Covid-19 recovery plans must include financing for biodiversity to reduce future pandemic risks

Reflections from the Virtual Conference on Biodiversity Finance

Covid-19 stimulus measures must include safeguards for nature to reduce risks of future pandemics. A radical re-think of budgets, investments, and destructive policies that harm biodiversity is essential for long-term recovery after this crisis, according to the international conference on biodiversity that was moved online in April due to the coronavirus.

“Our house is on fire. Incremental changes won’t do it,” said Ines Verleye, one of the 520 participants to the three-day Virtual Global Conference on Biodiversity.

The event was organized by the OECD Biodiversity Land Use and Ecosystems (BLUE) programme, and the UNDP Biodiversity Finance Initiative (BIOFIN).

“We can build back better and emerge from the current crisis stronger and more resilient than ever – but to do so means choosing policies and actions that protect nature – so that nature can help to protect us,” added Ms. Verleye, one of the Co-chairs of the Thematic Workshop on Resource Mobilisation under the Convention on Biological Diversity (CBD).

“The coronavirus is a stark reminder of the complex links between infectious diseases and biodiversity,” said OECD Secretary-General, Angel Gurria, in his opening remarks to the conference. “Covid-19 is a powerful messenger with a powerful message – our system is broken,” he added.

Participants to the Virtual Biodiversity Conference included representatives from governments, UN offices, and ministries of planning, environment, and finance from countries around the world. They logged on through Zoom for three consecutive Wednesdays in April. The original plan was to host the meeting at OECD headquarters in Paris.

In his remarks to the participants, UNDP Administrator, Achim Steiner, noted that Covid-19 will have a wide-ranging global impact. “The pandemic is more than a health crisis. It will leave deep scars on our world. This is a crisis that knows no borders,” he said. He also stressed, “we can no longer afford finance to be an afterthought in the discourse of the environmental conventions, it needs to be at the foundation.”

Throughout the conference, participants reiterated that investments in biodiversity are investments in the Sustainable Development Goals, contributing directly to poverty reduction, resilience, economic growth, and sustainability.

Before the coronavirus, 2020 was to be the “super-year” for the environment with several planned international policy meetings, each with the potential to set nature on a path to recovery. Most of those conferences have been moved to 2021.

 “We should use this crisis as opportunity to rethink our recovery. If 2020 can look disappointing, it buys us time to keep building strong coalitions and finding innovations for biodiversity finance,” said Ms. Brune Poirson, France’s Secretary of State to the Minister for the Ecological and Inclusive Transition.

Bård Vegar Solhjell, Director General of Norad, was optimistic about the future, even when talking about the repercussions of Covid-19. “We humans have the ability to solve problems we caused ourselves, like wars, natural disasters and even pandemics. We are our best selves when we cooperate together.”

Onno van den Heuvel, global manager of BIOFIN, explained that the world of biodiversity finance needs cooperation from many “stars.” Among those stars from the private sector are commercial banks, development banks, pension funds insurers, private enterprises, asset managers, to name only a few. “We are all part of a global ecosystem – both financial and natural,” he said.

Carlos Manuel Rodríguez, Minister of Environment and Energy, Costa Rica said that we have failed to reach biodiversity targets in part because “we depended on ODA for nature conservation. We haven’t learned to mobilize funds from a range of sources.”

Minister Rodríguez lauded BIOFIN efforts to help countries estimate the size of the gap between what they invest and what they need to reach their biodiversity aims. Often, funding can be found within local and national budgets. “Countries need to do better in mobilizing domestic resources,” he urged.

He pointed to Costa Rica’s carbon tax as one effective and profitable example.  Its carbon tax is linked with the country’s payment for ecosystem services program, which pays farmers and landowners who protect and restore their forests for the carbon, water, and biodiversity services their land provides.

Seychelles was presented as a country at the forefront of innovative financing for biodiversity.  Mr. Alain de Comarmond, Principal Secretary, Ministry of Environment, Energy and Climate Change, highlighted financial solutions the country is using to maintain its natural environment, with emphasis on its vast marine protected area.

Among the financing measures in the Seychelles are efforts to green the tourism sector, including raising airport service fees and increasing levies on cruise ships and passengers. The country is strengthening its cost recovery fees for more effective biosecurity services. At the heart of its approach is the creation of a Biodiversity Finance Unit within the government that will coordinate biodiversity projects and mainstream financing into the budgetary and economic planning processes.

Anabelle Plantilla, National Coordinator for BIOFIN in the Philippines, spoke about the Biodiversity Finance Plans in her country. The Philippines was one of the first in the world to undertake a BIOFIN assessment to analyse financial solutions that could help the country reach its biodiversity aims.

