Finance issue pushing countries into ‘two opposing camps’ at biodiversity COP #IndiaFinance

The second week of the Conference of Parties (COP16) meeting under the United Nations Convention on Biological Diversity (UN CBD) in Cali, Colombia, began with an issue that has followed every discussion at the talks – finance. October 28 marked ‘Finance Day’ at the COP16, where events matched the day’s theme in discussing funding for nature. In negotiations, however, the question of how to mobilise funds for biodiversity has been the most contentious and seen disagreements between countries over equity and access.

“Two opposing camps have been standing in their corners stubbornly,” Bernadette Fischler Hooper, head of international advocacy at WWF UK, said during a press conference on Monday, “It is crucial that parties build trust and the confidence that those resources will flow. This deadlock needs to be broken now.”

If delegates are unable to agree on a finance mechanism, discussions will be taken over by Ministers before the conference comes to an end on November 1. “A lot of ground needs to be covered in providing easily accessible means of implementation, i.e.  financial resources, technology and capacity building needs with the requisite speed, scope and scale,” said Union Minister of State for Environment, Forests and Climate Change, Kirti Vardhan Singh, while delivering India’s national statement on October 29.

Locating the biodiversity fund

The UN CBD is dedicated to the global conservation and sustainable use of biological resources, covering ecosystems, species diversity, and genetic resources – all of which contribute to economic activity everywhere. The protection and restoration of nature, however, is facing a resource gap of at least $700 billion per year.

At COP15 in 2022, parties adopted The Kunming-Montreal Global Biodiversity Framework (KMGBF), an agreement setting four goals for 2050 and 23 targets for 2030, which included gradually closing the biodiversity finance gap, as well as calling for a more robust and equitable implementation of financial resources. For lower and middle income countries, this has meant making drastic changes to the existing finance mechanism, which routes biodiversity funding through the Global Environment Facility (GEF), of which the World Bank is a trustee. Higher income countries, on the other hand, prefer to keep the existing set up, arguing a new mechanism will be “resource intensive and add little value.”

“Developing country parties are very strongly of the view that, as a funding mechanism designed to deliver the commitments under the biodiversity convention, it should be responsive and accountable to parties directly. The main issue is that the fund favours the developed country interests through the governance structure of the GEF,” said Tom Picken, director of the forests and finance campaign at the Rainforest Action Network, in a phone call with Mongabay India. The GEF’s governing council reserves 14 seats for developed countries, 16 for developing countries, and two for economies in transition.

South Africa and Colombia were among the countries calling for a fund dedicated solely to biodiversity finance, while Fiji, representing 14 small island developing states, said that the Pacific is underrepresented in the existing mechanism. India and Bangladesh also said “the GEF procedures are cumbersome, noting the need for a transparent and inclusive mechanism,” according to the Earth Negotiations Bulletin issued by the International Institute for Sustainable Development, which tracks negotiations closely.

Raising biodiversity finance

More than half of the world’s gross domestic product (GDP) depends on high-functioning biodiversity, according to the think tank ODI. But these resources are running thin: 73% of species diversity across the world are in decline, with the Latin American, Asian, and African regions experiencing the most rapid declines in recent decades. These regions are also among the most megadiverse in the world.

One of the near term targets under the KMGBF is to increase financial resources for biodiversity conservation to $20 billion per year by 2025 and $30 billion by 2030. Cumulatively, rich countries have contributed around $8.39 billion towards biodiversity finance as of 2021. Newer contributions, especially to the recently set up Global Biodiversity Framework Fund under the GEF, have not kept pace. Despite the looming 2025 deadline, total pledges to the GBF fund amount to just $396 million, after $163 million was pledged on Monday by twelve donor countries.

The GEF, which also serves the United Nations Framework Convention on Climate Change and five other conventions, has only raised $5.33 billion in pledges in its latest round. “The GEF simply has not secured the adequate finances as required under the GBF Fund. So there’s not enough money being committed into the Global Biodiversity Framework Fund, and it’s currently difficult to access because of the GEF’s procedures,” said Picken. “Developed countries, along with financial sector and business interests, are very strongly pushing private sector interests like biodiversity credits and offsets.”

In a recent analysis, ODI assessed what the “fair share” contributions of developed country parties would be to the $20 billion, and found that only Norway and Sweden had met their fair shares so far. “International public biodiversity finance flowing from developed to developing countries is important in ethical and symbolic terms to acknowledge differing responsibilities in historic and current biodiversity depletion; in relational terms to demonstrate solidarity and ensure trust in multilateral governance arrangements; and in instrumental terms to provide resources to countries with severe fiscal and financial constraints,” says the analysis.

The analysis assessed fair share contributions of 28 rich countries, by looking at each country’s historic responsibility (their ecological footprint over the past 60 years) along with their capacity to pay (measured by gross national income, and population). While Norway and Sweden met their contributions, three others came close, meeting 74% or more of their calculated obligations – Germany, France, and Canada.

The rest of the countries analysed met 49% or less of their fair share contributions. Poland and Greece are the worst performing, according to the analysis, having met just 5% and 7% of their fair shares. “While the absolute volume of biodiversity finance these countries should provide is small, their failure to meet this target may reflect the low importance they assign to biodiversity conservation,” the analysis says.

Reforming the finance system

Apart from the quantum, location, and access to biodiversity finance, several countries and civil society organisations have said existing global finance systems need to be reformed so they align with the interests of the GBF.

In 2023, the United Nations Environment Programme’s State of Finance for Nature report estimated, for the first time, the quantum of finance flows that impact nature. The report found that close to $7 trillion is invested globally each year in activities that have a direct negative impact on nature, from both public and private sector sources, equivalent to roughly 7 per cent of global GDP.

“The finance for biodiversity conservation is currently minuscule compared to expenditure on other sectors that impact biodiversity in a negative way, especially in developing countries like India,” Neeraj Khera, an independent consultant working on biodiversity mainstreaming, told Mongabay India. “If effective measures to mainstream biodiversity are not taken today, the demand for biodiversity finance is going to shoot up in the years to come. There’s an urgent need to evaluate the synergies and trade-offs of biodiversity conservation with interventions from other sectors to avoid this future financial loss.”

According to Lim Li Ching, a senior researcher with civil society organisation Third World Network and co-chair of the International Panel of Experts on Sustainable Food Systems, low and middle income countries are often “locked into” making investments in sectors that harm biodiversity and hinder long term sustainable development.

During a press conference on Monday, she cited examples of how bilateral agreements and development banks operating in Colombia and Ecuador incentivise investments in extractive sectors. Colombia is currently in a bilateral investment treaty with the UK that has provisions for Investor-State Dispute Settlements, which allows foreign investors to sue sovereign governments if they believe the value of their investments have been damaged.

“Although it’s explicitly prioritised a just transition off coal, Colombia is forced to continue to operate its largest open pit, coal mine due to an international investment settlement, and this prevents it from backing out without facing severe financial penalties. When Ecuador announced its national referendum to restrict oil and mineral extraction in ecologically sensitive regions, the biggest credit rating agencies immediately downgraded Ecuador. What is the country to do in those kinds of situations?” she said.

Ching added, “What we have really is developing countries being constrained in their ability to choose more sustainable pathways, because they are in a position within an unfair international financial architecture that keeps them in conditions of financial subordination. Governments are therefore forced to make decisions to maintain short term financial stability at the expense of long term ecological stability.”

Banner image: Officials in discussion at the COP16 in Cali, Colombia. Image by IISD/ENB/Mike Muzurakis.