BIODIVERSITY FINANCE
From bird insurance to blue bonds: China tests eight new ways to fund nature
UNDP’s Biodiversity Finance Initiative (BIOFIN) in China pilots market-based solutions, from migratory bird insurance to blue bonds, in Shanghai and…
China
China is one of the world's 17 megadiverse countries, covering 960 million hectares and hosting nearly 35,000 higher plant species and more than 6,400 vertebrate species. Its rich biodiversity supports economic development, climate resilience, food security and the well-being of millions of people.
Over the past decades, China has made significant progress in biodiversity conservation through an expanding protected area network, ecological redlines, ecological restoration programmes and growing investment in nature. However, rapid economic development, habitat fragmentation, pollution and climate change continue to place pressure on ecosystems, highlighting the need for additional investment and innovative financing mechanisms.
BIOFIN China was launched in 2021 to strengthen the country's biodiversity finance framework. The programme supports the assessment of biodiversity expenditures and financing needs, the identification of innovative finance solutions, and the integration of biodiversity into green finance and public investment. Starting with a pilot in Shanghai, BIOFIN is helping develop practical finance mechanisms—including ecological compensation, blue finance, biodiversity risk management and nature-positive investment—to mobilize additional resources for biodiversity conservation.
Finance solutions
Based on the findings of the Policy and Institutional Review (PIR), BIOFIN identified a portfolio of recommended finance solutions to strengthen biodiversity financing in Shanghai. These solutions are intended to inform the city's Biodiversity Finance Plan (BFP) and guide future public and private investment in biodiversity conservation.
Finance Solution 1: Public Investment and Ecological Compensation
Strengthen public investment in biodiversity by increasing fiscal expenditure, improving ecological compensation mechanisms, enhancing green taxation, optimizing agricultural and fisheries subsidies, and scaling up nature-based infrastructure investments. The approach also promotes ecosystem service valuation and Gross Ecosystem Product (GEP) accounting to better inform investment decisions.
Finance Solution 2: Market-Based Biodiversity Finance
Develop market-based financial mechanisms that mobilize private capital for biodiversity conservation. Priority actions include expanding mechanisms for realizing the value of ecosystem services, strengthening biodiversity risk management within financial institutions, promoting green finance, encouraging private and philanthropic investment, and supporting nature-based climate solutions.
Finance Solution 3: Blue Carbon and Blue Bonds
Develop innovative financing for Shanghai's coastal ecosystems through blue carbon valuation, carbon compensation mechanisms and blue bonds that support wetland restoration, coastal resilience and marine biodiversity conservation.
Finance Solution 4: Biodiversity Insurance
Pilot index-based Migratory Bird Insurance on Chongming Island to reduce human–wildlife conflict while protecting internationally important migratory bird habitats. The mechanism compensates farmers for biodiversity-related losses while creating incentives for conservation.
Finance Solution 5: Biodiversity-Positive Financial Products
Design biodiversity investment funds, biodiversity-linked loans and bonds, blended finance mechanisms, and biodiversity risk assessment tools to attract institutional investors and mainstream biodiversity within China's sustainable finance system
Key results
First Biodiversity Finance Policy and Institutional Review for Shanghai
BIOFIN completed Shanghai's first Biodiversity Finance Policy and Institutional Review (PIR), providing a comprehensive assessment of the city's biodiversity governance, policy framework, financial mechanisms and institutional arrangements. The review establishes the baseline for subsequent BIOFIN analyses, including the Biodiversity Expenditure Review (BER), Financial Needs Assessment (FNA) and Biodiversity Finance Plan (BFP).
Comprehensive Review of Biodiversity Finance Policies
The PIR mapped the full policy and legal framework supporting biodiversity conservation in Shanghai, demonstrating that biodiversity considerations are increasingly integrated into urban planning, economic development and financial policies. It also produced Shanghai's first catalogue of biodiversity finance mechanisms, incentives, subsidies and revenue sources, providing the foundation for future biodiversity finance reforms.
Strengthening Institutional Coordination
BIOFIN identified the major government institutions responsible for biodiversity conservation and analysed how they interact across sectors. The review highlighted opportunities to strengthen institutional coordination, improve stakeholder engagement and enhance the effectiveness of biodiversity finance governance across Shanghai.
Establishing a Biodiversity Finance Baseline
The PIR identified the main drivers of biodiversity change using the internationally recognized DPSIR framework, linking biodiversity outcomes with policy responses, investment decisions and institutional responsibilities. This provides an evidence base for prioritizing future biodiversity finance solutions and measuring progress over time.
Key documents
Shanghai, located at the confluence of the Yangtze River and the East China Sea, is home to diverse ecosystems, including internationally important wetlands, forests and coastal habitats. As one of China's leading financial centres, Shanghai has integrated biodiversity conservation into its urban development through comprehensive policies, strong institutional frameworks and growing investment in green finance.
Despite significant progress, biodiversity continues to face pressures from rapid urbanization, habitat fragmentation, pollution, invasive species and climate change. The Policy and Institutional Review (PIR) assesses Shanghai's biodiversity governance and policy framework, identifies gaps and opportunities, and recommends measures to strengthen biodiversity finance. Key recommendations include increasing public investment, expanding ecological compensation mechanisms, strengthening green finance, improving biodiversity-friendly tax incentives, and mobilizing greater private sector investment to support long-term conservation.
Shanghai Biodiversity Finance Policy and Institutional Review
Latest Publications
SEE ALL
