Expansion of the conservation estate: the role of biodiversity and climate finance solutions

South Africa

June 4, 2024

The Three Rondavels, a natural rock formation on the edge of the Blyde River Canyon along the Panorama Route in Mpumalanga.

Photo: Nicholas Theron

The world faces an escalating crisis of biodiversity loss, climate change, and land degradation. Globally, countries have signed the Rio Conventions to address these crises and aim for a nature-positive world for people and the planet. However, the integration of the Rio Convention’s goals into the policy process remains fragmented. The Rio Conventions are implemented in silos, often ignoring the potential for synergistic benefits. Climate and biodiversity outcomes are treated separately, typically managed by different units within national governments with minimal cross-collaboration

Climate and biodiversity are intrinsically linked; climate change can lead to biodiversity loss by modifying habitats on which different species depend. Numerous species and habitats are being severely harmed by increasing sea levels, melting glaciers, warming temperatures, and extreme weather events. The loss of biodiversity fuels climate change as well. Peatlands, woods, and other healthy ecosystems are significant carbon sinks that absorb emissions. Degradation or destruction of these releases stored carbon and lessens the planet's capacity to control the climate. Coordination is needed to combat both biodiversity loss and climate change. Simultaneously, biodiversity loss and climate change present significant risks to global economies and livelihoods. On one hand, over 50% of global GDP is nature-dependent,[1] and on the other, if climate change is left unchecked, the global economy might lose up to 18% of GDP[2]. This underscores the critical need to address both issues considering they are intertwined.

The upcoming Conference of Parties (COP) for both biodiversity and climate presents a unique opportunity to solidify the climate-nature-biodiversity nexus. Inefficient mainstreaming across these domains hampers the rapid expansion of the conservation estate and undermines efforts to keep the global temperature rise below 2 degrees celsius. To overcome obstacles such as inconsistent approaches and poor integration between sectors and levels of government, it is crucial to ensure full participation from both the private and public sectors. One key area that could benefit from synergies between climate and biodiversity finance is the expansion of the conservation estate

The Kunming-Montreal Global Biodiversity Framework (GBF) calls for the expansion and protection of the conservation estate to at least 30% of terrestrial, inland water, and coastland marine areas. These areas, especially those critical for biodiversity and ecosystem functions, should be conserved and managed through ecologically representative, well-connected, and equitably governed systems of protected areas and other effective area-based conservation measures. This framework also recognizes the importance of integrating these areas into broader landscapes and seascapes while respecting the rights of indigenous peoples and local communities. The expansion of the conservation estate presents a win-win scenario for both the climate change and biodiversity agendas. As more habitats remain intact and are restored, they play a role as carbon sinks, hence contributing to the climate agenda. However, while this target is noble, it is challenging for developing countries that are already struggling to maintain their current conservation estates. Setting aside land for conservation is one thing, but effectively protecting habitats to preserve ecosystems and wildlife populations is another, especially in countries with strained public budgets. For instance, South Africa, despite having a larger public budget than many other African countries, faces fiscal constraints due to low economic growth. Management authorities are struggling to maintain the current conservation estate, with South African National Parks reporting a significant deficit (R223 million or around US$11.92 million) for 2021/22, even after efforts to reduce expenses. Similarly, KwaZulu-Natal (KZN) Ezemvelo Wildlife, a provincial organization, also faced a deficit (R89 million, or roughly US$4.77 million)[3]. The lack of funds negatively impacts the biodiversity value of areas under conservation.

