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Evaluating the Financial Viability of Natural Climate Change Solutions

Evaluating the Financial Viability of Natural Climate Change Solutions

International development finance – including climate finance – is undoubtedly a key enabler of investments in nature-based solutions (NBS) in developing countries. Many developing countries rely highly on external financial assistance to supplement domestic government revenues to invest in sustainable socio-economic development, and environmental conservation and protection. This is especially true for those classified among the least developed countries (LDCs) and small island developing states (SIDS). External finance will likely remain essential for implementing NBS in LDCs and SIDS.

The authors acknowledge that it is difficult to accurately assess how much international development finance is being mobilized for NbS and that results should be treated as illustrative. Nevertheless, they argue it is important to compile data using different approaches so that decision-makers can understand the variation rather than relying on single sets of figures.

The assessment of the OECD data set found 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 we call finance for “NbS-like” activities). Note that this excludes most funding from multilateral development banks, a significant gap in these figures.
  • Since 2017, there has been a declining trend in climate finance targeted toward 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 the loss of biodiversity globally.
  • Experience with NbS-like finance varies among the countries which are most vulnerable to climate change. Many small islands 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.

The authors also carried out a scoping review of a small subset of projects from SIDS and LDCs and found that it is unclear how benefits for both people and biodiversity are achieved. The authors point out that If this reflects a wider pattern, meaning project activities are not explicitly designed to reflect ecosystem challenges and co-benefits are just assumed, then-current estimates of NbS funding are likely to be masking a more significant finance gap.

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