“State of Finance for Nature” Report

December 11, 2023

A new United Nations report, “State of Finance for Nature,” reveals that countries invest nearly $7 trillion annually in subsidies and private investments with direct negative impacts on nature. This staggering figure accounts for 7% of the global gross domestic product, highlighting the urgent need for a shift in financial practices.

Launch and Presentation at COP28

The report was presented by the UN Environment Portal (UNEP) at the 28th Conference of Parties (COP28) to the United Nations Framework Convention on Climate Change. Launched on 8th December, 2023, the report analyzes private finance flows affecting nature negatively, providing unprecedented insights into the scale of the issue.

Disparity: Nature-based Solutions (NbS) vs. Negative Impacts

Private finance flows negatively impacting nature total $5 trillion, a stark contrast to the significantly lower private investments in nature-based solutions (NbS), estimated at $200 billion annually. The report emphasizes the urgent need to address this substantial disparity in funding.

Industries Contributing to Negative Impact

The analysis identifies five industries as major contributors to negative financial flows: Construction, electric utilities, real estate, oil and gas, and food and tobacco. These industries collectively contribute about 16% of overall investment flows in the global economy.

Fossil Fuel Subsidies and Global Trends

The report notes that global fossil fuel subsidies to consumers doubled between 2021 and 2022, reaching $1.16 trillion. This increase was fueled by subsidies related to Russia’s invasion of Ukraine. The International Energy Agency (IEA) also highlighted additional spending of $500 billion to lower energy costs in 2022.

Agriculture and Environmental Harmful Subsidies

Environmentally harmful subsidies in agriculture account for over $345 billion. The report reveals that, while the agricultural sector receives substantial support, only 13% is allocated to public goods and services, essential for NbS-based infrastructure.

Positive Trends: Increase in NbS Financing

Despite challenges, the report brings a glimmer of hope, indicating an 11% increase in total traceable finance flows to NbS in 2022, amounting to $20 billion. This rise is attributed to a $17 billion increase in public funding for NbS in sustainable agriculture, fishing, and forestry.

Urgent Call for Action

To align with global targets, the report recommends doubling annual finance flows towards NbS from $200 billion to $436 billion by 2025 and nearly tripling it to $542 billion by 2030. It underscores that addressing climate change, biodiversity loss, and land degradation requires a significant reduction in the $7 trillion finance flows directed toward nature-negative practices.

Gap Between Commitments and Actions

The report highlights a misalignment between countries’ commitments and their actions, warning that the world may experience a 2.8°C warming by the end of the century if current trends persist. It calls for immediate and substantial efforts to bridge the financing gap and redirect funds toward sustainable practices.

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