The UN Summit of the Future and its resulting Pact for the Future that took place in September recognised the urgent need to reform the international financial architecture to tackle global challenges. Similarly, Brazil’s G20 presidency has made international financial reform a priority on its agenda, though following the G20 Summit at the end of this month the mantle will pass to South Africa.
One of the biggest global challenges that must be tackled through such reforms is the need to build our collective resilience to nature loss and climate change. As emphasised in the recently concluded UN Biodiversity Conference in Colombia, the nature and climate crises are two sides of the same coin – a theme that will hopefully be highlighted at Cop29, taking place now in Azerbaijan – and we must urgently mobilise resources for adaptation and resilience.
This ecological crisis poses significant threats to our ability to thrive on this planet – jeopardising our economic and financial systems, our businesses and livelihoods, and our access to food and water, leading to increased conflict over resources, geopolitical tensions and forced migration.
There has been much focus on climate change, but nature loss poses a similarly significant threat. It not only exacerbates climate change but has its own independent devastating effects in terms of risks of fires, droughts, floods, diseases and shortages of food and water, all of which have major social costs and economic costs affecting every country in the world. The global economic system stands on the precipice of an interconnected nature and climate crisis – the two mutually exacerbating threats must be reversed in parallel.
The serious implications of this for our economy and financial system are now widely recognised. As written by the Coalition of Finance Ministers for Climate Action: “The global economy is embedded in nature as it is profoundly dependent – and has a profound impact – on nature, placing nature loss squarely in the realm of economic decision makers. The gap between humanity’s demands on nature and its ability to supply is widening, threatening continued provision of the critical ecosystem services that underpin key economic sectors.”
There is no time for piecemeal solutions.
We need to create an economy that is aligned not only with net zero and the achievement of the UN Sustainable Development Goals, but also with nature-positive goals – including an economy whose activities facilitate and help drive the reversal of nature loss by 2030 and net gains thereafter.
This can only be achieved by changing the economic incentives and rules of the game embedded in the global economy. We must stop bankrolling nature’s destruction and instead reward investment in more nature-friendly patterns of production and consumption, while at the same time ensuring a just transition to deliver prosperity and sustainable livelihoods for people on the frontlines of the climate and biodiversity-loss crisis.
Current levels of finance to achieve nature-positive goals continue to be insufficient. By 2030 annual investment into nature-based solutions must almost triple globally from their current level, which doesn’t exceed $200 billion.
The geographical distribution of investments mobilised for nature is inequitable. Only 20 per cent of today’s global nature finance flows to developing countries, despite the fact that emerging and developing economies are estimated to account for around 90 per cent of the investment opportunity in conserving and restoring nature from 2020 to 2030.
In addition, existing economic structures and incentives (including in finance and trade) undermine governments’ abilities to implement policies that are aligned with the goals and targets of the Kunming-Montreal Post-2020 Global Biodiversity Framework agreed by the Convention on Biological Diversity (CBD), which aims to reverse nature loss by 2030 and achieve full restoration by 2050.
An example of one of these incentives is the focus on GDP as the primary yardstick for measuring economic progress, which creates damaging incentives for short-termist decision-making that undermines future economic prospects. As recognised in the UN Secretary-General's Our Common Agenda report: “GDP rises when there is overfishing, cutting of forests or burning of fossil fuels. We are destroying nature, but we count it as an increase in wealth.”
Without shifting the emphasis to alternative measures of economic success that prioritise resilience and investment in the assets upon which our prosperity is based, including our natural capital, we will not meet existing global goals on nature.
There is also a lack of any real regulation of the financial sector around the climate and nature impacts of the investments they make, effectively ignoring the risks that are difficult to quantify with traditional models. Yet, business-as-usual directly threatens financial stability – the primary objective of financial regulators.
Another area where reform is needed is the creditor-dominated debt architecture that, in many cases, forces countries to increase extractive and ecologically devastating industries to repay their debts. Debt service payments average nearly 40 per cent of budget revenues in developing countries, severely limiting the fiscal space for investment in more sustainable development pathways, or building resilience to environmental threats, both of which would support nature-positive goals.
These are just some of the significant blockers to achieving a nature-positive economy that currently exist; indeed, there are many others, such as global trade rules that may restrict countries’ abilities to equitably reward environmental stewardship, the lack of governance of the global commons and the limited contribution of private finance, which represents only 18 per cent of current nature finance.
In 2022, nearly 200 countries signed up to the Global Biodiversity Framework. The goals of the Framework will only be achieved if we can align the economy with their delivery. High-level environmental forums including the CBD and UNFCCC Cops are key forums where we can advocate on this issue, but the conversation must also be taken forward in economic forums like the coming G20 Summit in Brazil in November 2024.
The CBD’s deadline for countries to submit revised National Biodiversity Strategy and Action Plans in line with the Global Biodiversity Framework has now passed. Yet, a majority of countries are yet to submit their revisions. As countries continue to revise their NBSAPs, they must design these to be synergistic with the enhanced and investable NDCs of countries. These revisions and the implementation to follow must also acknowledge the role of economic transformation to deliver nature-positive outcomes and facilitate investment in the transition.
With the G20, there is a great opportunity to advance this agenda through the G20 Sustainable Finance Working Group and their Sustainable Finance Roadmap, which thus far has not explicitly incorporated nature-related issues.
The conservation organisation WWF has published a Global Roadmap for a Nature-Positive Economy, which sets out an agenda for action to work towards a nature-positive economy by outlining areas of reform required in the economic rules of the game at the global level.
Many of these recommendations could, for one, be embedded in the work of the G20 Sustainable Finance Working Group, particularly as Brazil’s G20 presidency has emphasised the urgent need for reforms to the international financial system. The Working Group will be reviewing progress on its roadmap next year, providing an avenue to incorporate nature-related issues into the refreshed work programme.
The global community needs to grasp this nettle and work harder and faster to deliver the changes we need to tackle our self-destructive operating model and deliver a nature-positive economy. The coming events within a year could provide opportunities to start this process.
