Mobilising private sector finance is essential to deliver on the Kunming-Montreal Global Biodiversity Framework’s targets (CBD, 2022[1]). According to the latest data (OECD, 2024[2]), private finance mobilised by official providers for biodiversity more than doubled between 2021 and 2022, up from USD 749 million in 2021 to USD 1.8 billion in 2022 (Figure 7.1). Over 2017-22, financing in this space mainly targeted activities related to water resources conservation, core biodiversity-related activities (e.g. conservation and protection of wetlands, endangered species and natural reserves) and biosphere protection (e.g. air and marine pollution control), financial and environmental policy and administrative management, small and medium-sized enterprises and business development, energy generation from renewable sources, and agricultural and forestry development (e.g. agricultural financial services, alternative development, water and land resources, crop production).
Biodiversity and Development Finance 2015-2022
2016-22, USD million, full values
Notes: DAC: Development Assistance Committee; ODF: official development finance. The analysis only captures 2017-22 data given that data on biodiversity prior to this range are limited, mainly due to evolving methodologies and quality of data reporting. For more information, see Annex A.
Source: Authors’ estimates based on OECD-DAC statistics from OECD (2024[3]), Creditor Reporting System (database), on mobilised private finance from OECD (2024[2]), http://data-explorer.oecd.org/s/q.
Although increasing, figures are relatively small for biodiversity, representing 3% of total private finance mobilised in 2022 (Figure 7.1) and 1% of total private finance mobilised on average over 2017-22 (as a reference, private finance mobilised for climate action represented 35% of total private finance mobilised, at USD 16.1 billion on average over the period). This may reflect the challenges associated with mobilising private sector financing specifically for biodiversity-related action, including public policy failures, lack of data for measuring impact and nature-related risk, issues with small-scale or non-commercial biodiversity investment opportunities, and the lack of a (readily available) pipeline of investment projects (World Bank Group, 2020[4]), as well as the lack of conducive enabling environments overall (see Box 3.2). Importantly, most biodiversity and natural resource challenges are location-specific, further creating difficulties in both identifying a problem and then replicating a solution, particularly for nature-based solutions. In addition, the lack of long-term funding and support further hampers the success and implementation of related projects (OECD, 2023[5]).
Despite these challenges, DAC members acknowledge the crucial role of mobilising private finance for biodiversity action and are working to understand the financing mechanisms involved and to overcome investment barriers to secure additional funding. For instance, Germany is supporting the Biodiversity Finance Accelerator Southern Africa in Malawi and Zambia, aiming to mobilise biodiversity investments by developing a pipeline of bankable market-based solutions, increasing the understanding of conservation finance and designing biodiversity financial leveraging instruments (IKI, 2024[6]). Further, it provides capacity building programmes and empowers biodiversity-friendly micro, small and medium-sized enterprises to access growth finance and amplify positive biodiversity impacts. Given the relevance of mobilising private finance for biodiversity, the OECD and DAC members will be explicitly focusing on this issue, looking closer into the issues mentioned in this chapter (OECD, forthcoming).
A growing number of DAC members mobilise private finance for biodiversity, increasing from just 3 DAC members in 2017 to 131 in 2022. However, the volume of mobilised funds remains concentrated among a few members. In 2022, three DAC members - namely the United States (74%), France (11%) and Australia (7%) - accounted for 93% of the total bilateral private finance mobilised for biodiversity-related activities. Similarly, only a few multilateral institutions stand out in this space, with most private finance mobilised for biodiversity-related action concentrated on a few providers.
Private finance for biodiversity was mostly mobilised in upper middle-income countries (62% of the total without considering unspecified allocations), followed by lower middle-income countries (25%) and least developed countries (13%), on average over 2017-22. In particular, Ecuador accounted for 50% of the total over the period, followed by Belize (18%), Cambodia (6%), the Democratic Republic of the Congo (4%) and Brazil (3%). Overall, the most targeted regions were Latin America and the Caribbean (73%), followed by Asia (13%) and Africa (12%).
Overall, in 2022, private finance was mobilised by a variety of leveraging mechanisms, yet mostly concentrated around guarantees (67%).2 Other leveraging mechanisms applied include credit lines (9%), simple co-financing (8%), direct investment in companies and special purpose vehicles (9%), shares in structured or flat collective investment vehicles (5%, e.g. shares in the riskiest tranche, first loss share and other), and syndicated loans (less than 1%). See OECD (2020[7]) for more information on the methodologies for measuring the amounts mobilised from the private sector by ODF interventions, and Annex A for an overview of the leveraging mechanisms captured in OECD-DAC statistics.
