working paper

Public International Funding of Nature-Based Solutions for Adaptation: A Landscape Assessment

Stacy Swann Laurence Blandford Sheldon Cheng Jonathan Cook Alan Miller Rhona Barr
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1.1 Background

Nature-based solutions (NbS) are defined as “actions to protect, sustainably manage, and restore natural or modified ecosystems, that address societal challenges effectively and adaptively, simultaneously providing human well-being and biodiversity benefits” (World Conservation Congress 2016).

In recent years, awareness has increased about the importance of investing in NbS to both mitigate and adapt to climate change (Griscom et al. 2017). Attention has focused on identifying promising approaches and developing initiatives that can scale finance for NbS for adaptation (NbSA), often through innovative mechanisms that blend public capital to catalyze and leverage private capital (see Box 1 for definitions used in this paper). NbSA projects are inherently complex, often delivering public goods that may imply longer-term returns on investment and entail bringing together a broad range of stakeholders to address systemic community and societal challenges (Seddon et al. 2020a). Nonetheless, the benefits of NbSA are significant (Figure 1) for their flexibility in terms of context, utility, and cost efficiency (UNEP 2021).

Figure 1 | Relationships between the Natural Environment and Climate Change Adaptation by Sector

Source: Global Commission on Adaptation 2019.

Furthermore, while awareness has grown, so has interest in funding and implementing these approaches. For example, 62 percent of all first NDCs (104 out of 168) include NbS as adaptation actions,7 and 63 percent of nationally determined contributions (NDCs) declare that the protection of ecosystems and/or biodiversity is the intended outcome of adaptation planning (Seddon et al. 2019). Additionally, 19 national adaptation plans (NAPs) submitted to the United Nations Framework Convention on Climate Change (UNFCCC) by March 2020 included NbSA and/or ecosystem-based adaptation (EbA; Terton and Greenwalt 2020).

Box 1 | Definitions: NbS, NbSA, EbA, and Eco-DRR

Nature-based solutions (NbS) can be used for a variety of objectives, including climate change mitigation and/or adaptation, biodiversity conservation, and disaster risk reduction. This paper will focus on NbS that is used primarily for adaptation (NbSA). Note that NbS can often cut across sectors and provide multiple cobenefits; thus, although the focus of the paper is on NbSA, many of these NbS will provide benefits for biodiversity and mitigation as well.

NbSA, also known as ecosystem-based adaptation (EbA), is defined thusly by various organizations:

IUCNa and CBDb: “EbA is the use of biodiversity and ecosystem services as part of an overall adaptation strategy to help people to adapt to the adverse effects of climate change.”

UNEPc: “[EbA] uses biodiversity and ecosystem services as part of an overall adaptation strategy to help people and communities adapt to the negative effects of climate change at local, national, regional, and global levels.”

European Commission: “EbA refers to physical measures or management actions that utilize natural or ecosystem-like processes to adapt to a variety of climate hazards.”

NbSA can be categorized under different use cases, including agriculture, forestry, coastal, urban, water management, and disaster risk reduction. NbS for disaster risk reduction are sometimes known as ecosystem-based disaster risk reduction (Eco-DRR).

These definitions of NbSA inform the methodology in Box 3.

Notes: a. International Union for Conservation of Nature; b. Convention on Biological Diversity; c. United Nations Environment Programme. Sources: McVittie et al. 2017; SCBD 2009; Travers et al. 2012.

There is a significant overall funding gap for adaptation, of which NbSA are a part. In its Adaptation Gap Report 2020, the United Nations Environment Programme (UNEP) identified adaptation investment needs of more than US$140 billion per year by 2030 (UNEP 2021). The Climate Policy Initiative (CPI) estimates that only $30 billion in (mostly public) funding flowed for adaptation in 2018 (Buchner et al. 2019).

Figure 2 | The Relationship between NbS Finance for Adaptation, Climate Finance, and Conservation Finance

Notes: NbS = nature-based solutions.

Source: UNEP 2021.

To date, there is no estimate of the total NbSA investment needed, although some estimates exist for related subsectors of NbSA (Figure 2 shows the relationship between these subsectors). For example, Financing Nature: Closing the Global Biodiversity Financing Gap estimated a current biodiversity conservation financing gap of between $598 billion and $824 billion per year (Deutz et al. 2020). Nevertheless, the report by the Global Commission on Adaptation (the Commission) highlighted access to finance as one of three key barriers that impede the scaling up of investment in NbS (Global Commission on Adaptation 2019).

In addition to the challenges of quantifying the NbSA funding gap, little analysis has been done of the amounts, types, and channels of public international funding to support NbS in developing countries. Given the importance of public capital in funding NbSA, a better understanding of these sources of funding is needed.

1.2 About This Working Paper

This paper provides an assessment of the landscape of public international funding for NbSA and seeks to help donor and developing countries better understand the current state of funding for NbSA. The findings in this paper are based on the sources in Box 2. This paper’s primary audience is public donors providing funding for NbSA; a secondary audience is developing countries looking to fund NbSA as part of their climate action plans, as a number of the findings and recommendations relate to enabling better, more efficient use of public expenditure for NbSA regardless of its origin.

This paper assesses the current landscape of public funding sources for official development assistance (ODA) available to developing countries for NbSA by

  • estimating public international flows for NbSA;
  • describing key funders and modalities of current funding sources;
  • identifying challenges and barriers that may prevent increased funding for NbSA unless addressed; and
  • illustrating through examples several promising approaches for programming public funding, including those that catalyze private investment in NbSA.

The paper concludes with actionable recommendations to improve the provision and application of public international donor funding for NbSA.

This assessment is meant to complement other ongoing research related to financing NbSA, including recent studies related to innovative financial instruments (e.g., insurance, results-based payments) and those assessing the potential to mobilize private investment for NbSA. It is also meant to complement other efforts to quantify climate finance flows writ large (e.g., CPI’s climate finance landscape).8

Box 2 | Sources Used for This Report

The findings in this report are based on three main sources:

  • The Organisation for Economic Co-operation and Development’s Creditor Reporting System Aid Activity Database and other online research.
  • A literature review, including information related to NbSA from donors, funding channels, developing country governments, and project developers.
  • Surveys and interviews with key stakeholders (bilateral donors, development finance institutions, climate funds, developing country officials, etc.).
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