For the Philippines, the approach has meant positive change. Its Expanded National Protected Areas System Bill was amended to substantially increase the number of protected areas by 94 in the country. Revenue sources to finance the protected areas will emanate from both public and private enterprises, including tourism and an oil and gas fund.

Vinod Mathur, Chairperson of the National Biodiversity Authority in India, and Fernanda Montero from the Ministry of Finance in Mexico, both explained that biodiversity funding does not need to be new money. Countries can take advantage of existing mechanisms, including in the public sector in subnational governments.

During a technical session on biodiversity expenditure reviews, conference participants pointed to some of the challenges they face in analysing and tagging local and national budgets to estimate how much goes towards biodiversity.

Dewa Ekayana, of the Indonesian Ministry of Finance, noted that biodiversity is a new expenditure category and “tracking it needs political will and capacity.”  He added that tagging and tracking are important to generate more effective budget allocation.

Finland’s, Armi Liinamaa, of the Ministry of Finance, and Marina von Weissenberg, of the Ministry of the Environment, Sustainable development, and budgeting, both noted that up-to-date and accurate statistics are vital for effective biodiversity finance.

Fernando García, who works with UNDP-BIOFIN in Guatemala, spoke about some of the unique issues in integrating biodiversity into municipal budgeting. He emphasized that it is a long-term process. With high poverty rates in municipalities, biodiversity is not a political priority. Therefore, consideration should be made as to how biodiversity will improve livelihoods for the poor and provide much-needed resources for municipalities.

Do No Harm

How to reform subsidies and policies that are harmful to biodiversity was another important focus of the Virtual Biodiversity Conference. Governments spend approximately USD 500 billion a year in supports that are potentially harmful to biodiversity. That is five to six times more than total spending on biodiversity.

“In the last 50 years, significantly more resources have been allocated to expenditure harming biodiversity than to conserve it. If we invest in biodiversity, we will see financial benefits. It is in our economic interest to conserve and protect biodiversity. If we do not, the costs will be higher later,” said Yasha Feferholtz, Member of the Expert Panel on Resource Mobilization for the Post-2020 Global Biodiversity Framework, UN Convention on Biological Diversity.

Katia Karousakis, of the OECD Biodiversity, Land Use and Ecosystems Programme explained that “fossil fuel supports are among the largest flows of public finance potentially harmful to biodiversity.” Support to other sectors, such as fisheries and mining, can also hurt the environment.

Agriculture is another prominent sector that receives support that can be deleterious to the planet. In 2017, OECD countries alone provided USD 228 billion in support to farmers, of which more than half -- USD 116 billion -- is considered more environmentally harmful than other types of support.

“While the percentage of overall support to agriculture, identified as potentially most environmentally harmful, has declined considerably since 1990, it has remained relatively constant over the past decade,” added Ms. Karousakis.

Kai Schlegelmilch, Federal Ministry for the Environment, Nature Conservation and Nuclear Safety in Germany, noted that his country offers roughly 55 billion Euros a year in subsidies that are considered potentially harmful to the environment.

He said that agriculture, because it encompasses the largest land use of any sector, has the highest impact on biodiversity in Germany. Mr. Schlegelmilch recommended that, for a start, the sector should make “compensation payments for the excessive use of synthetic fertilizers and pesticides,” which his argues, would provide approximately Euros 2 billion a year. He suggests those funds could then be applied to meeting Germany’s biodiversity goals.

Lira Zholdubaeva, of the UNDP BIOFIN programme in Kyrgyzstan, presented a model of how such a subsidy in the country could be replaced with an alternative approach. Farmers are allowed an exemption of VAT import taxes for fertilizers and pesticides. As a result, they overuse synthetic pesticides and fertilizers because they are inexpensive and can increase yields.

Now, the Kyrgyzstan Government is planning a cancellation of the VAT exemption and developing financial incentives to stimulate the use of environmentally friendly fertilizers and plant protection products and promote organic and sustainable farming practices.

Gabriela Blatter, of the Federal Office for the Environment in Switzerland, shared her country’s  experience with removing direct payments to livestock farmers, while increasing payments to farmers that meet biodiversity goals, like extensive upland grazing. The removal of the payments for intensive livestock farming was hotly debated. The government was able to overcome opposition by seizing a politically conducive moment for such a change and reaching a compromise that would use transition payments to minimize negative impacts on farmers. They used robust evidence to gather support for the reform and extensive discussions to build alliances.

Aldo Ravazzi, Ministry of Environment, Italy, said that even if subsidies are aimed at reducing poverty, “It is not a good idea to give subsidies that harm the environment or undercut biodiversity.” He added that for many subsidies, “We have to continue to study them and find ways to transform them from negative to positive biodiversity impacts.”