Indeed, additional financial flows from a wide variety of sources are needed for sustainable development to meet biodiversity, oceans, degraded land and climate change targets, and enhance ecosystem services (G20 Rome Summit, 2021[8]). Creating favourable conditions to the development of financing mechanisms and private sector instruments (PSI) – as well as through partnerships, alliances and country-platforms – is also important to test, implement and capitalise upon and develop new initiatives that will allow private financing for biodiversity and natural resources to grow. Box 7.1 showcases some of the recent financial mechanisms used to mobilise private finance for biodiversity [e.g. debt-for-nature swaps], concerning the public and private sectors, and civil society, as well as efforts to strengthen PSI.
Ecuador and the Galápagos Islands: Championing biodiversity financing
Ecuador is one of the most biodiverse countries in the world (WorldRainforests, 2023[9]; UNEP-WCMC, 2020[10]) and has recently accomplished the world’s largest debt-for-nature conversion with support from the United States’ Development Finance Corporation (DFC) and the Inter-American Development Bank (IDB), that will allow the country to reduce its debt burden and free up resources for long-term marine conservation in the Galápagos Islands, promote greater sustainability and improve livelihoods (IDB, 2024[11]).
The operation consists of an USD 85 million IDB guarantee and a USD 656 million DFC political-risk insurance to Ecuador to purchase existing public debt at better terms (IDB, 2024[11]). This debt purchase with cheaper financing will generate lifetime savings of more than USD 1.1 billion and savings to finance conservation activities for USD 323 million. These resources will be used to capitalise an endowment for the Galápagos Life Fund, which will finance conservation activities over the next 18.5 years in both the Galápagos Marine Reserve and the Reserva Marina Hermandad. Combined, the debt conversion and endowment will generate more than USD 450 million for marine conservation in the Galápagos Islands (DFC, 2023[12]). In addition, Credit Suisse Group provided structuring and technical advice for the transaction, Oceans Finance Company served as project manager and Pew Bertarelli Ocean Legacy as co-operating partner.
The growing momentum of debt-for-nature swaps
Debt-for-nature swaps (DNS) can be traced back to 1987 (World Bank, 1988[13]) but have a renewed momentum. A number of other countries – such as the Plurinational State of Bolivia, Costa Rica and the Philippines – have used DNS in the past to manage debt and improve their environmental protection and resilience in the process (World Bank, 1990[14]). Recently, such deals have created marine protected areas or funded other conservation measures in the waters of Belize, Barbados and the Seychelles (The Nature Conservancy, 2023[15]; The Nature Conservancy, 2023[16]; TNC, 2020[17]). Indeed, scaling up the number and size of DNS, along with complementary technical assistance, can help countries strengthen fiscal and environmental sustainability at a time when financing is scarce (IMF, 2023[18]; Jiang and Cao, 2024[19]).
Private sector instruments
At the DAC High Level Meeting in 2016, development ministers identified the private sector as a key partner to advance the international development agenda (OECD, 2016[20]). In pursuit of a more fitting enabling environment for innovative partnerships with private institutions, they agreed on a set of principles for reflecting donor effort in private sector instruments (PSI) in official development assistance (ODA). In 2023, after detailed negotiations, the DAC agreed on methods for counting donors’ loans to the private sector, equity investments, guarantees and reimbursable grants in ODA on a grant-equivalent basis, as well as enhanced transparency provisions, ODA-integrity safeguards and monitoring provisions. This agreement is expected to incentivise donors’ use of PSI for greater development impact.
Indeed, when deployed in support of nature-related solutions, PSI can help build biodiversity-friendly markets and mobilise additional finance. For example, the United Kingdom’s vehicle Mobilising Finance for Forests extends PSI to combat deforestation and other environmentally unsustainable land-use practices in tropical forest regions that are contributing to global climate change and improved livelihoods (FMO, 2021[21]). In addition, the Netherlands’ Dutch Fund for Climate and Development (DFCD) aims to promote climate-resilient growth through improving the well-being and prospects of vulnerable groups and the health of critical ecosystems such as river basins, tropical rainforests, marshlands and mangroves (DFCD, n.d.[22]). Recently, for example, DFCD has supported the development of integrated mangrove shrimp farms in Viet Nam, by assisting to de-risk the business, make it investment-ready and aligned with stakeholders’ needs (DFCD, 2024[23]).
