Copyright infringement not intended

Picture Courtesy: Down to earth

Context:

The UNEP report highlights a severe distortion in global financial flows, where for every $1 invested in protecting nature, more than $30 is spent on activities that harm it.

Key Highlights of the UNEP State of Finance for Nature 2026:

• Extreme imbalance in nature finance: The report highlights a severe global imbalance in environmental finance, showing that for every $1 invested in protecting nature, more than $30 is spent on activities that damage ecosystems, with nature-negative finance reaching about $7.3 trillion annually compared to just $220 billion for nature-based solutions (NbS).

• Dominance of harmful subsidies and high-impact sectors: A large share of environmentally harmful finance flows from public subsidies worth around $2.4 trillion, primarily supporting fossil fuels, industrial agriculture, and excessive water use, while private investment remains concentrated in high-impact sectors such as energy, mining, utilities, and heavy industry.

• Inadequate funding for nature-based solutions: Nature-based solutions, including reforestation, wetland restoration, mangrove protection, and sustainable land management, receive only 5% of global GDP, and UNEP estimates that investment must increase to at least $571 billion annually by 2030, which is more than double the current level.

• Decline in certain public and philanthropic contributions: Public finance for sustainable agriculture, forestry, fisheries, environmental policy, and wastewater management has declined in recent years, while private philanthropic funding for nature has dropped sharply, and voluntary nature-based carbon offset markets have contracted due to concerns over credibility and standards.

• Uneven regional distribution of nature finance: Government spending on nature-based solutions remains highest in Asia, while North America and Europe recorded notable growth, but Africa, the Middle East, and Oceania saw substantial declines, revealing widening regional disparities in environmental investment.

• Growing role of Official Development Finance (ODF): Official Development Finance for nature-based solutions has increased and plays a crucial enabling role for developing countries, also helping mobilise private capital, though future ODF flows may face pressure due to global geopolitical and fiscal constraints.

Nature-based solutions:

Nature-based Solutions are actions that protect, restore, or sustainably manage ecosystems in ways that address societal challenges such as climate change, biodiversity loss, disaster risk, water security, and human well-being.

Types of nature-based solutions:

NbS include activities such as reforestation, afforestation, wetland and mangrove restoration, watershed management, agroforestry, urban green spaces, coral reef protection, and sustainable land and water management.

Challenges in Nature-based Solutions (NbS) finance:

Massive global finance imbalance: Despite global commitments, the world currently spends over $30 on nature-destructive activities for every $1 invested in nature protection, with annual nature-negative flows at around $7.3 trillion compared to $220 billion for NbS in 2023, a stark imbalance that undercuts efforts to shift capital toward NbS at the scale needed.

Enormous investment gap: To meet global biodiversity, climate and land-restoration targets, NbS investment must increase 2.5 times to about $571 billion per year by 2030, yet current funding is far below this level, representing only about 0.5 % of global GDP. This persistent financing gap is a core structural challenge.

Heavy dependence on public finance: Nearly 90 % of current NbS funding comes from public sources, while private investment remains very low (about $23.4 billion in 2023). This over-reliance on public budgets limits scale because government resources are finite and face competing development priorities.

Weak private sector participation: Private capital flows heavily into nature-negative sectors, and private investment in NbS is just around $23 billion, reflecting low private appetite due to perceived uncertain or long payback periods, lack of clear financial returns, and limited high-quality, bankable NbS projects.

Limited financial instruments: There is a lack of diversified financial instruments tailored to NbS needs (e.g., blended finance, impact bonds, risk-sharing mechanisms). Without innovative tools that can de-risk investments and attract institutional finance, scaling remains constrained.

Strategic challenges for India arising from low NbS finance:

• Increased climate vulnerability: India is among the most climate-vulnerable countries, facing rising extreme rainfall events, cyclones in the Bay of Bengal, and heatwaves, yet underfunded restoration of mangroves, forests and wetlands weakens natural climate buffers that could significantly reduce disaster impacts.

• Threat to agricultural sustainability: Nearly 55% of India’s workforce depends on agriculture, but around 30% of India’s land is degraded (ISRO Desertification Atlas), and low NbS investment limits scaling of agroforestry, soil restoration and watershed development, which are crucial for improving soil fertility and water retention.

• Rising economic losses from disasters: India loses billions of dollars annually due to floods, cyclones and droughts, and studies show ecosystems like mangroves can reduce wave height by up to 66%, yet insufficient NbS finance means higher reliance on costly engineered infrastructure.

• Water security under stress: India supports 18% of the world’s population but has only 4% of global freshwater resources, and degraded catchments, deforestation and wetland loss reduce groundwater recharge, worsening urban water crises like those seen in Chennai and Bengaluru.

Measures to scale up Nature-based Solutions (NbS):

• Reforming environmentally harmful subsidies: UNEP stresses that governments must phase out or repurpose the $2+ trillion in environmentally harmful subsidies, especially those supporting fossil fuels and unsustainable agriculture, and redirect these funds toward ecosystem restoration and sustainable land management.

• Integrating nature into national economic planning: The Dasgupta Review on the Economics of Biodiversity recommends that countries incorporate natural capital accounting into budgeting and national accounts so that ecosystems are valued as economic assets, encouraging greater public investment in NbS.

• Scaling up public domestic finance: UNEP identifies public domestic budgets as the largest existing source of NbS finance and calls for aligning national development plans, climate adaptation strategies, and biodiversity action plans with increased allocations for ecosystem restoration.

• Developing robust carbon and biodiversity markets: Strengthening standards, transparency, and monitoring in voluntary and compliance carbon markets can rebuild trust and channel more finance into forest, mangrove, and soil carbon projects, while emerging biodiversity credit markets can create new incentives for conservation.

• Aligning financial regulations with nature goals: Financial regulators can encourage nature-positive investments by integrating nature-related financial risks into disclosure frameworks, building on initiatives like the Taskforce on Nature-related Financial Disclosures (TNFD).

• Expanding Official Development Finance (ODF): UNEP notes that ODF plays a catalytic role in developing countries and recommends using it strategically to de-risk projects and crowd in private investment, particularly in biodiversity-rich but capital-scarce regions.

Conclusion:

Scaling up finance for Nature-based Solutions is not merely an environmental priority but an economic and developmental necessity, as restoring ecosystems strengthens climate resilience, biodiversity, and long-term human well-being.

Source: Down to Earth