G20 leadership required to catalyze private capital inflow for nature-based solutions

G20 country investments in nature-based solutions (NbS) need to reach USD 285 billion/year by 2050 to address the interrelated climate, biodiversity, and land degradation crises; however, current G20 spending is only USD 120 billion/year. These are the findings of a new report, the ‘State of Finance for Nature in the G20’.

It also reveals that the spending gap in non-G20 countries is larger and more difficult to bridge than in G20 countries, but only 2 per cent of the G20’s USD 120 billion investment (using 2020 as a base year) was directed towards official development assistance (ODA). Similarly, private sector investments remain small, at just 11% or USD 14 billion/year, even though the private sector contributes 60 per cent of the total national GDP in most G20 countries.  Thus, the business and investment case for nature needs to be made stronger.  

The report is led by the UN Environment Programme (UNEP), the World Economic Forum (WEF)  the Economics of Land Degradation (ELD) Initiative hosted by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in collaboration with Vivid Economics. It builds on the 2021 report, ‘State of Finance for Nature – Tripling Investments in Nature-based Solutions by 2030’, which calls for closing a USD 4.1 trillion financing gap in nature-based solutions between 2020 and 2050.

The report also discloses that G20 investments represent 92% of all global investments in NbS in 2020. Furthermore, the vast majority of these G20 investments, 87% or USD 105 billion, were distributed internally towards domestic government programs.  

These findings confirm the urgency to increase net-zero and nature-positive investments  to close the biodiversity and climate finance gaps, as reflected in the Global Biodiversity Framework’s Target 19 of UN Biodiversity Conference (COP15) and in the Glasgow Climate Pact of the UN Climate Change Conference (COP26). They also reinforce the need to accelerate land restoration around the globe, as declared by the UN Decade on Ecosystem Restoration 2021-2030.

Annual G20 NbS investments need to increase by at least 140 % to meet all agreed biodiversity, land restoration and climate targets by 2050, which means an additional USD 165 billion per year, especially in ODA and private sector spending. To put this into perspective, more than USD 14.6 trillion was spent by 50 leading economies in 2020 in the wake of the Covid-19 crisis, of which only USD 368 billion, or 2%, was considered ‘green’ by a  2021 UNEP report. 

At the global investment level, future investment in NbS needs to increase four-fold by 2050, equating to an annual investment of over USD 536 billion/year. The future investment needs for G20 countries account for approximately 40 per cent of this total global investment in 2050. G20 countries have the capacity to meet this investment need as they carry out most of the global economic and financial activity with fiscal leeway. The report stresses the necessity for G20 countries to embrace their role as influential change agents and align development and economic recovery with international nature and climate goals.

Justin Adams, World Economic Forum Director for Nature-Based Solutions said, “The climate and nature crisis are two sides of the same coin, and we can’t turn things around unless we transform our economic models and market systems to take nature’s full value into account.”

The report also calls for G20 Member States to seize opportunities to increase investment in non-G20 countries, which can often be more cost-effective and efficient than investing in similar nature-based solutions internally. 

“In many instances, G20 countries can improve economic efficiency in nature-based solutions spending by targeting investments in non-G20 countries,’’ noted Nina Bisom, Coordinator of Economics for the Land Degradation Initiative. “For example, the average cost of converting land from other uses to nature-based solutions in G20 countries is USD 2.600/hectare, while the same costs only USD 2,100/hectare for non-G20 regions.”

A paradigm shift by governments, corporations and finance institutions is urgently required if we are to effectively tackle the interrelated nature, climate, and land degradation crises on which much of our economies are dependent.

“To scale up private finance, governments can boost the investment case for nature, for instance by creating stable and predictable markets for ecosystem services like forest carbon or by using public money on below-market rates,” said Ivo Mulder, Head of UNEP’s Climate Finance Unit, and added that, “Systemic changes are needed at all levels, including consumers paying the true price of food, taking into account its environmental footprint. Companies and financial institutions should fully disclose climate- and nature-related financial risks, and governments need to repurpose agricultural fiscal policies and trade-related tariffs.”

The report concludes that governments need to truly ‘build back better’ instead of building back-as-usual following the COVID-19 crisis. Many developed countries can borrow cheaply in international capital markets. Thus, they need to tie ‘nature and climate conditions’ when providing fiscal stimulus to sectors across their economies – in addition to creating more favorable regulatory, fiscal and trade policies to transition economies – so that international biodiversity, climate and land degradation targets are met. G20 nations have the ability and means to lead by example.