Written by Helen Avery (Green Finance Institute) and Jessica Smith (UNEP FI)

We have 86 months left. The decade that began with a commitment to keep a planetary temperature rise within 1.5°C this century and the recognition that this could only happen if we collectively make radical changes and sweeping investments before 2030, is slowly slipping away.

As global leaders from governments, business, finance, and NGOs gather in Egypt for COP27, it is under the cloud of recent estimates from the United Nations Environment Programme (UNEP) that – even with the worldwide climate pledges made at COP26 – we are heading towards a planetary temperature rise of between 2.4°C and 2.6°C by 2100.  

We have to increase our ambition. We have to turn pledges into on-the-ground investments.  And we have to be more strategic about immediate solutions. That means ensuring nature, and investment at scale into nature’s restoration and protection, are embedded in discussions happening in Sharm El-Sheikh. There is no way to keep the 1.5°C ambition alive without stopping and reversing deforestation, transforming our food and land use systems, and protecting ocean ecosystems. More than 30% of the climate mitigation that is needed to achieve the Paris Agreement can come from nature-based solutions.

But, if the world is to meet its climate change, biodiversity, and land degradation targets, it needs to close a $4.1 trillion financing gap for nature by 2050. There is no time to lose.

In October, the Green Finance Institute and UNEP came together with this mission in mind, partnering on a COP27 Special Series of the Financing Nature podcast. Over five episodes we have spoken with global experts and local delivery partners to hear what we need from governments at COP27 to close this gap, and to showcase the crucial role private sector investment can play.

As the series concludes and the Conference gets underway, our guests have left us with clear messages:

1. Nature must be part of climate talks

It’s now commonly stated that climate and nature are two sides of the same coin, yet we still hear: climate first, nature second. As José Pugas at JCP Asset Management shared, every nature investment is an investment for climate, and for developing economies in particular, the immediate focus is on nature for mitigation, adaptation and resilience, rather than fossil fuel reduction. In Brazil, for example, over 70% of GHG emissions are based on land use change and the agricultural sector.

At a global scale, deforestation accounts for 11% of GHG emissions; “It’s therefore impossible to be net zero without being deforestation zero”, said Pugas. Lest we forget the role of healthy oceans, Karen Sack at the Ocean Risk and Resilience Action Alliance (ORRAA) also reminded us that if it weren’t for our oceans absorbing heat and a third of CO2, the average mean temperature on land today would not be around 13°C, but rather a staggering 50°C.

It is not an either/or discussion where emissions reduction takes priority and nature restoration is seen as a second focus. They are both urgent and imperative.

2. There is a material economic risk of inaction that is not being fully recognised

Investment into specific projects and nature-based solutions will support the immediate need for nature restoration, but we must simultaneously look to shift the trillions of dollars in the real economy away from having a negative impact on nature and towards nature positive outcomes.

One lever that can support this shift is a greater recognition of the material economic risk of inaction. In pursuit of this, the Green Finance Institute hosts the Taskforce on Nature-Related Financial Disclosures Secretariat, supported by UNEP and UNDP. The framework in development by the TNFD will support companies in assessing nature-related risk through their impacts and dependencies said guests, but we do not have to wait to nudge companies in the right direction. Evidence of material economic risk exists now.

Sack highlighted, for example, that about two in every three publicly listed companies are exposed to – and in some degree dependent on – a healthy ocean. If business as usual continues, the value at risk in the blue economy over the next 15 years stands at some $8.4 trillion. Sagarika Chatterjee at the Global Financial Alliance for Net Zero (GFANZ) similarly highlighted material risk in the food sector, sharing that some of the most valuable food and agricultural companies could lose up to 26% of their value by 2030 if they do not change practices to account for climate change and biodiversity loss.

Guests called attention to the fact that companies making pledges are far more numerous than companies taking action – and that is putting us all in economic peril.  Central banks and Treasury Departments must take note.

3. There is a strong connection between economic growth, resilience, and nature

On the flip side to the previous point, connecting conservation, economic growth and resilience provides an opportunity that is crucial for us to remember. Guests expressed their concerns that previous ambition will be weakened at COP27 because of pressures on governments to address accelerating fuel costs and domestic cost of living crises. At COP26, nearly 200 countries agreed to upgrade their climate pledges by this year’s conference – yet only around two dozen have done so. It is therefore vital we understand that nature supports a thriving economy.

