$7 trillion invested every year in products and activities that directly harm nature

The State of Finance for Nature report, released at COP28 by the UN Environment Programme (UNEP) and its partners, reveals a sobering reality: nearly $7 trillion, or about 7% of the global GDP, is invested annually in activities detrimental to nature. This stark revelation brings into focus the urgent need to redirect these investments towards more nature-positive initiatives.

Disturbing imbalance in nature-related investments

The report highlights a worrying disparity in investment patterns. While $200 billion was invested in nature-based solutions in 2022, investments in activities harming nature were over 30 times larger. This imbalance underlines the critical need to confront the combined crises of climate change, biodiversity loss, and land degradation.

Inger Andersen, UNEP’s Executive Director, emphasizes the underfunding of nature-based solutions. “Nature-based solutions are dramatically underfunded. Annual nature-negative investments are over 30 times larger than financing for nature-based solutions that promote a stable climate, and healthy land and nature,” said Andersen.

The stark contrast between annual investments in nature-negative activities and those promoting a stable climate and healthy ecosystems is alarming. Andersen calls for a reversal of this trend, advocating for Indigenous Peoples as primary beneficiaries.

“To have any chance of meeting the sustainable development goals, these numbers must be flipped – with true custodians of the land, such as Indigenous Peoples, among the chief beneficiaries,” Andersen implores.

Where the nature investment funds flow

The analysis unveils that private nature-negative finance flows amount to a colossal $5 trillion annually, dwarfing the modest $35 billion in private investments for nature-based solutions. Predominant sectors contributing to these negative flows include construction, electric utilities, real estate, oil and gas, and food and tobacco.

Niki Mardas, Executive Director of Global Canopy, stresses the danger of persisting with current business practices. He highlights the need for a transition to sustainable practices and the cessation of financing activities that destroy nature.

“This year’s report is a stark reminder that continuing with ‘business as usual’ poses a severe threat to our planet, reinforcing the urgent need for a transition to sustainable business practices and to stop the financing of nature destruction,” said Mardas.

Mardas points to increasing regulatory pressure and the availability of data and frameworks as tools for companies to commit to a nature-positive future.

“The net is tightening, with increased regulatory pressure in key areas like tackling deforestation, it means that those companies and financial institutions still driving the problem now need to make best use of the excellent data, guidance and frameworks already available to urgently commit to a nature-positive future,” Mardas concludes.

The report sheds light on government spending on environmentally harmful subsidies, estimating it at $1.7 trillion in 2022 across agriculture, fossil fuels, fishery, and forestry sectors. A notable increase in fossil fuel subsidies underscores the necessity of policy reform in these areas.

The funding gap and future targets

There’s a notable gap in financing for nature-based solutions, with governments leading the meager $200 billion allocated in 2022. To meet the Rio Convention targets and the Global Biodiversity Framework, funding for nature-based solutions needs to almost triple by 2030 and quadruple by 2050.

Jochen Flasbarth, from the German Federal Ministry for Economic Cooperation and Development, underscores the importance of investing in nature-based solutions.

“The widespread degradation of nature is not only exacerbating the climate crisis but also pushing us towards exceeding planetary boundaries. Investing in nature-based solutions provides a strategic and cost-effective avenue to address the interconnected challenges of climate change, biodiversity loss, and land degradation while at the same time making tangible headway towards the sustainable development goals,” said Flasbarth.

Investment opportunities in nature-based solutions

The report highlights substantial investment opportunities in sustainable land management and ecosystem protection. These investments are not only cost-effective but also provide multiple benefits, including long-term profitability and private investment catalysis.

To achieve the Rio targets, there needs to be a dramatic reduction in the nearly $7 trillion currently flowing into nature-negative practices. The financial sector and businesses must increase their investments in nature-based solutions and foster incentives to divert finance from harmful activities.

Government policies are critical in creating an environment conducive to nurturing nature-positive investment opportunities. This includes repurposing subsidies and encouraging private sector participation.

In summary, the State of Finance for Nature report calls for a significant shift in global investment patterns. The need to realign nearly $7 trillion from nature-negative to nature-positive investments is paramount. This shift presents a critical opportunity to impact climate change positively, protect biodiversity, and prevent land degradation, marking a pivotal moment for transformative change in global finance.

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