As we begin the third year of this zoonotic pandemic, nature action and green finance has become more relevant. A nature positive economy can address the root causes of this health emergency, and unlock $10 trillion of business opportunities by transforming the three economic systems that are responsible for almost 80% of nature loss: food, infrastructure and energy.
Over half of global GDP is moderately or highly dependent on nature, as emphasized in a recent WEF report. Investing in nature is crucial for livelihoods, human well-being, and the economy.
Supporting nature-positive investments is important for the global climate target of net-zero emissions by 2050. To achieve this, we need to halve emissions by 2030, and the only way to hold the 1.5°C line is to simultaneously cut emissions, safeguard natural carbon sinks and transform agriculture from one of the largest sources of greenhouse gases to a vital store of carbon.
This is how we transform a crisis into an opportunity and set a clear goal for green growth. At its heart, the goal includes zero loss of nature from 2020 onwards, nature positive by 2030, and a full recovery of a resilient biosphere by 2050. The IDB Group has already positioned itself on the challenges ahead, with the intention to increase the share of resources channeled to green finance. At the same time, we await the approval of the post-2020 Global Biodiversity Framework, and the setting of new targets for biodiversity conservation later this year.
As we enter 2022, we have a look at some of the key areas of work to come on the nature and biodiversity agenda this year.
1. Supporting a sustainable development in the Amazon Basin & Tropical Forests
The Amazon is a critically important ecosystem as it provides around 40% of Latin America’s fresh water, regulates air quality, stores net carbon emissions, and regulates nutrient and hydrological cycles for the South American continent and even beyond.
In March 2021, the IDB developed the Amazon Initiative, a bank-wide program to support regenerative activities in the Amazon Basin. The Initiative builds on four pillars: bioeconomy, land use, forestry and sustainable livestock, human capital development, and sustainable cities.
Later that same year, the IDB launched the Amazon Bioeconomy Fund which includes $279 million from the Green Climate Fund in a $600 million program to ensure support for the Amazon Initiative, the largest ever for the GCF, to deploy in this vital biome. At COP26, the governments of Germany and the Netherlands also pledged $35 million to support the IDB’s Amazon Initiative with a strong focus on Indigenous Peoples and Local Communities empowerment.
In the first quarter of 2022, four new projects will be designed and approved by the IDB to promote the conservation and restoration of tropical forests in the region. With a total of $2,900,000 in French Funding and $850,000 in IDB funding, these projects will i) support biotrade by indigenous communities in the Bolivian Amazon, ii) scale the Habitat Bank Program in Colombia also to include voluntary markets, iii) support the conservation and restoration of the natural and cultural capital of Ciudad Blanca in Mosquitia forests of Honduras and iv) develop science, technology and innovation to protect the biodiversity of the Amazon Basin with Ministries of Science.
2. Accelerating biodiversity mainstreaming across the IDB and the region
Latin America and the Caribbean has been making progress in mainstreaming biodiversity into policies and public planning. In 2021, the IDB began supporting 15 member countries to integrate biodiversity into their country strategies.
The IDB has also supported countries in developing post-pandemic recovery strategies based on natural capital, as in the case of the Blue Economy COVID-19 Recovery Strategy of Costa Rica.
We are also working with the National Planning Department of Colombia to better integrate biodiversity national programming through direct technical assistance. We plan to continue to do more of this – mapping national strategies and economic, infrastructure, climate, and development plans to identify key areas where nature can be a driver of positive impact for a population’s well-being and livelihoods (or, basically, to see where one dollar spent can reap multiple impacts).
Moreover, the IDB is developing an action plan for mainstreaming Natural Capital and Biodiversity across our institution and to support our countries for approval in early 2022.
3. Developing innovative financing mechanisms and tools
Despite the efforts to reverse the destruction of forests and other habitats, we are witnessing the fastest decline in biodiversity ever recorded. If we want to turn this around, the world will need to increase global biodiversity conservation and restoration financing from US$120 billion per year to between US$722-967 billion per year over the next ten years.