There is also acknowledgment that a global funding gap exists for climate action and biodiversity. The estimated NDC funding gap for African nations ($2.8 trillion) is more than 93% of Africa's GDP. This gap may increase as the NDCs are revised. African governments have thus far committed $264 billion in domestic public resources, or 10% of the total expected implementation costs, to financing the execution of their various NDCs, despite competing development objectives and significant debt loads.  The business sector and the global donor community must provide the remaining $2.5 trillion. Simultaneously, the GBF estimates the funding gap for biodiversity to be between $599 billion and $824 billion annually. According to UNDP[4], “the funding gap for safeguarding 30% of our terrestrial and marine areas has been estimated to be between $103 billion and $178 billion annually (around 0,3% of our global GDP)” 

The GBF recognizes the existing funding gap in biodiversity and calls for innovative mechanisms to bridge this gap. The upcoming COP 29 in Baku, Azerbaijan, will focus on climate financing, presenting an ideal opportunity to discuss how climate and biodiversity initiatives can collaboratively address funding gaps. This is especially significant given the renewed emphasis on the role that finance institutions can play in addressing the funding gap in both the biodiversity and climate arenas. Publications such as "The Climate-Nature Nexus: Implications for the Financial Sector" underscore the significance of taking climate and nature impacts into account jointly, emphasizing that solving both crises jointly will result in a different future than handling climate change alone. The growing attention given to the relationship between nature and climate finance is influencing how financial institutions evaluate material risks, include environmental factors in their investment plans, and participate in legislative and regulatory efforts to promote sustainable finance practices. Together, climate and biodiversity finance can leverage the knowledge, assets, and influence of the financial industry to bring about the revolutionary shift required to help bridge the funding gap required to achieve the 30 by 30 agenda.

However, to get sustained finance sector investment into areas like biodiversity, there needs to be a funding model developed that moves beyond impact and philanthropic investment. The climate arena has managed to develop funding models which ensure that money flows to it and back to the investor with tangible and attractive returns. In the case of biodiversity, the current funding model has not been adequately established. While initiatives such as green/species bonds have been piloted, the returns they offer are still unappealing to broader investor interest.

A key area that UNDP has been exploring in South Africa is to encourage private sector investment and show the synergies between climate change and biodiversity through offsetting. Biodiversity offsets, positioned at the bottom of the mitigation hierarchy, offer a potential solution for bridging the biodiversity funding gapProactively securing offset sites around expanding parks and nature reserves can address funding issues currently plaguing the conservation estate. In South Africa, there is a particular opportunity as the country moves towards tripling renewable energy capacity by 2030. Some renewable energy projects, such as wind farms, may require offsetting due to their potential negative impact on biodiversity. This illustrates the climate-biodiversity nexus, where climate and energy initiatives can finance biodiversity conservation and conservation estate expansion. For offset banks to be effective, there must be predictable demand created by conditional regulatory approvals in the renewable energy sector. With various investments in the South African economy, this last-resort option could enable the expansion of protected areas and help meet South Africa's obligations under the GBF.

UNDP is exploring other finance mechanisms which finance institutions could support and participate that bridge the climate-biodiversity dichotomy:

  • Social impact bonds that incorporate environmental criteria, promoting sustainability in addition to social outcomes but without a focus on biodiversity. 

  • Mechanisms that incorporate environmentally sustainable practices into lending criteria and promote sustainable entrepreneurship. 

  • Green bonds that support a wide range of projects, including renewable energy, energy efficiency, and sustainable infrastructure, contribute to overall environmental sustainability. 

  • Mechanisms that include both climate and biodiversity as risks whilst deploying appropriate financial instruments.

Throughout South Africa’s quest to expand the conservation estate, the role of biodiversity and climate finance solutions is integral. One cannot overemphasize the critical need for integrated approaches to address the challenges of biodiversity loss, climate change, and land degradation. There are important synergies between climate and biodiversity finance, particularly in the context of expanding the conservation estate. Innovative mechanisms involving the private sector in general and the finance sector specifically present viable solutions to bridge the funding gap in biodiversity conservation. As countries strive to meet ambitious targets like those set by the GBF, it is evident that collaborative efforts between the public and private sectors are essential to ensure the sustainable management and protection of ecosystems. By fostering cross-sectoral cooperation, nations can work towards a nature-positive world that benefits both people and the planet.

By Nokutula Mhene, Project Management Specialist, UNDP BIOFIN