These Innovative Finance Solutions Combat Land Degradation Climate Change and Biodiversity Loss

Today, 40% of the world’s land is degraded, affecting billions of people and with dire consequences for our climate and biodiversity. Land degradation is the process that robs fertile land of its ability to support life. It’s a major cause of biodiversity loss and climate change.

The science is increasingly clear that we are more likely to succeed in tackling the climate crisis, biodiversity loss and land degradation if we take a unified approach that acknowledges their interconnected nature.

Degraded landscapes contribute to biodiversity loss, water insecurity, migration, and economic displacement. Solving these issues will require scalable investments, a mix of public and private financing, and a strong attention on community involvement—particularly in Least Developed Countries, where constrained fiscal space and elevated financial risks can halter progress.

Every dollar invested in restoring degraded lands yields an economic return of US$7 - $30 and unlocks co-benefits for climate and biodiversity. Urgent action and economic incentives can unlock a trillion-dollar restoration economy. Every restored landscape is a step toward food security, economic stability, and a resilient planet.

As governments deliberate on global challenges related to land degradation, drought, and desertification at the COP16 of the United Nations Convention to Combat Desertification (UNCCD) currently being held in Saudi Arabia, we look at solutions from UNDP’s Nature Finance work that have helped countries make significant strides in addressing the interconnected crises of Land Degradation, Biodiversity Loss and Climate Change.

Since 2018, UNDP’s Biodiversity Finance Initiative (BIOFIN) has helped 41 countries unlock over US $1Bn in financing for nature, with innovative finance solutions that span everything from crowdfunding to green bonds. Below are some examples of work carried out by  BIOFIN and partners:

Mongolia: Land use taxes boost biodiversity protection budgets

Overgrazing, climate change, mining and industry have taken a particularly heavy toll on Mongolian soils - 77% of soil is degraded to some degree, leading to a decrease in soil fertility, desertification and a decline in biomass and biodiversity.

Now the central Asian country is channeling more resources to biodiversity protection than ever before. Mongolia taxes the commercial use of natural resources such as land, and the latest changes in policy will mean an ever-larger portion of those revenues will now be directed to protecting biodiversity. 

With technical assistance from UNDP-BIOFIN the government made changes to its Natural Resource Use Fee Law (NRUF Law). In 2023, the Mongolia spent US$ 11.92 million from these fees on environmental expenditure, nearly double of earlier averages (2016-2021). Projections for 2024 indicate this may double once more to cross US$22 million. 

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South Africa: Finding champions for nature on private land

South Africa's Biodiversity Stewardship Programme (BSP) has been a key policy instrument for significantly increasing South Africa's protected area coverage, helping the country meet national and international biodiversity conservation targets under the Convention on Biological Diversity (CBD).

BSP works by forming agreements with private and communal landholders to protect and manage land in areas of significant biodiversity value. Led by provincial conservation authorities, this initiative has proven to be an effective method for expanding protected area coverage and achieving international conservation targets.

 Land ownership remains with the landholders, while the programme integrates biodiversity conservation with broader land-use practices. This approach supports a range of management strategies, from strict biodiversity protection to sustainable use, ensuring both conservation and practical land utilization.

Between 2008 and 2016, 68% of the newly added protected areas were established through Biodiversity Stewardship declarations (DEA, 2017).

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Kazakhstan adds 29 million hectares to protected area status

When BIOFIN started working in Kazakhstan about 10 years ago, funding for protected areas was limited. As of 2023, Kazakhstan has designated over 29 million hectares as protected areas, covering 10.77 percent of the country's land. Aligning with the global "30x30" target - to protect 30% of the planet for nature by 2030 - BIOFIN supported Kazakhstan in establishing eight new protected areas and expand three existing ones.

Developing a new generation of management plans for protected areas has paid off and the available budget for protected areas has increased significantly, reaching US$ 70.3 million in 2023, a threefold increase compared to 2018.

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Cuba: ‘Pricing in’ economic benefits that value forests over timber

Cuba’s adoption of a Payment for Eco-system Services (PES) system in 2024, will allow forest owners to claim payments on the global carbon trading market for the carbon removed from the atmosphere by the trees on their land.

The country’s Institute of Agroforestry Research (INAF) will be responsible for the measurements that allow forest owners to benefit from the incentive.

By integrating carbon trading into Cuba’s forest management, the PES system not only enhances the economic value of standing forests but also directly supports the global push for land restoration and resilience. The PES system is a financial solution that features in the country’s Biodiversity Finance Plan, drawn up with UNDP-BIOFIN support.

