Financing nature to support people – and making sure it works

Over the past 15 years, countries in Latin America and the Caribbean have been steadily driving a transformation in how nature is valued by their governments: from a focus on reducing negative impacts of traditional development approaches, to also recognizing nature as a powerful, generative force for economic development and human well-being. The Stanford-based Natural Capital Project (NatCap) and the Inter-American Development Bank (IDB) have been supporting this shift in many ways, most recently collaborating with the Belizean and Colombian governments on innovative pilot projects funded by the Global Environmental Facility. New reports and case studies on the projects are now available.

“These projects demonstrate how integrating the value of nature into national economic planning can redefine development itself,” said Gregory Watson, Unit Chief of Natural Capital and Biodiversity at the IDB and a longtime close collaborator with NatCap. "In partnership with governments and institutions like Stanford, the IDB helps turn data into practical policy and financing tools that support nature-positive growth. Our ultimate goal is to make natural capital a core pillar of how progress is measured, financed, and sustained across the region in order to conserve and restore ecosystems and improve lives."

The projects in Belize and Colombia are part of a broader effort across 16 countries, 3 development banks, and NatCap to rapidly scale up the use of natural capital approaches. These approaches value nature’s benefits to people (also known as ecosystem services) and incorporate this information in policy and finance decisions to achieve better outcomes for both people and nature. See the list of publications for each project.

Illuminating the high value of Colombia’s protected areas 

In one of the world's most biodiverse countries, Colombia's National System of Protected Areas (SINAP) plays a vital role both in national well-being and in meeting policy commitments. The country has long been a leader in integrating nature into its development agenda. Yet recent analyses have revealed worrying declines in ecosystem services and their contributions to people’s quality of life, and funding is needed to strengthen protections. 

To address this, Colombia set out to bring together public, private, and community sectors and to increase their “co-responsibility” for biodiversity protection, including through the use of financial mechanisms that ensure those who benefit from ecosystem services – like drinking water, carbon storage, reliable water supply for irrigated agriculture, and ecotourism – contribute to their preservation. 

The pilot project team evaluated three major municipalities in the Northeastern Andes –Tunja, Duitama, and Sogamoso – quantifying their reliance on the forests and páramos of the surrounding watersheds for critical services. The assessment revealed striking findings about which ecosystem services most directly support economies, where those services originate, and which sectors and communities benefit from them.

“This work shows that the value of the ecosystem services from SINAP is much higher than previously assumed,” said Héctor Angarita, senior scientist at NatCap and a leader of the project team. “Public water utilities use environmental rates to encourage water conservation and fund infrastructure that supports water supplies, and these historically didn’t factor in the ecosystems that support provision of clean water. It turns out this is the equivalent of subsidizing 10 times the current environmental rates.”

For example, protected areas provide water supply services to Duitama equivalent to 111% of its local tax revenue, and water quality and erosion control services worth 87% of the city’s tax revenue. Drawing on these insights and other data from the pilot project, Colombia’s Department of National Planning (DNP) has evaluated the economic benefits of further investments in protected areas and is using the results of the natural capital valuation to assess the use of different financial mechanisms. 

“Now the government has a solid monetary value for their return on investment from ecosystem protection. This is being used to inform the next generation of biodiversity financing, including through adjusted subsidies, taxes, fees, and compensation mechanisms, and to promote the idea of co-responsibility. Investing in ecosystems is a very cost-effective way to maintain these services for some sectors,” said Angarita.

In coordination with Colombia’s National Department of Statistics (DANE), the project team also produced ecosystems accounts to advance monitoring of changes in the country’s natural capital over time. The team helped align these accounts with global standards and brought together stakeholders from different government departments. 

Colombia plans to extend this pilot’s approach to additional municipalities and ecosystem services, strengthen collaboration between DANE and DNP, and engage the national park system and civil society to value cultural services from protected areas. 

“A key lesson from the project is the importance of bridging the languages of fiscal management, public investments, and ecosystem care. Ecosystem valuation and accounting foster a unified vision of nature and society,” said Fabián Darío Villalba Pardo from DNP’s Directorate of Environment and Sustainable Development.

Read about earlier work in Colombia that fed into this project.

Tracking the success of investments in Belize’s blue economy 

Belize’s coastal and marine ecosystems are central to the country’s economy and culture – supporting tourism, small-scale fisheries, and other local livelihoods, sometimes referred to as its “blue economy.” For nearly two decades, Belize has been quantifying the benefits its ecosystems provide to people and the economy, exemplified by the country’s groundbreaking Integrated Coastal Zone Management Plan in 2016. Yet these ecosystems face mounting pressures from hurricanes, coral bleaching, coastal development, agricultural runoff, and plastic pollution. 

