Unlocking finance for nature must guide MDB reform
By following three practical principles for reform, multilateral development banks can help shape an equitable, net zero, nature-positive global economy that delivers lasting prosperity.
Elisa Vacherand, Interim Leader, WWF Global Finance Practice
Eighteen months ago at COP26 in Glasgow, in the thick of the pandemic, ten leading multilateral development banks (MDBs) made a significant joint statement on nature, people and planet.
Recognising nature’s critical role in securing our well-being, health, and prosperity, and in underpinning climate resilience and adaptation, they made commitments to foster nature-positive investment, and to put nature at the heart of their decision-making.
More recently at COP15 in Montreal, agreeing a new lodestar for global action on nature through the Kunming-Montreal Global Biodiversity Framework (GBF), 196 countries committed to halt and reverse biodiversity loss by 2030, including by eliminating harmful subsidies and mobilising at least $200 billion annually for nature.
Now is the time to deliver on these commitments — and to go further, by making unlocking and scaling finance for nature the raison d’être of long overdue MDB reforms. While there is broad consensus on the need for reform, shareholders at this week’s World Bank / IMF Spring Meetings have a clear opportunity to set its direction.
Investing in nature is essential to reversing unprecedented biodiversity loss and avoiding the systemic threats it poses to financial stability and the global economy. More fundamentally, it will deliver for people and communities, offering renewal for countries and economies facing a climate, nature, poverty, debt, and inflation polycrisis.
We cannot tackle climate breakdown nor realise the promise of the SDGs — prosperity for all on a healthy planet — without nature. As we lose natural diversity and degrade ecosystems, we restrict opportunities to harness nature-based solutions to climate change and other societal challenges. In turn, climate change further drives nature loss and lessens the resilience and productivity of natural systems. At the same time, it is the most vulnerable and marginalised groups in society that suffer disproportionately from the impacts of climate change and the ravages of nature loss.
To meet global climate, nature, and land degradation targets, the world needs to close a $4.1 trillion financing gap for nature by 2050. It’s an investment worth making. Nature-based solutions have the potential to deliver at least 30% of the climate solutions we need by 2030, and could lift a billion people out of poverty, create 80 million jobs, and add $2.3 trillion in growth to the global economy. They also offer valuable protection against the economic costs of climate change, saving at least $104 billion annually by 2030 and $393 billion by 2050. More broadly, transitioning to a nature-positive economy could generate annual business opportunities worth $10 trillion and create 395 million jobs by 2030.
Realising these benefits and a nature-positive economy requires vision and leadership that MDBs must now show — by embracing the opportunity to renew and revitalise their missions in ways that incentivise development that works with nature rather than against it.
In becoming fit-for-purpose, able to respond effectively to today’s compound crises, WWF proposes three practical principles that should guide MDB reform.
Do no harm
First, MDBs must ensure they do no harm. Building on the joint statement made in Glasgow, a first step must be to define and implement consistent financing strategies that make addressing climate change and nature loss central to delivering poverty alleviation and shared prosperity. This means aligning lending with the goals of the Paris Agreement, the GBF, and sector-specific agreements such as the recently signed Biodiversity Beyond National Jurisdictions Treaty. It also includes eliminating funding for projects and activities that contradict these, improving environmental and social risk management frameworks, quantifying the impacts of nature’s decline on borrowing country economies, and defining ambitious short, medium, and long-term climate- and nature-related targets.
Do more good
Second, MDBs must scale finance for sustainable, inclusive, and resilient development, not just through more effective use of their balance sheets but also through blended finance. They must unlock increased investment from private sector actors already shaping equitable nature markets and for whom the opportunities for investment in climate and nature action continue to grow. The World Bank’s Evolution Roadmap is a good first step but it needs to move further and faster while delivering on the recommendations of the independent review of MDB Capital Adequacy Framework presented to G20 finance ministers in July 2022.
In addition, MDBs should acknowledge the concerns of V20 countries who have called for urgent action on debt relief, and ensure easily accessible, unconditional, concessional finance reaches those most in need. This includes supporting institutional development in fragile states, advising governments on financing nature-based solutions, scaling instruments such as debt for nature swaps that unlock funding for nature, and increasing financial support for rights-based approaches and Indigenous peoples and local communities as stewards of nature. For the benefit of recipient countries, they must also foster greater inter-bank collaboration.
Influence for good
Lastly, MDBs have a responsibility to use their influence to advance a nature-positive agenda. This includes encouraging governments to develop ambitious Nationally Defined Contributions and National Biodiversity Strategies and Action Plans that respectively accelerate delivery on the Paris Agreement and the Kunming-Montreal Global Biodiversity Framework. They should support national governments and financial regulators to implement the principles of the Coalition of Finance Ministers for Climate Action, disclose and mitigate nature- and climate-related risks, and support the development and adoption of the Taskforce on Nature-related Financial Disclosures.
With less than a decade to prevent catastrophic climate breakdown, we must move rapidly from commitment to implementation. It will take ‘everything, everywhere, all at once’ — but financing for nature is the first step, and MDBs can lead the way.
Our economies are embedded within nature. By investing in it, we can strengthen the foundations for a just transition and lasting prosperity.