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Colombia: Agricultural Sector Policy Management

In Colombia, the extension of the agricultural surface to new lands is known as the ‘expansion of the agricultural frontier’.  As part of the work of BIOFIN in Colombia, an evaluation was carried out on changes in land use caused by existing agricultural management instruments, such as subsidies, tax incentives, market incentives, provision of goods and regulation of the territory.  A geospatial analysis was also carried out and verified that a pattern of change in the vegetation coverage associated with agricultural production systems exists, with 50 percent of the changes in natural coverage due to the expansion of the agricultural frontier occurring  in the bioregions of the Amazon and the Orinoquía.

Based on the results of the study at the national and regional levels, this phase will present relevant recommendations to government agencies to redesign instruments that have a negative effect on biodiversity and contributing to land change. Recommendations are being made to green the subsidized agriculture loan scheme by strengthening the monitoring and evaluation system of the scheme with the integration of biodiversity and climate risks management criteria.

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Botswana: Nature-positive investments for the inclusive development of the Cubango-Okavango River Basin

The Cubango-Okavango River Basin (CORB) is a transboundary river system flowing through the republics of Angola, Namibia and Botswana. Within the geography of the CORB, there is a world heritage site (the Okavango Delta) and several other protected areas such as the Bwabata National Park in Namibia.

The Nature Investment Facility (NIF), a partnership between UNDP, UNCDF and UNESCO, is developing a long-term sustainable financing mechanism that will support the long-term CORB development to be environmentally sound and economically prosperous .  The mechanism will support the operationalization of the CORB Fund, which aims to finance (in grants and equity participations) social and environmental interventions that protect biodiversity of global importance, build more resilient communities in the face of climate change, and promote livelihoods and socio-economic development. The project will also  provide a simultaneous catalytic support to the CORB Fund with two complementary windows of UNCDF loan instrument and UNCDF’s guarantee instrument, earmarked to the CORB Fund’s pipeline.  

While the observed land degradation in the CORB remains largely localized, the cumulative impact of inappropriate land use practices at basin level remains largely unknown.  Part of the supported activities will focus on improving adaptive capacity and resilience by facilitating and fast-tracking adoption of climate smart and sustainable land management practices.

Incorporating land neutrality targets into public policy 

Looking at the public sector, it is not easy to establish a baseline on how much we are already doing and how much we need. Land degradation, climate change and biodiversity loss are challenges faced by our entire economy. They do not represent single specific sectors. On topics like gender equality, climate change and biodiversity, much progress has been made with budget tagging, reviewing which major budgets contribute to these goals.

Indonesia leads the way by having in place a system of budget tagging for climate mitigation, adaptation and since this year also biodiversity. We need to include the alignment of Land Neutrality Targets into this work. In Colombia, a study was carried out to understand which public subsidies could be contributing to the drivers of biodiversity loss.  An analysis of changes in land use, agricultural production systems, and land occupation, generated recommendations to green the subsidized agriculture loan scheme with the integration of biodiversity and climate risks management criteria. This shows the importance of considering how existing incentives can be repurposed to promote sustainable land use.

Recognizing land degradation as a material risk for the private sector

Looking at private finance, we know more work is needed to bring them on board. Initial estimations say private finance for nature solutions reached a total of $102 billion, while only the Global Biodiversity Framework calls for mobilizing $200 billion annually by 2030.

We need to look at two sides of the coin: How we can prevent businesses operations and investments having a negative impact, and how to invest in positive opportunities. A promising trend is in the area of reporting and disclosures. With the advent of frameworks and standards as  TCFD, TNFD and GRI, companies around the world are now starting to measure their impact on nature and climate, define dependencies, risks and consider opportunities.

For example, it has been proven that in Brazil, exposure to degraded land can impact the value of listed companies in the food supply chain. In Malaysia, banks have been found to be strongly exposed to a broad range of nature-related risks, including derived from deterioration in surface water caused by unsustainable land use.  As such, investors must incorporate land degradation, as a long-term material risk, within their investment decision-making processes and actively engage with companies to mitigate their impacts.

The UN Convention to Combat Desertification (UNCCD) serves as the leading global platform where governments, businesses, and civil society converge to address current challenges and shape a sustainable future for land. As one of the three Rio Conventions, alongside treaties on climate change and biodiversity, the UNCCD underscores the inseparable nature of these issues.

Addressing the climate crisis, biodiversity loss, and land degradation cannot be done in isolation—these challenges require a unified approach, with healthy land serving as the cornerstone for achieving global climate, biodiversity, and sustainable development goals.