Private money for the public good  

Only through cohesive actions by both the private and public sector can the necessary shifts happen in financing for biodiversity. Private investors – from socially oriented start-up companies, ultra-net worth individuals, up to pension funds, banks and institutional investors – can be tapped to contribute and invest in a share of the USD $200-300 billion needed each year to conserve the world’s most important ecosystems.

The business case for private investments in conservation is becoming more evident.  Markets for goods produced in ways that are beneficial to biodiversity have grown rapidly, mostly in organic foods and certified timber value chains. In addition, when companies follow sustainable practices, they can also boost their reputation among consumers.

Yet, the private sector has much untapped potential in the biodiversity finance arena. “It’s not easy to get the private sector on board for conservation,” said Onno van den Heuvel. “That is why we need to find a mix of financing solutions.”

Philippe Zaouati, Chief Executive Officer of Mirova, sees a rising trend in private sector impact investment. Attracting big institutional investors, however, will require mechanisms for sharing the risk and scaling initiatives.

“Projects that are just starting are not investable,” said Mr. Zaouati. He suggests that small projects could benefit from public support to get off the ground in the incubator state. That would serve to “de-risk” investments so larger institutional investors can come in to bring initiatives to scale, using financial mechanisms like natural capital bonds.

Alice Durand-Reville, Corporate Public Affairs Director of Danone, agrees that the “Challenge is to go beyond pilot projects. We need to scale them up in a massive way.” In the agriculture sector, she predicts that “food systems have 10 years left to bend the curve. Otherwise, it’s doubtful we will have healthy and sustainable supply chains for agriculture.”

Her company, Danone, is a multinational food-product corporation that espouses regenerative agriculture to protect soil, empower farmers and promote animal welfare. It provides financial and technical support to more than 100,000 farmers worldwide. In Mexico, for example, it provides strawberry producers with technical and financial support for sustainable soil practices and better water management. It has transformed the value chain of strawberries they use while increasing producers’ income.

Dr Anil Perera, Additional Director-Domestic Operations, Central Bank of Sri Lanka, and Secretary to the Steering Committee on Sustainable Finance spoke about his country’s work in supporting the banking system to improve green finance practices through the creation of a Central Bank-led Sustainable Finance Road Map. BIOFIN is working with partners within this plan to design a business case for green financing products. This work is expected to produce an increase in the size and number of business loans connected to the sustainable use of biodiversity and natural resources.

Gilles Kleitz, Director for Natural Resources, Agriculture, Water, Forests and Oceans at the French Development Agency talked about the importance of the 400-500 development banks around the world that collectively provide between USD $4-9 billion in ODA for biodiversity finance. He said, “They are an incredible political lever to align financing for SDGs, climate and biodiversity.” One of their unique strengths is their convening power to bring together representatives from the public and private sectors, beneficiaries, scientists, NGOs, academia, and governments.

Ms. Mabel M. Niala, Head of Public Relations and Communications Strategy, Corporate Affairs, CEO Office, GCash, the Philippines presented a gamified way that her company is helping the environment. GCash is a company that offers fintech services, including mobile payments and transactions. The customers using the app can earn points from doing green activities like buying sustainable products or switching to paperless services. Once a customer earns enough points, a virtual tree appears in the app and they can choose a native tree to adopt. The tree is a real tree that will be planted under existing conservation schemes for watersheds. In just one year, GCash has more than 2.8 million users. They hope to sign on more green merchants and expand operations.

Looking to the future, Cheryl Case, Head of International Biodiversity and Environment at the Department of Food and Rural Affairs in the UK, said that the UK will soon issue a pathbreaking report on the economic case for biodiversity. As policymakers grapple with ways to reverse the alarming decline of the natural world, the review will calculate the benefits provided by ecosystems, such as forests and oceans that absorb carbon, and mangrove swamps that buffer coastlines. It will also show the costs of neglect.

Ning Liu, Negotiator for CBD COP15, Deputy Director General, Department of Nature and Ecology Conservation, Ministry of Ecology and the Environment in China said that the

Post-2020 agenda cannot be separated from financial needs. He recommended the establishment of long-term mechanisms to better evaluate and supervise the efficiency of biodiversity conservation funds.

Ms. Tracey Cumming, Member of CBD Panel of Experts on Resource Mobilisation, provided a preview of the Panel Report on resource mobilization for the post-2020 Global Biodiversity Framework. Scheduled to come out in May, the report, like the discussions during the Virtual Biodiversity Conference, recommends that countries undertake three actions: reduce or redirect resources that cause harm to biodiversity; generate additional resources to meet the objectives of the Convention on Biodiversity; and enhance the effectiveness and efficiency of those resources.

Ms. Cumming concluded that such shifts for biodiversity “will require transformative, inclusive and equitable change across economies and society.”

Photo Credits Gregoire Dubois