Authors: Arlette Schramm and Angelique Pouponneau
As the Convention on Biological Diversity's (CBD) COP16 prepares to reconvene in Rome, the discussions around financial mechanisms are at the forefront of everyone’s minds. The resumed COP16 session presents a crucial opportunity to strengthen the financial architecture supporting the Kunming-Montreal Global Biodiversity Framework.
Success will require more funding and smarter funding mechanisms that can effectively channel resources to where they're needed most. Three key areas stand out as requiring immediate attention:
- Scaling up resource mobilization
- Streamlining access to finance
- Private sector engagement
Let’s unpack each of these in more detail and investigate why they are so crucial to the success of any financial mechanism for biodiversity.
Scaling up Resources
While this figure may seem daunting, capital markets—where investors buy and sell financial securities like stocks and bonds to allocate capital efficiently— routinely handle transactions of this magnitude. The real challenge lies in creating the proper market infrastructure and incentives to channel this capital effectively toward biodiversity conservation.
Our current funding architecture, heavily reliant on public funds and philanthropic giving, simply cannot meet this challenge alone. We need to tap into institutional capital - pension funds, insurance companies, and investment managers - who collectively manage over $100 trillion in assets globally.
These investors are increasingly seeking sustainable investment opportunities, but they require sophisticated market infrastructure and standardized products that can meet their fiduciary obligations. This means:
- Creating well-regulated markets for biodiversity-linked financial instruments with clear taxonomies and standardized performance metrics
- Establishing robust verification and tracking systems for biodiversity credits that build on lessons learned from carbon markets
- Leveraging ocean accounts frameworks to provide reliable, standardized data that can underpin financial products and risk assessment
- Developing clear guidelines for measuring impact and reporting that aligns with existing commonly used frameworks
The success of green bonds, which grew from virtually nothing to a $500 billion market in just over a decade, provides a blueprint for how we can scale up biodiversity finance.
But biodiversity and the ocean, in particular, present unique challenges in terms of measurement and verification. This is where common data infrastructures, such as the United Nations System of Environmental Economic Accounts (SEEA) and the ocean accounts framework from the Global Ocean Accounts Partnership (GOAP), become crucial, providing the standardized data and metrics needed to underpin financial products and enable proper risk assessment.
Streamlining Access to Finance
The current fragmented funding landscape creates significant inefficiencies. The biodiversity financing ecosystem includes a complex patchwork of multilateral funds, bilateral aid arrangements, private foundations, and impact investors—each with different priorities, eligibility criteria, and reporting requirements. Developing nations and coastal communities–often the most critical stewards of biodiversity–face complex application processes across multiple funds, each with its own requirements and timelines. This fragmentation increases transaction costs and creates delays that can make biodiversity projects unviable.
We need to build a market infrastructure that can:
- Establish centralised clearing mechanisms for biodiversity investments, similar to how modern securities markets operate. (Centralised clearing mechanisms for biodiversity investments would function as trusted intermediaries that standardize verification, reduce transaction costs, and manage risk between buyers and sellers.)
- Create standardized documentation and reporting frameworks
- Implement digital platforms that can match projects with investors while maintaining robust due diligence
- Develop automated monitoring and verification systems using satellite data, IoT sensors (Internet of Things), and Artificial Intelligence
The key is to build systems that can scale. While individual funds might be able to manage with bespoke processes, achieving our global biodiversity goals requires infrastructure that can handle thousands of projects efficiently while maintaining proper oversight.
Mobilising the Private Sector
Historically, private sector engagement in biodiversity finance has been limited, but this is changing rapidly.
The success of the recently agreed "Cali Fund" for Digital Sequence Information provides a mechanism for the private sector to engage when frameworks are clear and benefits are well-defined. To achieve the scale needed, we need to move beyond individual funds to create a comprehensive market infrastructure.
The challenge is not just about creating new financial products - it's about building the systems that allow these products to scale. Institutional investors need reliable data, standardized metrics, and efficient trading mechanisms. They need to be able to assess both the impact and the financial performance of their investments with the same rigor they apply to traditional investments.
Private sector engagement requires more than just innovative financial products - it needs reliable market infrastructure that:
- Establishes clear frameworks for measuring and verifying biodiversity impact, potentially using distributed ledger technology
- Creates standardized biodiversity investment products that can be easily integrated into existing portfolio management systems
- Develops risk management tools that can properly price biodiversity risks and opportunities
- Builds secondary markets for biodiversity-linked instruments to provide liquidity
Frameworks including SEEA, or ocean accounts for the ocean specifically, could serve as the foundational data layer, providing standardized metrics that enable proper valuation and risk assessment. Ocean accounts establish standardized statistical frameworks that integrate ecological, economic and governance data on marine and coastal ecosystems, supporting investment decision-making through spatially-explicit asset valuation, benefits attribution, risk quantification, and performance benchmarking. As implemented by the GOAP in 34+ countries, the accounts systematise cross-sectoral data flows between environmental monitoring systems, national statistical offices, and financial institutions—creating interoperable information architecture that reduces transaction costs, enhances transparency, and facilitates cross-jurisdictional comparability for biodiversity-linked financial instruments.
The recent advances in environmental markets provide valuable lessons. For example, the rapid growth of carbon markets shows both the potential and the pitfalls of creating new environmental asset classes. Learning from these experiences and leveraging modern market infrastructure presents us with the opportunity to develop more efficient and effective biodiversity finance markets from the start.
The future of global biodiversity conservation depends on getting these financial mechanisms right. As delegates head to Rome, they must focus not only on adopting the financial resources mobilisation strategy but also the infrastructure required to deliver tangible results for biodiversity conservation and sustainable use.
