-Arendal / Flickr

Introduction

The concept of nature-based solutions (NbS) is used frequently to describe actions that are designed to “protect, sustainably manage, and restore natural or modified ecosystems, that address societal challenges effectively and adaptively, simultaneously providing human wellbeing and biodiversity benefits” (IUCN, 2016).

Yet, many countries, particularly those across the Global South – which hold much of the world’s biodiversity hotspots – are constrained by limited financial resources. Therefore, the appeal of NbS is that it offers an approach that maximizes co-benefits and can provide “cheaper solutions than standard (non-natural) solutions over the longer term, owing to the potential for responding to damages and the ensuing avoided costs” (Mulder et al., 2021).

In this paper, the authors explore the extent to which international development finance supports nature-based solutions. They estimate how much of this finance was earmarked for “NbS-like” activities from 2016 to 2020. It is methodologically challenging to estimate finance for NbS, so compiling estimates using different approaches means that decision makers can understand the variation rather than relying on single sets of figures.

In addition to overall amounts, the authors analyse: (1) how these commitments have trended over time; (2) what the primary sources of funding are; and (3) what types of financial instruments are used. They show how this finance has been distributed between world regions and how much funding has been targeted to small island developing states (SIDS) and least developed countries (LDCs).

ThisweADAPT article is an abridged version of the original text, which can be downloaded from the right-hand column. Please access the original text for more detail, research purposes, full references, or to quote text. Other briefs in the SEI series introduce NbS; explore principles for just and equitable NbS; and address how they can be implemented at scale.

Methodology

The analysis is based on data of international development assistance, publicly available and downloaded through OECD DAC’s Creditor Reporting System (CRS) on 21 June 2022. The CRS includes all funding to developing countries from OECD and some non-OECD bilateral sources, multilateral funders, international funds and multilateral development banks (MDBs), and private philanthropic organizations.

Because there is an absence of clearly tagged data about NbS support, the study includes financial commitments that principally targeted climate change objectives (mitigation and/or adaptation) and, at the same time, targeted biodiversity objectives (either principally or significantly).

Given that the definition of NbS includes that it targets the needs of biodiversity/natural ecosystems, the authors argue that to be considered as NbS, projects must explicitly target biodiversity. This in an important methodological difference from some previous studies (e.g. Mulder et al., 2021) which have assumed that using climate finance in sectors like agriculture or forestry is synonymous with NbS, even though much of the critical literature on the subject highlights how projects in these sectors can undermine biodiversity outcomes (e.g. Seddon et al., 2020).

Estimating NbS finance is also methodologically challenging, given the information included in the data available. The analysis is unable to provide a precise estimate of total finance amounts for NbS for various reasons.

Key Findings

The key findings of the study our outlined below; please refer to full brief to explore them in more detail.

  • The study’s estimates suggest that, for developing countries globally over the five-year period from 2016 to 2020, a total of US$ 14.66 billion of commitments that targeted climate change were also targeted at biodiversity objectives (which they call finance for “NbS-like” activities). Note that this excludes most funding from multilateral development banks, a significant gap in these figures.
Total climate finance commitments and total NbS-like finance commitments, 2016–2020, inclusive (see Fig. 1, p. 10)
  • Since 2017, there has been a declining trend in climate finance targeted towards biodiversity objectives, both in total amounts committed and as a share of total climate finance (which has also declined). This should worry those interested in reversing the degradation of natural ecosystems and loss of biodiversity globally.
Percentage of climate finance that uses NbS-like approaches, 2016–2020 (see Fig. 3, p. 11)
  • France, Norway, and the US appear to be the largest bilateral funders (in total commitments) of NbS for climate change in developing countries globally. Among multilateral organizations, the EU has been a major funder .
Main bilateral sources of finance for NbS and regional breakdown of recipients, 2016–2020 (see Fig. 4a, p. 12)
  • Experience with NbS-like finance varies among the countries which are most vulnerable to climate change. Many small island developing states (SIDS) and least developed countries (LDCs) have received little or no climate funding that supports NbS-like approaches, even though these countries are financially constrained domestically, and many have significant natural ecosystems to manage. For example, the Marshall Islands and Tuvalu are custodians of vast marine territories important for global biodiversity and fisheries, so NbS approaches would seem essential there. Yet the lack of financial support to these countries suggests that NbS approaches are not being prioritized in climate planning and/or project development.
  • Based on a scoping review of a small subset of projects from SIDS and LDCs, it is at best unclear how benefits for both people and biodiversity are achieved. If this reflects a wider pattern, meaning project activities are not explicitly designed to reflect ecosystem challenges and co-benefits are just assumed, then this study’s present estimates of NbS funding are likely to be masking a more significant finance gap.

Conclusions

There is an urgent need to know better how nature-based solutions are being financed and how the concept is being translated into practice.

This study’s small, qualitative review of project documents reinforces the conclusions of an earlier study which looked at how extensively international climate adaptation finance was targeting the needs of ecosystems and biodiversity in the face of climate risks: that study concluded that only a tiny fraction of adaptation finance has been designed to include some aspect of natural ecosystems or biodiversity and, worryingly, that most of these activities are designed to manage climate risks for people rather than for biodiversity itself (Atteridge & Tenggren, 2019).

There is also a need for better data on how financial support is targeted to properly assess the use of the NbS concept in practice. This includes a more transparent explanation by funders about how projects tagged as targeting biodiversity deliver benefits for our natural ecosystems or species and what outcomes might be evaluated as a measure of success.

Suggested Citation:

Atteridge, A., Bhatpuria, D., Macura, B., Barquet, K. and Green, J. (2022).Assessing Finance for Nature-based Solutions to Climate Change. SEI working paper. Stockholm Environment Institute, Stockholm. http://doi.org/10.51414/sei2022.052

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