Inger Andersen is Under-Secretary-General of the United Nations and Executive Director of the UN Environment Programme, headquartered in Nairobi, Kenya. From 2015 to 2019 she was the Director-General of the International Union for Conservation of Nature (IUCN). Andersen has more than 30 years of experience in international development economics, environmental sustainability, strategy and operations. She has also held several leadership positions at the World Bank, including Vice President of the Middle East and North Africa, Vice President for Sustainable Development and Head of the Consultative Group on International Agricultural Research (CGIAR) Fund Council.
Nature is sending us invoices, and they are getting bigger by the day. The costs of the COVID-19 pandemic and other zoonotic diseases, linked to how we treat nature, are well-documented. Increasing wildfires and heatwaves, associated to climate change, are costing national economies billions of dollars each year. Pollution and waste are damaging ecosystem services, claiming millions of lives and placing a huge financial burden on healthcare systems.
These impacts and costs – all arising from what we at the United Nations Environment Programme (UNEP) call the triple planetary crisis of climate change, nature and biodiversity loss, and pollution and waste – are only going to increase. This was clearly laid out by the recent reports from the Intergovernmental Panel on Climate Change (IPCC) – which outlined the full consequences of steaming towards temperatures that far exceed the Paris Agreement targets of limiting global warming to 1.5 or 2°C.1
We cannot afford to keep paying these invoices as they arise. Instead, we must invest now in mitigating and adapting to climate change, protecting nature, and soundly managing chemicals and waste.
As the IPCC recently pointed out, financial flows are currently a factor of three to six below the levels needed by 2030 to limit warming to below 1.5 or 2°C. There is, however, sufficient global capital and liquidity to close investments gaps. It is likely to cost some US$ 60 trillion between now and 2050 to transition to net-zero emissions and climate-resilient economies. COVID-19 showed we can find these levels of investment in moments of emergency, with trillions of dollars going into vaccine development and rescue packages. Make no mistake: the triple planetary crisis is an emergency.
Decarbonisation moving, but adaptation stalling
For nature to do its work, we must decarbonise. It is in this area that most of the financing focus, and progress, has taken place.
The Paris Agreement commits governments to ensuring that all financing – public and private – becomes consistent over time with the long-term Paris objectives. We have seen numerous commitments on net-zero financing, with one example being the United Nations-convened Net Zero Asset Owner Alliance, through which 35 institutional investors with US$ 5.5 trillion in assets under management have committed to net-zero emissions portfolios by 2050.
Meanwhile, 38 commercial banks have, through the Collective Commitment to Climate Action under the UNEP Finance Initiative-led Principles for Responsible Banking, committed to aligning their US$ 15 trillion in assets with a sub-2°C-warmed world.
Though we are largely at the commitment stage on mitigation, with a lot of work still to be done, the private and public sectors are at least leaning in. The same cannot be said for adaptation. Investing in mitigation may reduce the need for adaptation, but it will not end it. The Paris Agreement calls for mitigation and adaptation to be balanced for good reason – we are looking at a world suffering from a climate disaster each day by 2030.
Climate finance from the public and private sectors has increased steadily over the past decade, reaching US$ 632 billion in 2019/20. Adaptation finance, however, accounted for less than 10% of this figure. UNEP’s 2021 ‘Adaptation Gap Report’ indicates that estimated annual adaptation costs could hit US$ 140–300 billion by 2030, rising to almost double that by 2050.2
We know systemic risks to disasters and climate change impacts can be addressed by investing in healthy, well-managed ecosystems and nature-based solutions. Effective ecosystem-based adaptation reduces risks to people, biodiversity and ecosystem services, with multiple co-benefits.
There have been numerous high-level calls to better harness the conservation, restoration and management of ecosystems for delivering climate adaptation, and to significantly scale up financial support for nature-based solutions. Despite this, international public finance for ecosystem-based adaptation is rising too slowly, making up less than 2% of total climate finance flows. Taking a wider view, UNEP’s 2021 ‘State of Finance for Nature’ report estimates the nature-based solutions finance gap will reach US$ 8.1 trillion by 2050.3 If our global climate, biodiversity and land degradation targets are to be met, nature-based solution investments will have to triple over the next ten years.
The resolution adopted on nature-based solutions by the UN Environment Assembly in March 2022 represents a step forward, as having an agreed UN definition of nature-based solutions allows us to develop a common understanding of our aims, mutually reinforce what we do, track our progress and assess the impacts of our collective efforts. While this should help financing flows, it is just one step.
Global funds and institutions play a crucial role in unlocking public and private finance supporting the transition to a net-zero future. Nonetheless, they must move away from a project-based approach, which will never be sufficient to deliver the adaptation financing needed. Only changing the system will get the job done.
