Follow the money: Nature and climate summits must transform finance

As deadly hurricanes dominate headlines and scientists warn of calamitous drops in wildlife numbers, the dangers posed by ‘business as usual’ are on stark display. Soon, world leaders join corporate and financial institution bosses and civil society at two major summits – one focusing on nature and one on climate. We need decisive action at both to secure our collective future on a liveable planet.

By Darren Mckenzie

Senior Communications Lead

The Convention on Biological Diversity (CBD) COP16 is hosted by the Colombian city of Cali. This will be the first CBD COP since the Global Biodiversity Framework (GBF) was agreed two years ago, and seeks to chart progress on GBF goals and targets. A week later, climate COP29 starts in Baku in Azerbaijan. This has been dubbed the finance COP, as negotiators are tasked with updating climate finance goals.

Nature and climate are deeply interlinked. Deforestation, for example, is responsible for 11% of global greenhouse gas emissions, with protected and restored forests offering up to a third of the climate solution as well as vital shelters for biodiversity. Humanity urgently needs progress on both fronts to secure the foundations for our economies and our well-being. 

The big nature finance turnaround

Transforming public and private finance has to be a priority. At both Cali and Baku, governments and private sector leaders must work to turn off the tap for funding to activities that harm nature; use the leverage of finance to drive meaningful transition across all economic sectors; and ramp up sound investment in protecting and restoring nature. 

At the last nature COP, governments agreed to eliminate, phase out or reform incentives that harm biodiversity. At least $2.6 trillion a year of government subsidies around the world drive global heating and destroy nature. The GBF requires countries to identify these by 2025 and reduce them by US$500 billion annually, starting with the most harmful, and having regard to equity. COP16 is an important moment for governments to build momentum around this commitment. 

Private finance is also critical. The 2023 State of Finance for Nature (SFN) report revealed private nature-negative finance flows of US$5 trillion per year. While voluntary finance sector action plays an important part, including showing what can be done when the will is there, we need to see market-wide movement. Governments and standards-setters, supported by advocates within finance, must push for the sector to adopt and implement strong, well-integrated climate and nature transition plans aligned with global targets. The Global Canopy team will be at COP16 to highlight the well-developed data, tools and frameworks that can support effective finance sector action.

Connecting risks and impacts to opportunities to invest in nature

Governments, companies and financial institutions are often eager to showcase spending on solutions. But the numbers tell a sobering story: the SFN report finds US$7 trillion in finance spent harming nature, compared to US$200 billion spent on nature-based solutions intended to promote positive outcomes for nature and climate. 

$US7 trillion is invested annually in activities that harm nature.

State of Finance for Nature 2023

To be effective, positive spending must be joined up to work on reducing harm, as well as taking into account the human rights implications of proposed nature-related opportunities. Identifying the nature-related risks and impacts of business is also a way of locating meaningful opportunities for investment. Consider a recent Trase study looking at the path to net zero for Mato Grosso, Brazil’s largest beef-producing state. The 20% of pasture there which is severely or highly degraded is releasing stored carbon. Investment in pasture restoration stands to boost agricultural resilience and productivity while also offering a net zero win.

At COP16, Global Canopy will showcase tools and frameworks to support organisations in understanding their exposure to nature-related impacts. These include ENCORE, which we developed with UNEP FI and UNEP-WCMC, and which enables users to identify and quantify their impacts, risks and dependencies. We will also engage the finance sector on a draft framework for nature business – building on the connections between risks and opportunities, and expanding beyond the current focus on agriculture, reforestation and pollinators.

Building on the Glasgow Leaders Declaration on Forests

The recently released Forest Declaration Assessment tells us that humanity has “barely made a dent in curbing deforestation”. It finds that we are off track to meet the 2030 target for halting and reversing deforestation promised in the Glasgow Leaders Declaration at COP26 and the final agreement signed after COP28. 

Central to progress on these goals is action on the deforestation linked to commodity production and trade. Legislation on supply chains – like the European Union Deforestation Regulation (EUDR) and the UK Environment Act Schedule 17 – has not advanced as quickly as needed. In part, this reflects a need for much greater efforts at trust-building and partnership between commodity trading countries. 

To fulfil the promises of the Glasgow Declaration, major trading nations must put collaboration around deforestation-free supply chains on their diplomatic agendas at both COPs. With more material support from importing countries for implementation on the ground, and better technical exchange, both voluntary and regulatory supply chain measures can be made practical, workable and more equitable. At COP16, Global Canopy will also be showcasing advances in the data and tools that make it possible for the private sector to take targeted and effective action on key forest risk sectors.