The challenges of biodiversity investments through financial markets

Our planet continues to suffer a downward trend in biodiversity. Reversing this trend requires addressing the financial gap in nature conservation and restoration investment under scarce public funds. The Global Biodiversity Framework estimates $942 billion per year is needed from biodiversity finance to help solve the biodiversity crisis. To reduce this biodiversity finance gap, a variety of tools exist that direct private, public and blended finance to generate biodiversity positive outcomes.  The role of financial markets in biodiversity conservation has been broad in terms of novel instruments and frameworks but shallow in impact of reversing biodiversity decline. We performed interviews with financial experts focused on biodiversity impact bonds to understand the challenges and opportunities of transparency, additionality and liquidity of how investments into biodiversity from financial markets can assist in bending the curve.  The sum of all public spending on biodiversity and private market innovations has yet to ‘bend the curve’ of biodiversity decline as envisaged in the Kunming-Montreal Global Biodiversity Framework and reversing biodiversity decline is not helped when we have yet to agree on a standard for what we mean by biodiversity nor how we should value biodiversity.  To reduce this biodiversity finance gap, a variety of tools exist that direct private, public and blended finance to generate biodiversity positive outcomes, including building markets for nature conservation (for example, carbon and biodiversity offsets markets), and creating financial market instruments such as green bonds and debts for swaps. This paper focuses on the latter, i.e., in financial markets instruments are those regulated by regulators as the role of these financial markets in biodiversity conservation has been limited in capital raised relative to the overall size of international markets. The overall global bond market stands at $133 trillion of which $5.7 trillion are labelled as green bonds, which would be ample to plug the biodiversity gap. However, only 3% or $171 billion of those green bonds have some allocated benefit for biodiversity. We present the results of 23 interviews with financial markets experts across Europe and North America investigating the barriers and opportunities for leveraging financial markets in nature conservation.