Closing the Global Biodiversity Financing Gap Full Report AUTHORS REVIEWERS/CONTRIBUTORS DISCLAIMER Andrew Deutza, Geoffrey M
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FINANCING NATURE: Closing the Global Biodiversity Financing Gap Full Report AUTHORS REVIEWERS/CONTRIBUTORS DISCLAIMER Andrew Deutza, Geoffrey M. Healb, Justin Adams (Tropical Forest Alliance, The authors would like to thank the Rose Niuc, Eric Swansonc, Terry World Economic Forum), Géraldine Technical Advisory Group members, Townshendc, Zhu Lic, Alejandro Ang (Organisation for Economic contributing authors, and reviewers Delmard, Alqayam Meghjid, Suresh A. Cooperation and Development), Ulrich for their valuable contributions that Sethid, and John Tobin-de la Puented Apel (Global Environment Facility), strengthened the report. The content Marco Arlaud (UNDP Biodiversity and positions expressed are, however, Finance Initiative), Mohamed Imam those of the authors and do not CONTRIBUTING AUTHORS Bakarr (Global Environment Facility), necessarily reflect the perspectives Global biodiversity background for Larry Band (Independent Consultant), of those who provided input, nor Foreword and Executive Summary: Andrea Barrios (Rockefeller Foundation), the organizations to which they are Tom Lovejoy Rafaello Cervigni (The World Bank), affiliated. Biodiversity offsets: Bruce McKenney, Gretchen Daily (Stanford University), Jessica Wilkinson, Joseph Kiesecker, Nick Dilks (Ecosystem Investment SUGGESTED CITATION: Christina Kennedy, and James Oakleaf Partners), Mafalda Duarte (Climate Financing for biodiversity conservation Investment Funds, The World Bank), Deutz, A., Heal, G. M., Niu, R., Swanson, in urban environments: Robert Yasha Feferholtz (UN Convention on E., Townshend, T., Zhu, L., Delmar, McDonald Biological Diversity), Monica Filkova A., Meghji, A., Sethi, S. A., and Tobin- Green financial products: Patricia De (Climate Bonds Initiative), Charlotte de la Puente, J. 2020. Financing Pauw, Sebastián Molina Gasman, and Kaiser (The Nature Conservancy), Nature: Closing the global biodiversity Alekhya Mukkavili Kerry ten Kate (Natural England), financing gap. The Paulson Institute, Harmful subsidy reform: Kara Guse Amanda Kelsten (Bloomberg), Sean The Nature Conservancy, and Investment risk management: Marie- Kidney (Climate Bonds Initiative), the Cornell Atkinson Center for Justine Labelle, Alekhya Mukkavilli, Linda Krueger (The Nature Sustainability. and Yasomie Ranasinghe Conservancy), Gemma Lawrence (Loan Market Association), Richard Natural-based solutions and carbon GRAPHIC DESIGN: markets: Kelley Hamrick Lawrence (Overlook Investments), Natural infrastructure: Alekhya Mukkavilli Winsor J. Lee (Bloomberg NEF), Li Jonathan Tsao Nuyun (China Green Carbon Fund), Official development assistance: Lu Xiankun (LEDECO Centre), Pascal Marie-Justine Labelle, Yasomie PHOTO CREDITS: Ranasinghe, Everett Sanderson, and Martinez (Global Environment Facility), Cover (trees/waterfall): © Ken Geiger/ Jim Stephenson Adam C.T. Matthews (The Church of England Pensions Board), Tom Mitchell TNC; Page 1 (redwoods): © Patrick Sustainable supply chains: Kara (Cambridge Associates), Jen Molnar McDonald/TNC Photo Contest 2018 Guse, Yasomie Ranasinghe, and Jim (The Nature Conservancy), Stefano Page 30: © Tyler Schiffman/TNC Stephenson Pagiola (The World Bank), Edward Photo Contest 2019; Page 46: © Perry (Organisation for Economic Carlton Ward Jr.; Page 52: © Jennifer TECHNICAL ADVISORY GROUP Cooperation and Development), Adler; Page 120: Junqiu Huang/TNC Alexandra Pinzon-Torres (London Photo Contest 2019; Page 125, 177: Marco Albani (Independent Advisor), School of Economics), Kelly Racette (The © Jianmin Wang; Page 231: © Harvey Frank Hawkins (International Union Nature Conservancy), Massimiliano Locke for the Conservation of Nature), Riva (United Nations Joint SDG Fund), Onno van den Heuvel (UNDP Giovanni Ruta (The World Bank), Lynn Copyright © 2020 The Paulson Biodiversity Finance Initiative), Katia Scarlett (The Nature Conservancy), Hugh Institute, The Nature Conservancy, Karousakis (Organisation for Economic Searight (The World Bank), Andrew Seidl and the Cornell Atkinson Center for Cooperation and Development), (UNDP Biodiversity Finance Initiative), Sustainability Margaret Kuhlow (WWF International), Priya Shyamsundar (The Nature Kenneth Lay (Rock Creek Group), Conservancy), Krista Tukiainen (Climate Aileen Lee (Gordon and Betty Bonds Initiative), Hannah Vanstone Moore Foundation), David Meyers (Loan Market Association), Kurt Vogt (Conservation financing Alliance), (HPL LLC), Mike Wironen (The Nature Andrew Mitchell (Global Canopy), Conservancy), Tracy Wolstencroft Mark Opel (Campaign for Nature), and (National Geographic), and Zhao Xiaolu Kyung-Ah Park (Goldman Sachs) (Environmental Defense Fund, China) a The Nature Conservancy; b Columbia University; c