COP16.2: We need System Change for Just Biodiversity Finance

The UN Convention on Biological Diversity COP16 negotiations stalled in 2024 in Colombia, due to unresolved financial issues. It reconvenes at COP16.2 in Rome, Italy, with discussions centred on financial issues, particularly the creation of a new fund to ensure a fair distribution of available resources, especially to the countries most in need. These issues are urgent, as the current financial mechanisms for developing countries are deeply unjust. Funding is currently managed by the Global Environment Facility, which favors countries that offer large amounts of co-funding. As a result, many countries cannot access these funds. Additionally, the financial commitments made at COP15 fall far short of what is needed to address the biodiversity crisis—and worse, developed countries are failing to fulfil even those inadequate pledges.¹

However, these issues are only a small part of the deeper systemic financial problems fuelling biodiversity loss. They must be urgently addressed if the world is to have any hope of confronting the biodiversity crisis.

Financial flows and dependencies are at the root causes of biodiversity loss

Banks play a major role in biodiversity loss. Since 2015, they have provided over US$395 billion in credit to highly-extractive industries such as beef, palm oil, pulp and paper, rubber, soy and timber in regions vulnerable to deforestation.² These funds have further leveraged investments in these destructive sectors. Collectively, profit-driven industries like mining, oil and gas, forestry and industrial agriculture are estimated to drive up to 90% of global biodiversity loss.³

UNEP estimates annual investments in nature-destructive activities, including those contributing to climate change, total US$7 trillion, says Nele Marien, Forest and Biodiversity program coordinator at FOEI.⁴ This includes US$1.7 trillion in harmful subsidies provided by governments.⁵

Under the previous strategic plan for the Convention on Biological Diversity, countries committed to eliminating such subsidies by 2020,⁶ but have clearly failed to follow through.

Developing countries trapped in predatory debt and export cycles

For many developing countries, even if they wanted to address the key drivers of biodiversity loss, they lack the financial means to do so. High levels of debt leave them without resources to invest in biodiversity conservation.⁷ These nations are trapped in economic dependencies on exports that degrade biodiversity, relying on the dollars these nature-destroying activities generate. They face pressure from the International Monetary Fund and the World Bank to implement policies that incentivise destructive sectors while refraining from enforcing environmental regulations, despite international commitments to biodiversity protection. Examples include Argentina’s reliance on soy exports and the Democratic Republic of Congo’s dependence on mineral mining.

Profiting off biodiversity loss

Financial interests not only contribute significantly to biodiversity loss but are also increasingly finding ways to profit off this environmental crisis. The so-called “biodiversity funding gap” is expected to be filled by leveraging private finance. However, this finance is both insufficient – only US$ 5 billion raised so far – and comes with strings attached: companies “investing” in biodiversity are unlikely to be held accountable for the impacts of their activities on biodiversity, and their investments may even be based on biodiversity destruction.

The proposal of biodiversity offsets and credits to bridge this gap is particularly perverse. Any funds generated from offsetting stem from biodiversity destruction elsewhere. Indeed, an offset implies that one piece of a valuable ecosystem is destroyed, and then “compensated” through restoration or conservation elsewhere. Money poured into offsets cannot be called “investment in biodiversity”, as it stems from the need to compensate for destruction.  Furthermore, the offset is typically of lower quality than the original ecosystem⁸. An additional side effect of this false solution is that a lot of the available biodiversity finance flows into well-established institutions for offsetting schemes and the measuring of baselines. Neither of those contribute in any way to real biodiversity protection.

The financial sector further envisages profits from green bonds (which reached about US$1 trillion in investment in 2024⁹), for example. Many green bonds have  a high risk of greenwashing,¹⁰ and provide more benefit to the investor than to biodiversity itself.¹¹

The solutions

A fundamental system change is needed to safeguard biodiversity, starting with the reform of the financial system. Nele Marien explains:

The world requires robust regulations to stop the financial sector from supporting harmful activities, explains Nele Marien. This is part of a necessary multilateral regulation of economic sectors for biodiversity protection. At the same time, developing countries’ debt and economic dependencies must be addressed, enabling them to invest in biodiversity conservation. Harmful subsidies should be eliminated everywhere.

The limited funds available for biodiversity must be directed towards real, on-the-ground action. Indigenous Peoples and Local Communities (IPLCs) are the most effective at implementing biodiversity conservation, yet they receive the least financial support.¹² There are virtually no mechanisms to ensure these funds reach them directly. This results in economic pressures that often force them into detrimental agreements with corporations that threaten their territories, or into accepting offset funds that compensate for destruction elsewhere. Mechanisms must be established to directly allocate substantial portions of biodiversity funding to IPLCs. This is essential for enhancing their ability to protect biodiversity and is a fundamental act of justice.

Footnotes

1. Phoebe Weston, “The World needs 700 billion a year to restore nature but where is the money coming from“, The Guardian, 30/10/2024. ↩︎
2. Forest and Finance, Banking on biodiversity collapse report, 2024. ↩︎
3. Bruno Oberle et al., “Global Resources Outlook 2019: Natural Resources for the Future We Want,” International Resource Panel, United Nations Environment Programme, 2019. ↩︎
4. United Nations Environment Programme, State of Finance for Nature: The Big Nature Turnaround – Repurposing $7 trillion to combat nature loss, Nairobi Kenya, 2023. ↩︎
5.  idem ↩︎
6. Aichi Target 3 of the Global Strategic Plan 2010-2020 of the CBD ↩︎
7. Dempsey, J., Bigger, P., Christiansen, J., Muchhala, B., Nelson, S., Schuldt, A., & DiSilvestro, A. Biodiversity targets will not be met without debt and tax justice. Nature Ecology & Evolution, 6(3), 237-239, 2022. ↩︎
8. While biodiversity credits could, in theory, be established without functioning as offsets, this is not the case in practice. ↩︎
9. What are green bonds and why is this market growing so fast?, World Economic Forum, November 2024.  ↩︎
10. Xianwang Shi et al., Green bonds: Green investments or greenwashing?, International Review of Financial Analysis, Volume 90, 2023, 102850. ↩︎
11. Mona A. ElBannan, Gunter Löffler, How effectively do green bonds help the environment?, Journal of Banking & Finance, Volume 158, 2024. ↩︎
12. Torbjørn Gjefsen, Indigenous people get less than 1% of climate funding? It’s actually worse (commentary), Mongabay, Nov 2021. ↩︎