Kaddu Sebunya at the African Wildlife Foundation shared new models in Rwanda and Tanzania that have created win-win situations for local economies and conservation resulting in the expansion of a national park and mountain gorilla population and the development of schools, roads, hospitals, and housing. Yabanex Batista at the Global Coral Reef Fund shared the expanded opportunities for fishing communities from reef restoration in Mexico.

We were also reminded in this series how nature investments can reduce infrastructure costs. As an example, it’s about 50 times more cost effective over 15 years to protect a coral reef or a mangrove, than it is to build a seawall.

UNEP’s Susan Gardner shared that it is now time to look closely at our reliance on systems of national accounting, like GDP, that don’t include any measure of the impacts of activities on nature, and that don’t recognize the dependencies of our economies on nature, nor the economic costs of collapse of nature and ecosystem services.

4. We need greater risk-taking investment strategies from public sector capital

Across the episodes we heard that multi-lateral development banks (MDBs) and development finance institutions need to up their ambition and innovation in order to drive private capital investment into nature-based solutions. Ivo Mulder at UNEP called for MDBs to “get real”, pointing out that while they made big pledges at COP26, nature finance still represents a tiny percentage of their balance sheet. Andrew Deutz at The Nature Conservancy stressed the need for development banks to set portfolio targets for nature, in the same way that they have set targets for low carbon.

An increased use of guarantees and political risk insurance was also repeatedly highlighted by guests, with examples of how this de-risking has resulted in several successful deals to date including the Belize Blue Bonds. Deutz also put forward the practical need to revisit banks’ internal accounting rules so that guarantees are not considered the same as loans on a balance sheet.

5. Sovereign debt restructuring can be linked to climate and conservation

Several guests made the link between sovereign debt and nature investment. We are on the cusp of a sovereign debt crisis, and there is an opportunity to restructure that debt and link it to climate and conservation KPIs – again if the IMF signals direction, and MDBs provide greater de-risking, said Deutz. Rough estimates by the Nature Conservancy point to $2 trillion of debt that could be restructured with such outcomes embedded.

6. We need to support communities in building capacity on the ground

All guests highlighted the value of investment readiness programmes or accelerator programmes that help develop bankable or investable projects and solutions on the ground, including a need for aggregation models that can bring smaller projects or enterprises together to appeal to larger investors.

Ultimately it is communities on the ground and non-profits that will deliver nature restoration, said Yasmine Sagita at Royal Lestari Utama, and so funding for development and training must be provided.

David Cheboryot at E4 Impact Foundation echoed the importance of funding to support capacity building, and to help projects and enterprises find a route to market. Philanthropy or technical assistance grants from governments can play a much larger role here, helping to fund projects that can then catalyse private capital and become sustainable.

Eighty-six months is not long, but it is enough if we do not waste a moment of it. It is up to all of us to keep applying pressure to our governments, businesses and financial institutions, and to take practical steps to move investment at scale into change on the ground, so that we can keep the 1.5°C ambition alive and turn the tide on biodiversity loss for people and planet.  

COP27 offers us a collective opportunity to do so, and we hope you will join us in sharing these messages.

Discover the podcast series

The COP27 Financing Nature Series can be found on Apple, Spotify and Anchor FM.

• Episode 1: Sagarika Chatterjee, Finance Lead, Climate Action Champions to discuss the Glasgow Financial Alliance for Net Zero & José Pugas, head of responsible investments and engagement at JGP Asset Management in Brazil to discuss the work of the IFACC
• Episode 2: Andrew Deutz, Director of Global Policy, Institutions and Conservation Finance at The Nature Conservancy & Yasmine Sagita, Chief of People, Sustainability and Corporate Affairs at rubber company, PT Royal Lestari Utama (RLU) to discuss the Tropical Landscape Finance Facility
• Episode 3: Kaddu Sebunya, CEO, African Wildlife Foundation & David Cheboryot, Director of Entrepreneurship Centres – Africa – E4Impact Foundation
• Episode 4: Karen Sack, executive director at the Ocean Risk and Resilience Action Alliance & Yabanex Batista, Deputy Head of the UN’s Global Team for The Global Fund for Coral Reefs
• Episode 5: Susan Gardner, Head of the Ecosystems Division at UNEP and Ivo Mulder, Head of the Climate Finance Unit, Ecosystems Division, UNEP