There is no one-size-fits-all in the mobilisation of private finance for biodiversity. Indeed, private finance mobilisation for biodiversity can be achieved through different financial structures and mechanisms. For instance, facilities that promote public-private partnerships (PPPs) can mobilise private finance by creating joint ventures with government bodies, enterprises, non‑governmental organisations and/or academia, together with development co-operation providers (Government of the Netherlands, 2023[24]). PPPs often help to de-risk financing for private financiers and can indicate strong government support of particular initiatives. For example, AGRI3 is a blended finance fund implemented by the partnership between the Dutch Ministry of Foreign Affairs (MINBUZA), the United Nations Environment Programme, the Dutch Entrepreneurial Development Bank (FMO), Rabobank and the Sustainable Trade Initiative which aims to unlock USD 1 billion towards sustainable agriculture, protecting forests and improving rural livelihoods by de-risking transactions (e.g. through guarantees and credit enhancement) and providing technical assistance (Agri3 Fund, n.d.[25]). In addition, MINBUZA is also supporting the Mobilising More for Climate programme, together with the International Union for Conservation of Nature, WWF and Topenbos International, seeking to connect entrepreneurs, companies, policy makers, investors, civil society organisations and local entrepreneurs to mobilise additional funding for nature-based solutions in developing countries, and to attract investments to implement these initiatives (MoMo4C, 2024[26]). Similarly, the United States Agency for International Development (USAID) together with the International Centre for Tropical Agriculture is supporting the Althelia Biodiversity Fund Brazil, a blended finance fund aiming to conserve biodiversity by de-risking allocations for investors (i.e. through guarantees and investing in junior tranches, respectively), and investments are managed by Mirova Natural Capital (Blended Finance Taskforce, 2019[27]).
Other structures include multi-donor funds and programmes. For instance, Aceli Africa is a financing facility promoting sustainable environment practices that offers de-risking financial incentives, defrays the transaction costs of lending and provides technical assistance to agri-SMEs, supported by grants from MINBUZA; the IKEA Foundation; the Swiss Agency for Development and Co-operation, the UK Foreign, Commonwealth and Development Office; and USAID (Aceli Africa, 2020[28]). Alternatively, other structures to mobilise private finance can involve multilateral biodiversity funds [e.g. the Global Environment Facility (GEF) and the KMGBF Fund, and the Green Climate Fund] or MDBs. For instance, the International Finance Corporation (as structurer and investor) and Banco Bilbao Vizcaya Argentaria (issuing bank) have partnered to issue a biodiversity bond and the resources will be used to finance projects focusing on reforestation, mangrove conservation, climate-smart agriculture and wildlife habitat restoration in Colombia (BBVA, 2024[29]). In addition, the World Bank has issued a Wildlife Conservation Bond consisting of an outcome-based bond that channels private capital to finance the conservation of endangered species, and together with GEF (which provides finance for the conservation success payment and de-risking) created an opportunity to attract private investment (WBG, 2024[30]). In particular, this so-called “Rhino Bond” focuses on achieving conservation outcomes by measuring an increase in black rhino populations in two protected areas in South Africa. The rhino growth rate will be calculated and verified by independent parties, Conservation Alpha and the Zoological Society of London respectively, over the bond term. The financial structure was developed with Credit Suisse Group, building on earlier preparatory work at the parks (World Bank, 2022[31]).
Finally, there are also multi-stakeholder partnerships spanning across a combination of public bilateral and multilateral donors and private funds, such as the example of Japan International Cooperation Agency’s loan agreement with Ghana to promote an environmentally sustainable cocoa industry, along with co-financing by development finance and private finance institutions, namely the African Development Bank, the Development Bank of South Africa and the Italian National Promotion Bank “Cassa Depositi e Prestiti” (JICA, 2020[32]). In another example, the Nature Facility is a multi-partner trust fund between the United Nations Capital Development Fund; the United Nations Development Programme; and the United Nations Education, Science and Culture Organization, together with Cartier for Nature as its first donor, aiming to pool and channel resources to address the drivers of environmental degradation and ecological instability, with a focus on Natural World Heritage Sites and the ecosystems and people that interact with them (UNDP, 2024[33]). The Nature Facility benefits from lessons learnt from similar initiatives such as the Global Fund for Coral Reefs (GFCR, 2024[34]), and is supporting the blended finance project in Burundi’s Kibira National Park by providing funding to the Kibira Foundation (a dedicated foundation to assist the park, co-managed by the government with participation of forest communities) to strengthen conservation and the sustainable exploitation of the forest’s resources (UN, 2023[35]). The project also seeks to generate financial returns (“hydro-credits”) from a hydropower public-private partnership that can be strategically re-invested into the Kibira Foundation, ensuring support for sustainable park management, peacebuilding and social cohesion activities.
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← 1. The following DAC members have mobilised private finance for biodiversity over 2017-22: Australia, Austria, Belgium, Canada, Czech Republic, Finland, France, Germany, Korea, Portugal, Spain, Sweden, Switzerland, UK, US.
← 2. Guarantees refer to legally binding agreements under which the guarantor agrees to pay part or the entire amount due on a loan, equity or other instrument in the event of non-payment by the obligor or loss of value in case of investment. The term guarantee refers to both guarantee and insurance scheme.