Toolbox on Financing Nature-Based Solutions

The 'Toolbox on Financing Nature-Based Solutions' report by the Climate Policy Initiative examines how blended finance can overcome barriers to investing in Nature-based Solutions (NbS). It highlights that because nature is often treated as a public good, it is difficult to monetize, leading to a market failure where harmful subsidies far exceed NbS investments. The report argues that the public sector must lead ecosystem building and provide concessional capital and technical assistance to prove commercial viability. Key findings emphasize that guarantees are the most catalytic tools for de-risking private investment, as demonstrated by case studies like the AGRI3 Fund and the Asia Climate-Smart Landscape Fund.

• Guarantees are identified as the most catalytic instruments for attracting private capital to NbS. They create a safer environment for testing new solutions and familiarizing investors with new sectors, especially when NbS have not yet proven their capacity to generate revenue.
• The public sector is essential for scaling NbS by providing direct concessional funding, technical support, and establishing regulatory environments and incentives that create new revenue sources for nature.
• NbS financing is hindered by a market failure where the benefits of nature are treated as public goods, making them difficult to monetize and providing little incentive for private sector investment.
• Ecosystem building, which includes investing in teams, educating investors, and piloting new approaches, is necessary to prove the commercial viability of NbS before private capital can be mainstreamed.
• The AGRI3 Fund uses a blended finance structure to bridge the gap for sustainable agriculture projects that commercial banks find too risky or too long-term. It provides guarantees to extend loan tenors and a Technical Assistance Facility (TAF) to help borrowers develop bankable business models.
• The Asia Climate-Smart Landscape Fund (ACLF) targets SMEs in Indonesia to reduce deforestation. It utilizes a 50% asset-level guarantee provided by the US International DFC and others to make investments in agricultural SMEs more appealing to private capital.
• Environmentally harmful subsidies for fossil fuels, agriculture, and fisheries significantly outweigh investments in NbS, with harmful subsidies estimated at approximately US$ 1.8 trillion.
• NbS can provide up to one-third of the cost-effective climate mitigation needs for 2030 and are critical for cheaper, longer-lasting country adaptation.

APA

Brasil-Leigh, A., Byrd, R., Käfer, P., Miao, G., Ruiz-Sierra, M., Vieira, A., & Wallock, W. (2024). Toolbox on Financing Nature-Based Solutions. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2024/09/Report-Toolbox-on-Financing-Nature-Based-Solutions.pdf

Chicago

Brasil-Leigh, Amanda, Rosaly Byrd, Phillipe Käfer, Gaoyi Miao, Maria Ruiz-Sierra, Arthur Vieira, and William Wallock. Toolbox on Financing Nature-Based Solutions. Climate Policy Initiative, 2024. https://www.climatepolicyinitiative.org/wp-content/uploads/2024/09/Report-Toolbox-on-Financing-Nature-Based-Solutions.pdf.

Wikipedia

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BibTeX

@techreport{brasilleigh2024toolbox, author = {Brasil-Leigh, Amanda and Byrd, Rosaly and Käfer, Phillipe and Miao, Gaoyi and Ruiz-Sierra, Maria and Vieira, Arthur and Wallock, William}, title = {{Toolbox on Financing Nature-Based Solutions}}, institution = {Climate Policy Initiative}, year = {2024}, month = sep, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2024/09/Report-Toolbox-on-Financing-Nature-Based-Solutions.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }