The accelerating crises of climate change and biodiversity loss are among the most pressing challenges of our time. Addressing them demands urgent global collaboration and action. The ongoing UNFCCC COP29, aptly referred as the “Finance COP,” brings renewed focus on the critical role of finance in addressing these challenges. Central to this year’s agenda is the establishment of the New Collective Quantified Goal (NCQG), which aims to replace the $100 billion annual climate finance commitment made by developing countries at COP15, with more ambitious financial targets starting in 2026. By prioritising the financial needs of developing nations, COP29 seeks to drive substantial investments in climate resilience and biodiversity conservation, setting the stage for global climate negotiations.
Addressing climate change and biodiversity loss demands a comprehensive and collaborative approach and given the scale of the challenge, traditional public funding sources alone are insufficient to meet global goals and the monumental demands of the crisis. This is where private sector engagement can come at the forefront of sustainable finance. By engaging public and private sectors, and leveraging the private sector’s financial resources and expertise, we can unlock significant investments in natural capital and nature-based solutions.
The Global Trends in Nature Finance
The global ecosystem for nature finance has evolved rapidly, with governments and organisations recognising the indispensable role of the private sector in closing the funding gap for Nature-based Solutions (NbS). At the global level, we have witnessed a growing trend of private sector involvement in nature finance. Corporations, financial institutions, and investors are increasingly recognising the material risks and opportunities associated with the health and resilience of natural ecosystems. This shift has led to the creation of innovative financial tools such as green bonds, nature-linked bonds, and biodiversity offsets, directing private capital towards conservation and restoration efforts.
The inclusion of environmental, social, and governance (ESG) factors in investment decisions has also significantly encouraged private sector involvement in nature finance. However, despite these advancements, the scale of funding remains to be inadequate. To achieve climate and biodiversity goals, investments in NbS need to triple up by 2030. However, at present only 14% of investments in NbS come from private sources, indicating a significant funding gap.
Overcoming Barriers to Private Sector Involvement
While private sector participation is the key to catalyse nature finance, many challenges persist: Lack of standardized measurement and reporting frameworks, Limited awareness of natural capital’s value, and Perceived misalignment between nature-based investments and traditional financial models, to name a few.
Addressing these issues requires policy interventions, regulatory reforms, and blended finance models to reduce investor risk and boost private sector involvement.
By offering an opportunity to accelerate these measures, COP29 advocates for supportive policy environments and innovative financial tools that can facilitate private investment in nature finance. The integration of ESG considerations into corporate strategies and COP29’s support for mandatory ESG reporting can improve transparency and mobilise capital for natural projects.
India’s Role and Initiatives
India, with its rich biodiversity and rapidly expanding economy, stands at the crossroads of development and conservation. As a megadiverse nation, India is home to about 8% of the world’s biodiversity and 18% of the global population, making nature finance a pivotal component of our sustainable development.
The country has made notable progress in encouraging NbS and attracting private sector investment in conservation. Initiatives such as the National Biodiversity Finance Plan is one such tool that aims to mobilise funds, including private sector contributions, for biodiversity conservation. India has also made a mark globally, emerging as the second-largest green bond market among developing nations, with cumulative issuances reaching $10.3 billion as of 2019. The establishment of the Compensatory Afforestation Fund Management and Planning Authority (CAMPA) illustrates India’s efforts to channel resources into forest conservation by utilising funds collected from development projects.
While domestic private sector involvement in biodiversity financing is still limited, blended finance models and emerging carbon and biodiversity credit markets offer opportunities to enhance this engagement. India’s goal of increasing forest cover aligns with private sector roles in afforestation and reforestation. To meet its climate and biodiversity targets, India needs to adopt innovative policies and financial instruments to develop a more dynamic nature finance market.
Learning from Global Success Stories
Successful global models represent how private sector finance can aid nature conservation. The Tropical Landscapes Finance Facility (TLFF) in Indonesia highlights the effectiveness of blended finance in reducing investment risks. Launched in 2016, TLFF integrates public and private funding, supporting sustainable projects that enhance rural livelihoods and protect tropical landscapes. Its issuance of a corporate sustainability bond worth $95 million in agriculture highlights the potential of blended finance to attract private investment for NbS.
Godrej & Boyce in India exemplifies corporate commitment to nature by conserving a 1,750-acre mangrove forest in Mumbai. This initiative protects urban biodiversity and sequesters 60,000 tons of carbon annually, showcasing how companies can aid biodiversity and provide natural climate solutions. India’s approach to COP29 highlights its dual focus on securing financial support for developing nations and advancing a fair framework in climate negotiations, while also leveraging mechanisms like carbon markets to drive private investments in NbS. By monetising carbon storage in ecosystems such as forests and wetlands, India encourages corporations to integrate nature-based carbon credits into their climate strategies. However, to align these efforts with COP29’s broader goals, India must address challenges like robust measurement frameworks, land tenure issues, and community rights – ensuring that climate action is both equitable and effective.
Policy Recommendations for COP29
To enhance private sector engagement in nature finance, COP29 should prioritise several key policy actions like:
- Standardised Frameworks: Adopting global measurement and reporting standards, such as those proposed by the Taskforce on Nature-related Financial Disclosures (TNFD), can boost investor confidence and encourage nature-positive investments.
- Fiscal Incentives: Tax credits and subsidies for biodiversity projects can reduce barriers for private investors.
- Public-Private Partnerships (PPPs): PPPs allow for shared risks and resources, enabling larger-scale conservation initiatives.
- ESG Integration: Promoting mandatory ESG reporting can increase transparency and encourage capital flows toward natural capital projects.
- Capacity Building: Equipping financial institutions, especially in emerging markets, to evaluate and fund NbS projects is crucial for expanding private sector involvement.
- Leveraging Carbon Markets: Developing robust carbon market frameworks with monitoring and verification mechanisms can finance biodiversity and climate goals through nature-based carbon credits.
- Addressing Loss and Damage: Integrating “Loss and Damage” into nature finance frameworks ensures a fair global response to climate change, fostering equity and supporting a just transition for all nations.
As COP29 unfolds, stakeholders look forward to progressive policies that can catalyse private sector involvement in nature finance. By establishing a supportive policy environment, COP29 has the potential to unlock major private investments in conservation, restoration, and climate resilience. The stakes have never been higher, but the solutions are within reach. With the right policies and commitments, COP29 can bring us closer to a future where economic progress and environmental sustainability go hand in hand. COP29 is not just a milestone – it’s a moment to reimagine the possibilities for a planet where nature thrives alongside humanity.