The public sector as enabler of adaptation finance
Public financing cannot close the financing gap on its own. Even so, the public sector can enable economy-wide investment in adaptation by setting policy and price signals, and developing the regulatory environment to incentivise investments in climate resilience. Taxing carbon-intensive practices, for example, would help establish a carbon price, thereby guiding investments towards less harmful technologies.
The barriers to governments scaling investment on ecosystem-based adaptation are many and varied: insufficient understanding, knowledge and information; inadequate technical skills to mainstream adaptation into policies, plans and investments; a lack of clear institutional arrangements and collaboration among government departments, institutions and sectors; and an absence of supportive policies and regulations.
Mainstreaming ecosystem-based adaptation into economic development strategies and sectoral strategies has also been challenging. For example, agricultural subsidies amount to well over US$ 500 billion globally every year, but, according to the Organisation for Economic Co-operation and Development, largely distort markets, stifle innovation and harm the environment. Tracking the impact of adaptation financing and course-correcting is also weak. If these barriers can be overcome, progress will be made on financing.
Nudging the private sector to do more
A 2019 UNEP Finance Initiative report noted five broad barriers to scaling up financing for adaptation within the financial sector: 1) inadequate support or incentives to act; 2) weak policies; 3) market barriers; 4) operational gaps at the institutional level; and 5) low technical capacity for climate risk management.4
While there are many good examples of adaptation models that can work, finance and capacity gaps are holding back the scaling up of promising initiatives. The public sector can help de-risk and enable the investment environment through policies and mechanisms that reduce costs, increase investment certainty and support private sector returns.
The financial community is not sufficiently aware of nature’s value and what it means for our planetary health and resilience. As such, they need to be nudged in the right direction.
The Task Force on Finance Disclosures developed a disclosure framework on climate-related finance risks that within two years was supported by 500 organisations. Similar initiatives aimed at ensuring nature is considered an asset on every balance sheet are needed – indeed, one such initiative, the Taskforce on Nature-related Financial Disclosures, is already in the works. UNEP’s Finance Initiative is working to convene the financial community under net-zero platforms to scale up investments and bridge the nature- based solutions finance gap.
Investing in nature saves money
There is a strong case for investments in nature offering a way of gaining public and private returns. A 2018 Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services regional assessment report on Africa, for example, found the economic value of investing in mangrove forests for coastal protection to be, respectively, US$ 4,500/km2/year and US$ 5,000/km2/year in West and East Africa.5
Meanwhile, a global review of the costs and benefits of coastal defences found that salt marshes and coral reefs were 2–5 times more cost-effective at protecting coastlines than engineered structures, and a study by the International Institute for Sustainable Development calculates that using nature in infrastructure projects can save governments and investors US$ 248 billion annually. Nature-based solutions can provide up to 37% of global cost-effective solutions to meet the Paris Climate Agreement targets spanning reduced deforestation and forest degradation. Getting these messages out there will build the case for investment.
Policy integration is critical
Closing the adaptation financing gap requires taking an integrated approach in the following three ways: 1) sharing risk and finance between the public and private sectors; 2) designing solutions that deliver mitigation as well as adaptation objectives; and 3) harmonising policies and investments across sectors.
Investing in nature for adaptation would allow policy-makers, donors and practitioners to pursue multiple policy agendas simultaneously, and help governments meet their commitments under almost every international process. Moreover, investing in ecosystem-based adaptation could contribute to countries’ national development strategies and sustainable development agendas by enhancing food, water and energy security; providing opportunities for training and empowerment; creating jobs; improving health outcomes; and reducing disaster risks.
So, either we keep paying the invoices as they arrive until the bank – and the planet – is depleted, or we get money flowing from public and private sources now in order to reduce their size and frequency. The UN has an important role to play in enabling greater understanding of the indivisibility of the environmental challenges we face, and why it makes financial sense to address them immediately.
In the long run, this work is all about safeguarding life on Earth – as well as profits. Investments in climate mitigation and adaptation, in protecting nature, and in reducing pollution and waste are not sunk costs. Rather, they are costs we will get back by keeping governments, businesses and humanity afloat.
United Nations Environment Programme (UNEP), ‘Adaptation Gap Report 2021:The Gathering Storm – Adapting to Climate Change in a Post-Pandemic World’, 2021, www.unep.org/resources/adaptation-gap-report-2021.
Climate Finance Advisors,‘Driving Finance Today for the Climate Resilient Society of Tomorrow’, UNEP Finance Initiative and Global Commission on Adaptation, 2019, www.unepfi.org/publications/driving-finance-today-for- the-climate-resilient-society-of-tomorrow/.