Why Biodiversity Finance Matters for Timor-Leste

Timor-Leste has started formal work on biodiversity finance through BIOFIN, the Biodiversity Finance Initiative. The process was launched at an inception workshop in December 2025 that brought together the Ministry of Finance, the Ministry of Tourism and Environment, other line ministries, regulators, state-owned enterprises, civil society groups, and development partners. The work is led by the government, with technical support from UNDP.

BIOFIN is meant to work out how much the country now spends on nature, how much it needs to spend to meet its own goals, and how it can pay for that within a tight budget. These matters because Timor-Leste's natural systems are under growing pressure, the money to protect them is limited, and the way that money is raised and spent is not well organised.

Nature that people rely on

Timor-Leste's forests, coasts, and marine areas support fishing, food, coastal protection, and tourism. Along the coast, mangroves, seagrass, and coral reefs function as one connected system, and damage to one part weakens the others. These systems hold up local fisheries and shield the shoreline from storms and erosion.

Mangroves are a prominent example of what is at stake. The country had around 9,000 hectares of mangroves in the 1940s. Today roughly 1,300 hectares remain a loss of close to 90 per cent. The decline has come from unsustainable land use, illegal logging, free grazing, rising sea levels, and limited capacity to monitor and protect these areas. Mangroves store far more carbon than dryland forest, and they shelter young fish and reduce wave energy. Their loss harms fisheries, weakens coastal protection, and lowers the country's resilience to a changing climate.

Money that is scarce and unreliable

Government revenue in Timor-Leste depends heavily on petroleum. Fiscal space is tight, and biodiversity competes with many other priorities for a share of the budget. The funding that does reach nature has been limited and inconsistent, and much of it comes from donor and NGO projects that run for a set period and then end.

The result is a recurring problem. Activities such as mangrove restoration, marine protected area monitoring, and community conservation often rest on a single grant. When the grant ends, the work stops. Trees are planted but not maintained. Protected areas are declared but not patrolled, because there is no budget for fuel, boats, or staff. Money is spent, but the results do not hold.

Spending that is hard to track

A large share of biodiversity-relevant spending sits inside other sectors such as agriculture, fisheries, water, and infrastructure. It is spread across many parts of government and is not recorded in one place. As a result, officials cannot easily say how much the country spends on nature, where that money goes, or where the gaps are. Without that basic picture, it is hard to plan, to make the case for more resources, or to judge whether current spending is working.

One of the first tasks under BIOFIN is to measure this spending. The Biodiversity Expenditure Review will draw on budget and treasury data, donor records, and information from state-owned enterprises and civil society, in order to produce a clear baseline of what is currently spent.

Legal tools that exist but are not used

Timor-Leste already has legal room to finance environmental work. The Environmental Framework Law provides for an environmental fund managed jointly by the environment and finance authorities, for environmental fees, for economic instruments such as compensation for damage, and for benefit-sharing with communities where natural resources are used. Pollution taxes are already being collected in some cases.

The challenge is that these tools are not fully applied, and the money they raise is not reliably returned to biodiversity work. The rules for how fees and penalties are set and used are unclear, and benefit-sharing arrangements are weak in practice. Part of the BIOFIN task is to work out how these existing tools can be used properly and tied into budget and accounting systems before any new instruments are considered.

Community solutions that need support

Some financing already works at the community level. Carbon farming, community conservation funds, payments for ecosystem services, and ecotourism were all presented as examples that raise income and involve local people in managing nature. These arrangements are useful, but fragile. Many lack legal recognition, steady revenue, and basic financial and administrative capacity, and the cost of running them is high for small groups. For these models to last, they need clearer legal status, simpler ways to reach small amounts of funding, and a direct link between local revenue, such as tourism or licence fees, and community conservation budgets.

Why the timing matters

BIOFIN activities are carried out in parallel with the update of the NBSAP 2026–2030 and the preparation of the updated NDC‑03 2026 -2035, both of which are now formally approved by the Government. This creates a strong foundation for implementation: BIOFIN can directly support these national commitments by identifying financing needs, clarifying funding responsibilities, and proposing practical mechanisms to ensure that priority actions are sustainably resourced.

Biodiversity finance is also closely linked to climate finance. The approved NDC‑03 estimates adaptation costs at USD 1.3 billion, and many of the country’s priority measures particularly coastal protection, watershed management, and mangrove restoration which deliver simultaneous benefits for climate resilience and biodiversity conservation. Coordinating financing across these agendas reduces duplication, prevents competition for limited funds, and strengthens the case for integrated investment in nature‑based solutions.