New in Biodiversity Finance: Nature at COP28

As the world reflects on the significance of the COP28 commitment to move away from fossil fuels, there is another big win to note. Nature, biodiversity, ecosystems featured prominently in the official COP28 documents as well as multiple high-level events, commitments, and pledges.

Nature and Climate

The first Global Stocktake , a global review of progress against the goals of the Paris Agreement, underscored the urgent need to address the interlinked global crises of climate change and biodiversity loss in a “comprehensive and synergistic manner.” ?The document emphasizes the importance of conserving, protecting and restoring nature and ecosystems towards achieving the goals of the Paris Agreement, including through halting and reversing deforestation and forest degradation by 2030.

The document also recognizes the critical role of protecting, conserving and restoring ecosystems of all types – fresh water, forests, oceans, mountains and cryosphere – in delivering both climate mitigation and adaptation benefits. The significance of healthy ecosystems for resilience and adaptation was also reflected in the Global Goal on Adaptation , meant to help countries build resilience to climate change. ??

There are several references throughout the Global Stocktake to nature, biodiversity and ecosystems. Here is one sentence that hits multiple strands (not the kind of sentence your English teacher would approve, though):

“Encourages the implementation of integrated, multi-sectoral solutions, such as land-use management, sustainable agriculture, resilient food systems, nature-based solutions and ecosystem-based approaches, and protecting, conserving and restoring nature and ecosystems, including forests, mountains and other terrestrial and marine and coastal ecosystems, which may offer economic, social and environmental benefits such as improved resilience and well-being, and that adaptation can contribute to mitigating impacts and losses, as part of a country-driven gender-responsive and participatory approach, building on the best available science as well as Indigenous Peoples’ knowledge and local knowledge systems.”

To underscore the need for a coordinated approach to solve climate change and biodiversity loss crises, COP28 president UAE and COP15 president China released a?Joint Statement on Climate, Nature and People singed by 18 countries. In addition, China announced that it will join the High Ambition Coalition for Nature and People , a group of 118 nations that have pledged to protect 30% of Earth by 2030, one of the targets of the Kunming-Montreal Global Biodiversity Framework adopted by over 190 countries last December.

Other significant announcements included updates to the Mangrove Breakthrough and the Freshwater Challenge – global commitments to restore mangroves, rivers and wetlands. These announcements were accompanied by Bezos Earth Fund committing up to $100 million and the Global Environmental Facility committing $125 million to help protect 30% of the Pacific.

A Coalition on Greening Construction with Sustainable Wood, made up of 17 countries, committed to advancing policies to support the use of wood from sustainably managed forests in buildings construction as a way to reduce GHG emissions and increase stored carbon.

Food, Nature and Climate

The topic of food – something we can’t live without and a major source of GHG emissions and a massive driver of biodiversity loss – was on the menu. One hundred and thirty-four countries endorsed the Emirates Declaration of Sustainable Agriculture, Resilient Food Systems and Climate Action, ?committing to accelerate the integration of agriculture and food systems into climate action and mainstream climate action across agriculture and food systems policies. It stresses the importance of improving the integrated management of water and maximizing the climate and environmental benefits through conserving, protecting and restoring land and natural ecosystems, enhancing soil health and biodiversity and reducing food loss and waste. While the declaration speaks to the need to scale up all forms of public and private finance, it does not address politically sensitive topic of repurposing harmful agricultural subsidies.

Meanwhile, more than 200 farmers’ groups, businesses, philanthropies and research institutions issued ?The Call to Action to create food systems that deliver significant, measurable progress for people, nature and climate. The signatories commit to reduce GHG emissions in their production and set scope 3 targets, increase support for regenerative agriculture, and promote nutritious and sustainable diets. Six major food companies, such as Nestle and Danone, launched Dairy Methane Action Alliance , committing to report on and reduce methane emissions in their dairy supply chains.

$$$$$ for Nature

As always, the topic of how we pay for the transition of our economy to tackle climate and biodiversity loss crises was front and center.

The COP28 Presidency and its partners announced $1.7 bn in funding committed to finance a series of new initiatives for forests and the ocean to meet climate and biodiversity goals in tandem.

Brazil announced plans to raise $250 bn from sovereign wealth funds and other investors, including oil companies, for its proposed “tropical forests forever” fund. The fund seeks to provide 80 tropical countries with finance to help keep their forest standing via annual payments based on hectares conserved or restored. Investors are expected to earn a return.

IFC and T. Rowe Price announced plans to raise $500 million over the next 12 months for the Emerging Markets Blue Economy Bond Strategy to invest in blue bonds by financial and non-financial companies. The strategy will target a return of 300 to 600 basis points over the US Treasury yield curve. IFC will set up a technical assistance facility to increase the quality and quantity of blue bond issuances under the program.

IFC together with Conservation International released a Catalogue of Nature-based Solutions for Infrastructure , starting with the water, mining and renewable energy sectors. The catalogue focuses on raising awareness and building a business case for integrating NBS into traditional infrastructure in order to scale the uptake of NBS in designing new and retrofitting existing infrastructure projects.

A group of MDBs, including the World Bank Group, signatories to the Joint Statement on Nature, People and Planet at COP26, released Common Principles for Tracking Nature-positive Finance across their portfolios. ?The principles define nature-positive finance (as a subset of broader green, environmental, or nature finance) as “finance that supports actions that protect, restore or enhance sustainable use and management of nature, or enables these actions, contributing to the implementation of the Kunming-Montreal Global Biodiversity Framework and its broad ambition to halt and reverse nature loss by 2030, with a view to full recovery by 2050. Such an action must also meet all of the following eligibility criteria, as determined by the respective MDB: (1) makes a substantive contribution to nature; (2) has expected positive outcomes for nature that are measurable and can be assessed and monitored against a baseline, where feasible, or otherwise, a business-as-usual scenario; (3) is not expected to introduce significant adverse environmental risks or impacts.”

Carbon markets, particularly the negotiations around the Article 6 of the Paris Agreement, were in focus. Yet again, countries failed to reach an agreement on Article 6.2 (rules for bilateral carbon trading between countries) and Article 6.4 (rules for international carbon market). The talks will resume next year.

This puts additional pressure and creates an opportunity for the voluntary carbon market. A number of actors came forward articulating the importance of transparent, well-functioning voluntary carbon markets and outlined their actions.

The World Bank released its Engagement Roadmap for Carbon Markets and announced plans for 15 countries to earn up to $2.5 bn from the sale of up to 126 million carbon credits from preserving their forests through the World Bank’s Forest Carbon Partnership Facility .

Major voluntary carbon credits standard setters signed an agreement to work in partnership to “amplify the impact of carbon markets in mitigating climate change and supporting countries in implementing Article 6 and their Nationally Determined Contributions.” The signatories commit to collaborate to promote integrity and dependability of the voluntary carbon market.

Several European governments issued a statement , proposing a framework “to prevent greenwashing and restore integrity in voluntary carbon markets” on the claims side. The US Commodity Futures Trading Commission proposed guidance regarding the listing of voluntary carbon credit derivative contracts .

Large conservation organizations, such as Conservation International, Birdlife International and the Nature Conservancy, put out a statement endorsing transparent, high integrity carbon markets as important in “moving climate action further, faster.”

Sustainability-linked sovereign financing instruments and credit enhancements to mobilize finance for climate and nature were another topic of the finance discussion. Eight Multilateral Development Banks (MDBs) announced a taskforce to look into developing such mechanisms.

Next Biodiversity COP

The next biodiversity -- COP16 -- will be held in Colombia from October 21 to November 1, 2024.

Thank you for reading and wishing everyone Happy Holidays!