Making blended finance work for nature-based solutions
This paper provides an overview of various financial instruments available for climate action and nature conservation, focusing on the innovative approaches taken by the Green Climate Fund (GCF) and its partners to catalyze finance at scale. This paper discusses five categories of instruments to catalyze finance for nature-based solutions and how instruments can be combined for maximum impact, such as blended finance mechanisms. It also aims to share the experiences of GCF and its partners in designing examples of these and other blended finance mechanisms through three approaches: complementarity, sequencing and partnerships.
In the wake of the adoption of the 2022 Kunming-Montreal Global Biodiversity Framework, the financing gap to address global biodiversity loss has never been more glaring. By 2050, the total investment needs for nature will amount to an annual USD 536 billion—more than four times the current global annual flows of USD 133 billion. There is an urgent need to reorient and realign the way public finance is planned and disbursed and catalyze private finance at scale for nature.
Recent figures are compelling: with half of the world’s gross domestic product (GDP) dependent on nature and 75 per cent of global crops relying on animal pollination, the importance of filling the biodiversity finance gap cannot be overstated. There is global recognition that biodiversity loss is just as urgent as the climate crisis and that they are intimately linked. Ecosystem degradation is both a cause and a consequence of climate change and ecosystem protection and restoration is a powerful solution to advert catastrophic climate change.
Numerous innovations to de-risk and catalyze climate and nature investments have appeared in the past half century. As at March 2023, the OECD database on “Policy Instruments for the Environment” (PINE) contains information on over 3900 economic and market instruments implemented in more than 130 countries globally. Notably, it lists a total of 234 biodiversity-relevant taxes spanning 62 countries. Similarly, the IEA’s Policies and Measures Database provides access to information on 7260 public climate policies and measures, including information instruments; regulations; taxation; and payment and transfer instruments.
