“Integrating biodiversity finance functions” costing
BIOFIN activities cover multiple functions. They encompass advocacy and awareness-raising (e.g. nurturing champions), coordination and policy coherence, technical support for the design and implementation of finance solutions spanning from public to private sector, and costing and modelling biodiversity actions. The sustainability of the BIOFIN Process is influenced by the way the activities are designed and managed. Government and stakeholder ownership, under the leadership of focal ministries, is no doubt critical. Ownership can be achieved in many ways including by favouring direct implementation from government institutions: in India the technical work was undertaken by government agencies, including the National Institute for Public Finance and Policy and the Wildlife Institute of India. The objective is to empower and enhance the organizational capacity of national institutions to promote and manage biodiversity finance into the future.
BIOFIN-related functions can be embedded into a country’s organizational framework (see figure 7.2) at multiple levels of commitment:
- At minimum, focal points for biodiversity finance/BIOFIN need to be appointed in the ministries of finance and environment.
- The Steering Committee can be transformed into a permanent, inter-ministerial coordination body, formally established through a government decree and made responsible for the implementation of the Biodiversity Finance Plan. Equally, the technical committee could become a permanent advisory board.
Figure 7.2: Levels of Institutionalization for the BIOFIN Process in a Country’s Organizational Framework
Biodiversity finance functions in public agencies
Biodiversity finance experts can be formally embedded in key ministries (such as finance, environment, or planning) to work full-time on biodiversity finance and act as lead technical advisors. Uganda, for example, has been exemplary by turning the BIOFIN project coordinator position into a staff post within the National Environment Management Authority.
A higher level of sustainability can be achieved by amending formal mandates and functions of units/ divisions within ministries or even entire ministries, ensuring they have a firm mandate to identify and deploy finance solutions.
A dedicated biodiversity finance unit, responsible to monitor the implementation of the Finance Plan, provide technical advice, coordinate all initiatives related to biodiversity finance and generate new and innovative ideas for additional finance solutions can be established and staffed (see the example from Seychelles).
The BIOFIN Methodology and related biodiversity finance courses can be integrated into academia and civil service training curricula to train the next generation of biodiversity finance experts. BIOFIN teams can also proactively deliver lectures at universities or training institutes within existing curricula. India and Thailand have taken steps towards developing and delivering national training material. Online training modules and webinars can offer the same to a wider audience.
Establishing a Biodiversity Finance Unit in the Seychelles
When BIOFIN started, no government entity in the Seychelles was mandated to work on biodiversity finance. Their finance plan contains provisions for establishing a new unit to work exclusively on biodiversity finance.
Introducing budget tagging/coding systems
BIOFIN assessments can be integrated as recurrent activities within public institutions. The Biodiversity Expenditure Reviews can be institutionalized by introducing biodiversity budget tagging or coding in public finance management software and practices. The tagging system will flag expenditures partly or fully allocated towards biodiversity, thus enabling the production of regular biodiversity expenditure assessments and lowering transaction costs. Budget tagging was successfully applied for climate change and is currently being piloted for biodiversity in both the Philippines and Indonesia.
Adding biodiversity categories to periodic public expenditure reviews is another approach. Development organizations could adopt biodiversity-related expenditure markers, the best-known example being the OECD-DAC Rio Markers. Finally, biodiversity expenditure recording can also be aligned to natural capital accounting and the reporting of statistical agencies.
Private companies do not usually register biodiversity spending as such, but several methodologies exist to track conservation spending, for example by including it in CSR reporting or by applying natural capital accounting systems.
Systematization of Biodiversity Expenditure Reviews: To enable countries to regularly conduct expenditure reviews, a rapid assessment can be conducted to find out the capacities required to do so. Ideally, this is done before the first BER or during an update of the report.
Climate Change Budget
Tagging in Indonesia
Indonesia has shown that it is possible to institutionalize an expenditure review, by adopting a tagging system into the national public finance management software. The software enables marking the relevance of each expenditure towards climate change mitigation. After this is done, automatic reporting can be produced. The tagging system resulted in the issuance of the first sovereign US$1.25 billion Sukuk, which relied upon it for the identification of eligible projects.
Aligning financial needs data with planning and finance practices
To increase the use of Financial Needs Assessment (FNA) in the national planning cycle, alignment with government expenditure accounting practices is crucial. Ideally, the FNA should generate data that can be used for medium- and longterm planning frameworks as well as annual budget proposals. Bhutan is one of the countries guaranteeing full compatibility. Its FNA directly provided baseline data for the 12th Five Year Plan.
An FNA, while necessarily a time-bound exercise, can reduce the costs of undertaking similar exercises in the future, including by identifying most applicable costable actions and unit costs and the development of costing models where possible. Costing exercises let us compare multiple implementation models with different costs, which can provide vital information for planning and decision-making and inputs to more sophisticated cost-benefit analysis. Building sound costing practices into any organization brings rigour to planning exercises and eventually fosters cost-effectiveness in public planning.
Systematization: Once the initial costing data are produced, and reporting templates have been developed and lessons documented, future costing exercises are likely to require less effort. Key government officials might need training on costing and modelling methodologies.