The Paulson Institute; d Cornell University. FINANCING NATURE: Closing the Global Biodiversity Financing Gap Full Report Acknowledgments The authors are grateful to the many individuals, in addition to the members of the Technical Advisory Group, who contributed to this report as reviewers, advisors, supporters, communicators, or sources of information, including Katie Baildon, Divina Baratta, Kristin Gomez, Sara Levin Stevenson, Alan Martínez, Bianca Shead, and Eve Wang. The Paulson Institute authors would like to thank Henry M. Paulson Jr. for his leadership and vision, Deborah Lehr for her inspiration and guidance, and Tom Lovejoy and Larry Linden for their wise counsel. The Nature Conservancy authors would like to thank Jennifer Morris for her support and vision. The Cornell University authors are grateful to the leadership and staff of the Cornell Atkinson Center for Sustainability for logistical, financial, and communications support. Contents Foreword......................................................................................................................................... 1 Endorsements.................................................................................................................................. 4 Executive Summary.......................................................................................................................... 8 Chapter 1. Introduction.................................................................................................................... 27 Chapter 2. The Economic Case for Protecting Biodiversity................................................................... 31 Chapter 3. Updating the Estimate of Current Global Biodiversity Conservation Finance......................... 47 Chapter 4. Estimated Financing Need for Global Biodiversity Conservation........................................... 53 Chapter 5. Financial and Policy Mechanisms to Close the Biodiversity Financing Gap............................ 63 5.1. Harmful Subsidies Reform............................................................................................ 68 5.2. Investment Risk Management..................................................................................... 81 5.3. Biodiversity Offsets..................................................................................................... 103 5.4. Domestic Budgets and Tax Policy................................................................................. 112 5.5. Natural Infrastructure................................................................................................. 121 5.6. Green Financial Products............................................................................................. 134 5.7. Nature-Based Solutions and Carbon Markets................................................................ 156 5.8. Official Development Assistance (ODA)......................................................................... 169 5.9. Sustainable Supply Chains........................................................................................... 178 Chapter 6. Report Level Recommendations........................................................................................ 195 Appendices...................................................................................................................................... 201 Appendix A. Methodologies and Analytical Framework........................................................ 201 Appendix B. Double Counting Risks.................................................................................... 231 References....................................................................................................................................... 232 Financing Nature: Closing the Global Biodiversity Financing Gap FOREWORD The world is in the midst of one of the most dramatic extinction episodes in history. The signs of biodiversity loss are everywhere. Tropical forests, our greatest stores of biodiversity and carbon, are in retreat. Coastal wetlands, vital to migratory birds and fisheries and also a significant global stock of carbon, are deteriorating worldwide. Although extinction is a natural phenomenon, scientists estimate that our planet is now losing species at 1,000 times the natural rate of one to five per year. If we continue on the HENRY M. PAULSON JR. trajectory we’re on, we face a future where 30–50% of all species may be Chairman, Paulson Institute lost by the middle of the 21st century. Climate change is exacerbating this loss, causing coral reef bleaching, rampant growth of insect disease in forests, and severe expected loss of Arctic species. And it is a vicious circle—biodiversity loss also aggravates climate change. In the Amazon, hydrological changes caused by deforestation may permanently dry out millions