Read and watch more about natural capital approaches in Belize over the years.

Results-based finance solutions refer to when funds are disbursed upon achievement of predefined, independently verified outcomes, and financial terms are adjusted when key performance indicators (KPIs) are achieved. This approach enhances transparency and accountability and ensures that investments lead to measurable outcomes (in this case, environmental and socio-economic results) sought by investors.

Building on its strong foundation of natural capital-based analyses and financing including its innovative Blue Bonds, Belize wanted to evaluate the outcomes of existing investments in its blue economy and pave the way for more. Beginning in 2023, the Global Environment Facility-funded pilot team in Belize developed a novel method to track socioeconomic and environmental key performance indicators (KPIs) and a dashboard for monitoring them. 

Among other insights, the KPI framework will help reveal whether investing in the effective operation of marine protected areas, which support fishing and other activities in certain areas, is leading to healthier ecosystems and whether local cultural uses and businesses depending on the ocean are thriving, too.   

The project was co-led by NatCap, IDB, and Belize’s Ministry of Blue Economy and Marine Conservation. The Ministry of Economic Development and Transformation, the Blue Bond Finance Permanence Unit, the Coastal Zone Management Authority & Institute, and WWF-Belize also collaborated with the team to help develop the KPIs as part of implementing a new funding initiative, the Resilient Bold Belize Project Finance for Permanence. The KPIs will also be used in the first-ever “Blue Economy Monitoring, Reporting, and Verification System,” being funded by IDB in Belize. 

Read the IDB blog post about the pilot project in Belize.

“A priority KPI that arose from conversations with Belizeans is related to the number of blue economy jobs created and supported thanks to investments into nature, ranging from Marine Protected Areas rangers, fishers, tour guides, seaweed farmers, and many other businesses that depend on these ecosystems. This information helps show the return on investment, making the case to investors, the government, and communities that marine protected areas are well worth the money spent,” said Jade Delevaux, senior fellow at NatCap and one of the leaders of this work.

Based on feedback from community workshops and ongoing collaboration with the Government of Belize, the team also developed a “Blue Economy Jobs” monitoring tool that Belize can use to track the number of jobs created and supported by coastal and marine ecosystems. The team also set up a prototype dashboard, currently called “BluePulse,” that will help centralize KPIs from across the government, NGOs, and other local actors, and share results back with the public to inform decisions and demonstrate impact from investments. 

The outcomes of the pilot project will support other results-based financing in addition to the Project Finance for Permanence initiative, such as IDB’s Outcome-Based Financing Framework for Biodiversity, as well as updates to Belize’s Integrated Coastal Zone Management Plan and the Belize Sustainable Ocean Plan. 

“The development of Belize's KPI framework and centralized dashboard is foundational to our credibility as a Blue Economy nation,” said Beverly Wade, CEO of the Ministry of Blue Economy and Marine Conservation. “By tracking both ecosystem health and community well-being, we ensure that results-based financing delivers real, measurable impact. We can already see the benefits in stronger cross-sector collaboration, clearer pathways to decision-making, and a shared understanding that our blue natural capital is central to Belize's future.”

Angarita and Delevaux will share these advancements in Belize and Colombia and in other pilot projects from the collaboration across 16 countries and 3 banks on an IDB-hosted panel, moderated by the IDB's Unit Chief of Natural Capital and Biodiversity Gregory Watson, on November 13 at the United Nations Conference of the Parties (COP30) in Brazil. The panel, “Mainstreaming Natural Capital in Economic Decision-Making: Unlocking the Nature-Climate Nexus,” will focus on the role of ministries of economy, finance, and planning.

The Belize and Colombia pilot projects were funded by the Global Environment Facility (GEF), implemented by IDB, and executed by Stanford University as part of Regional Technical Cooperation RG-T4141, “Transforming Policy and Investment Through Mainstreaming Rapid Approaches for Natural Capital Assessment and Accounting.”

The Natural Capital Project is based out of Stanford University, with core collaborators at the Chinese Academy of Sciences, Stockholm Resilience Centre, the University of Minnesota (NatCap TEEMs), Natural Capital Insights, The Nature Conservancy, and WWF. NatCap-Stanford is part of the Woods Institute for the Environment within the Stanford Doerr School of Sustainability, and the Department of Biology within Stanford’s School of Humanities & Sciences.

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