Payment for Ecosystem Services: Can they help bridge the nature-financing gap?

Investments in natural capital face significant funding challenges. In 2022, financial flows dedicated to natural capital were estimated at $200 billion. These investments represent only 27% and 37% of the required annual investments of $542 billion and $737 billion, respectively, to meet the biodiversity, climate change, and land degradation neutrality targets by 2030 and 2050. This indicates a substantial financing gap of $342 billion to $537 billion. To close this gap, current investments in natural capital would need to increase by almost three to four times (UNEP et al. 2023).

Government funding remains the primary source of support for natural capital, totaling $165 billion, which represents 82% of all investments. Majority of public finance is directed toward biodiversity and landscape protection, as well as sustainable agriculture, forestry, and fishing. In contrast, private sector contributions to natural capital remains limited, amounting to $35 billion or 18% of total investments. Within the private sector, biodiversity offsets and credits, along with sustainable supply chains, constitute $20.3 billion (57%) of investments. Impact investing and payment for ecosystem services (PES) account for $4.6 billion (13%) and $3.5 billion (10%), respectively. Other finance channels contribute between $0.7 billion to $1.9 billion, representing 2% to 5% of private finance in natural capital. While public funding is expected to continue to play a significant role, private sector finance is projected to drive growth, potentially reaching $243 billion and capturing a 33% share by 2050.

Given the central role of nature in sustaining life on earth and the substantial financing gap for nature, PES has increasing been utilized globally as a policy instrument to enhance investments in nature positive outcomes. Within this context, the webinar will focus on PES as a strategic tool for protecting, sustainably managing, and restoring natural resources, while also generating economic and social benefits and addressing the investment gap in nature. It will showcase PES initiatives in the Asia and the Pacific region and beyond, highlighting successful projects, lessons learned, and recommendations for effective implementation.

Objectives 

The webinar aims to:

●        Enhance awareness and understanding of the importance of PES in promoting sustainable natural resource management and encouraging investment in nature finance.

●        Share case studies, experiences, and lessons learned from successful initiatives on the effective and strategic use of PES to enhance sustainable natural resource management and bridge the funding shortfall in nature. 

Target Participants 

The webinar invites representatives from the following organizations engaged in agriculture, natural resources, and rural development:

• government and intergovernmental organizations
• multilateral and bilateral development institutions
• private firms engaged in the agriculture and food business
• research and development institutions, think tanks, and centers of excellence
• NGOs, civil society and advocacy organizations, other individuals and organizations interested and/or engaged in agriculture and natural resources.

 Program 

Moderator: Narayan S. Iyer, Senior Natural Resources and Agriculture Specialist (Agribusiness), Agriculture, Food, Nature and Rural Development Sector Office, Sectors Group (SG-AFNR)