Finance and investment for biodiversity

The most recent OECD analysis estimates global biodiversity finance to total USD 78-91 billion a year, covering public, private, domestic and international finance. Actual finance needs are projected to be in the hundreds of billions. Failure to scale up biodiversity finance will result in significant risks and costs to human health, well-being and the economy.

The Kunming-Montreal Global Biodiversity Framework, a historic agreement committing nations to halt and reverse nature loss by 2030, requires countries to mobilise at least USD 200 billion a year by 2030 (Target 19). Additionally, it calls for progressively aligning all financial flows with the objectives of the Framework (Target 14).

The way in which governments allocate public funds and raise revenue through taxes strongly affects biodiversity outcomes. Globally, governments spend an estimated USD 68 billion domestically per year on biodiversity – about two-thirds of total biodiversity finance. Biodiversity-related taxes generate at least USD 9 billion in revenue in OECD countries, some of which is earmarked for biodiversity action. Considerable scope exists to scale up the use and effectiveness of these types of policy instruments. 

At the same time, other budgetary and fiscal policy decisions may have the opposite effect, supporting activities that drive biodiversity loss. The OECD supports countries' efforts to assess and improve alignment of public budgets and fiscal policies with the objectives of the Kunming-Montreal Global Biodiversity Framework.

Businesses both impact and depend on biodiversity and ecosystem services.  For example, USD 235-577 billion worth of annual global food production relies on the direct contribution of pollinators. Companies can address their impacts and dependencies through their operations, supply chain and investment decisions. Untapped opportunities exist for the private sector to finance “green” and to green finance. Harnessing these opportunities requires coherent and strategic public policy interventions, covering environmental and fiscal policy, public governance and international trade. 

Biodiversity loss poses significant risks to the financial sector. Nature-related financial risks are pervasive but poorly understood. They stem from the dependency of portfolios’ profitability on biodiversity and the adverse impacts of financial decisions on biodiversity. The OECD has developed a Supervisory Framework for Assessing Nature-related Financial Risks, drawing on a mapping of existing tools, practices, definitions, transmission channels, metrics and indicators, as part of an EU-funded project. The Supervisory Framework is relevant for central banks, supervisors and retail banks across different country contexts, recognising that domestic circumstances and mandates differ. This Framework has already been applied to several countries, including the Hungarian financial sector.

Further improvements are needed to better track public and private finance flows for biodiversity, consistently and comparably across countries and companies. The OECD supports these efforts via data collection and analytical work to strengthen reporting frameworks. The OECD database Policy Instruments for the Environment (PINE) tracks biodiversity-positive incentives and the finance they generate and the DAC Creditor Reporting System (CRS) tracks biodiversity-related development finance.