Investing in Nature Unlocks Development Benefits

Nature’s ability to provide services like clean water and food security is in jeopardy, threatening the very existence of human life. Nearly one million animal and plant species (out of an estimated eight million total) are threatened with extinction, and 14 of the 18 assessed categories of ecosystem services have declined since 1970 (IPBES 2019). As with climate change, severe degradation of nature threatens communities, value chains, and economies, and low-income countries stand to lose the most, as the recent Economic Case for Nature report estimates.

A new World Bank Group approach paper, Unlocking Nature-Smart Development, builds evidence that nature loss is capable of erasing recent gains in development and stripping some of the poorest countries of the foundations for future growth. The silver lining is that investing in nature can also be a development opportunity. For example, a recent World Bank study on protected areas in four countries demonstrated that investment in conservation generates positive economic returns, creates income multipliers, and provides practical green recovery options in times of COVID-19. Shifting sectors and value chains toward nature-smart practices can also create inclusive, long-term value and greener and higher quality jobs.

Transformative global action is needed to address a challenge this magnitude and make the most of the opportunities. The new paper outlines the building blocks of an effective global response, as well as six specific response areas intended to guide governments and inform broader discussions on how to integrate nature into development planning and implementation (see Figure 1). 

Analysis shows that a few economic sectors are at the core of unlocking a nature-smart agenda. In other words, solutions to the crisis lie in the economic sectors that put the greatest pressure on biodiversity and ecosystem services: land and ocean use, infrastructure, and energy and extractives (WEF 2020b). For this reason, World Bank Group’s work on biodiversity goes beyond conserving and protecting nature. Biodiversity is integrated into the broader portfolio of the World Bank in sectors like agriculture, forestry, watershed management, fisheries, and coastal zone management (see Figure 2).

The World Bank Group has been engaged in biodiversity for over three decades supporting countries in the transition to a greener, more resilient, and inclusive economy. In 2019-2020, the World Bank portfolio included 70 active projects supporting biodiversity in more than 50 countries, with a net commitment amount of US$1.18 billion.

Here are some ways in which the World Bank is assisting countries with biodiversity and ecosystem services:

Investing in Nature-Based Solutions

Seeing nature as a solution can help countries tackle multiple challenges simultaneously, like food and water security, human health, and climate change. For instance, green infrastructure, such as mangroves, wetlands, and watersheds can enhance the performance of traditional infrastructure built for flood protection. Between 2012 and 2017, 81 World Bank projects supported green infrastructure and urban biodiversity solutions (Browder et al. 2019). It is estimated that nature-based solutions could deliver 37 percent of the cost-effective climate mitigation needed through 2030 (Griscom et al. 2017).

One example is the Metro Colombo Urban Development Project, which has supported urban wetland management and strategic planning for urban resilience at the municipal level. The project has supported tools to assess alternative approaches to flood risk mitigation and investing in flood protection through preservation of wetlands. During the COVID-19 pandemic, urban biodiversity has become even more vital, because it is linked to better quality of life and public health.

Increasing the Effectiveness of Protected Areas and Maximizing their Benefits to Local Communities

Protected forest areas are most effective when the community is a partner and jobs are created, including for indigenous peoples. Another priority area for the WBG is the creation of incentives for conservation, for example, by leveraging innovative co-financing models and financing mechanisms, to reduce the funding gaps for protected areas.

The GEF-funded Amazon Sustainable Landscapes program is designed to protect biodiversity and the integrity and resilience of the Amazon. The Amazon contains 40 percent of the planet’s rainforest and a critical reservoir of biodiversity, but is facing immense pressure from deforestation, land degradation, fragmentation, and overexploitation of forest and freshwater ecosystems. The program is strengthening the management effectiveness of 65 million hectares of protected areas, facilitating the creation of 4.3 million hectares of new protected areas, and promoting sustainable productive practices in 11 million hectares. It is also implementing conservation agreements with Indigenous Peoples and local communities to build capacity and support local governance of natural resource management.

Mobilizing finance

Estimates reveal that there is a financing gap of US$711 billion per year for biodiversity. In a recent report, the World Bank Group calls for a comprehensive approach to mobilizing resources that involves greening finance – directing financial flows away from projects with a negative impact on nature towards those with positive impact, as well as financing green - unlocking investment in conservation, restoration, and sustainable use of nature.

Another way to mobilize finance is through the design and application of financial instruments for conservation such as labeled bonds, transition bonds, sustainability-linked bonds, and insurance products, in the context of biodiversity. Over the past decade, the World Bank Group has created the foundation for what is today more than a US$750 billion green bond market, which is connecting environmental projects with capital markets and mainstream investors. Since 2008, the World Bank has raised US$14.3 billion through 168 green bonds issued in 22 currencies. The success of green bonds has inspired the creation of other thematic bonds, such as blue bonds.

The new approach paper is part of a series of papers by the World Bank Group that outlines the development challenges and opportunities associated with blue and green biodiversity and ecosystem services.