1.4.2 Finance results

There are many ways of influencing economics and finance to address biodiversity challenges. The most obvious is to assure long-term and steady financial flows to conservation through increased government budgets, publicly-privately funded trust funds, payments for ecosystem services, etc. However, if these finance solutions only mobilize or redirect money, they will not address the root causes of biodiversity loss and directly affect the drivers of biodiversity remediation and restoration. BIOFIN has developed a comprehensive framework for biodiversity finance built around four key desired results. These four complementary results recognize that all finance strategies, tools and instruments operate within complex systems. By specifying these four results as a lens to identify and prioritize finance solutions, stakeholders can seek a mix of comprehensive, innovative and effective finance solutions. Each result is described below:

  • Avoid future expenditures - measures that can prevent or reduce the need to undertake a future investment. This means eliminating or amending existing counterproductive policies and expenditures (e.g. increasing taxes on sugar content or tobacco), investing in preventative actions and infrastructure (green infrastructure, prevention of invasive alien species), or aligning business and livelihood practices with sustainable development. Examples include taxes on harmful products (this can generate a double dividend) or strong fines for illegal introduction of alien species.
  • Deliver better - measures that can enhance costeffectiveness and efficiency in budget execution, achieve synergies, align incentives, and favour a more equitable distribution of resources. Examples include the establishment of biodiversity business challenge funds, the merger or coordination of national conservation funds or donor efforts, retention of park entrance fees to better motivate managers, and the establishment of central procurement units or staff incentives to increase delivery of resources.
  • Generate revenues - measures that can generate or leverage financial resources allocated to biodiversity. Examples include protected area user fees, the attraction of impact investment in conservation projects, the revision or introduction of green taxes (fuel taxes, taxes on chemical pesticides, water fees, etc.), the issuance of debt instruments such as green and blue bonds, etc.
  • Realign expenditures - measures that reorient existing financial flows towards improved biodiversity management. Main options include reducing, redirecting or eliminating subsidies and other spending that harms biodiversity and increasing or redirecting financial flows towards biodiversity. Another example is lobbying for shifting budget allocations towards biodiversity.

A single finance solution can achieve multiple results. Introducing a green tax can help reduce future costs by influencing certain behaviours (e.g. reducing the level of use of chemical fertilizers and thus the need to restore the soil), while mobilizing additional resources the government can direct towards conservation.

Figure 1.4 highlights how financial results are connected to biodiversity, either by producing a measurable biodiversity outcome (e.g. expanding marine protected areas) or reducing a threat or negative pressure on biodiversity (e.g. applying sustainable forestry practices). Delivering better and generating revenues can contribute to improved biodiversity outcomes through increased budgets and more effective execution. The avoidance of future costs and the realignment of existing expenditures (such as phasing out of harmful subsidies) can reduce pressures on biodiversity by addressing the main drivers of loss, such as the overconsumption of natural resources due to unsustainable agriculture or fishery practices. Generating revenues and realigning expenditures directly affect financial flows. Delivering better and avoiding future expenditures are enabling actions that produce a measurable financial impact but not necessarily a financial transaction.

Figure 1.4: Relationship Among Financial Results, Biodiversity Outcomes and Actions