Developing and implementing innovative mechanisms can help close the biodiversity finance gap. In September 2021, we announced the creation of a new natural capital asset class at the New York Stock Exchange with our partner the Intrinsic Exchange Group and worked with the Government of Costa Rica for their natural assets to be the first to be offered on this platform. This exciting initiative will allow countries to unlock the tremendous intrinsic value of nature and bring institutional investors into the biodiversity space.
The IDB has also developed the Integrated Economic-Environmental Modeling platform, which allows countries to value their natural capital and apply it to economic models to inform decision-making. It has been applied in many of our member countries, and since December, the entire dataset for 25 countries is open source, as well as full training materials so that clients can begin to mainstream the value of nature in their planning.
In Peru, we have approved the first loan to a special purpose vehicle for bio-business finance, with our partners the National Development Bank COFIDE and the Ministry of Environment. Our innovation laboratory, IDB Lab, created the blended finance risk capital fund Regenerate – in partnership with our Natural Capital Lab.
We will continue to publish and develop toolkits and studies, like our recent Nature-based solutions finance series, that can be used to create new solutions on the ground. And will continue with and expand our new work on supporting countries with debt for nature conversions, and conservation trust funds
We are leading and funding an MDB joint work to develop a taxonomy for biodiversity finance, which will facilitate tagging our portfolios. This study will provide valuable inputs for the design of the IDB Green Finance Target, where natural capital and biodiversity will be an important core component.
4. Boosting nature-based investments
Latin America and the Caribbean is a biodiversity powerhouse, hosting 40% of the world’s biodiversity, 30% of the freshwater, and almost 50% of the world’s tropical forests. Natural capital is critical in post-COVID-19 recovery for the region as it creates jobs, generates income, leverages private-sector investment, and acts as vital climate mitigation and resilience infrastructure.
At COP26 the IDB announced a new ambitious target of 40 percent, roughly $24 billion, of green financing that includes commitments to biodiversity financing. As part of this work, at IDB we are developing innovative debt conversion products that can benefit nature, as a new generation of debt-for-nature finance.
The IDB also led a group of Multilateral Development Banks in developing the Joint Statement for Nature, People and Planet to mainstream nature across their policies and boost nature finance.
IDB can count on its Natural Capital Lab to lead and push forward biodiversity mainstreaming and support innovative finance projects across the Bank – note that this model is being replicated by ADB.
5. Integrating nature-based solutions into gray infrastructure investments
Nature-based Solutions (NBS) are key in mitigation and adaptation to climate change while also contributing to other priorities such as economic recovery, public health and clean water. In fact, NBS offer the potential to provide over one-third of climate mitigation needed by 2030.
A recent review by the IDB and WRI found that the IDB’s Infrastructure and Climate Change and Sustainable Development Sectors invested $813.23 million in green and green-gray projects between 2015 and 2020. These projects leveraged an additional $436.77 million in financing from partners, amounting to nearly $1.25 billion in total project costs.
The IDB is integrating NBS into gray infrastructure investments. For example:
- In the Bahamas, the IDB worked with the Ministry of Urban Works and Development to pair investments in road upgrades throughout the country with targeted mangrove restoration to enhance resilience to coastal flooding and erosion.
- In Honduras, a project to renovate an aging hydroelectric plant complemented investments in new hydroelectric equipment and forest restoration in the plant’s watershed to reduce the plant’s future operating costs.
- In Paraguay, the IDB worked with the city of Asunción to incorporate NBS in a neighborhood rehabilitation and affordable housing project to reduce flood risk of vulnerable communities near the flood-prone Paraguay River. The project includes financing for the restoration of lagoons and wetlands that provide a buffer zone between the neighborhood and the river, as well as green infrastructure within neighborhoods to mitigate stormwater flooding.
In 2022 we plan on increasing our support to the integration of NbS into operations across the IDB.
Nature is central in our response to climate change. The political momentum created by COP15, the forthcoming post-2020 Global Biodiversity Framework, the Task force on Nature Related Disclosure, and the numerous recent pledges of corporates signals future calls for even more action.
Nature preservation is intimately intertwined with climate change action, one of the IDB Group’s five critical pillars in its Vision 2025. Demand will increase from our member countries to support them in implementing their biodiversity national strategies, and the need for climate change and biodiversity goals to be addressed in a coordinated manner to ensure a better integration in NDCs and LTSs is urgent.
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