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Mobilising a well rounded approach to climate finance

Climate finance has customarily been constrained by both definition and interpretation.

The reference to ‘finance’ mistakenly isolates market-based solutions as the sole avenue through which to mobilise public, private, and alternative sources of funding. Moreover, this limited application tends to prop up carbon emissions (or their equivalent) as the only currency through which to evaluate the value of a proposed transaction or investment; leaving biodiversity loss, ecosystem degradation, and largely forgotten societal impacts behind. 

Carbon emissions cannot be treated as the sole indicator of climate health and instead, climate-finance solutions must take our natural world and its intangibility into account. This point is made clearer when examined in fiscal terms, where: more than half of the world's economic production - with an economic value of $ 44 trillion - is moderately or heavily dependent on nature.  

Unfortunately, nature, its corresponding ecosystems, and, by extension, our climate do not adhere to this linearity that global capital markets have grown accustomed to. Understandably, the primary barrier to their inclusion in the discourse of green financing has been the lack of equivalent simple metrics such as "global temperature" or "GHG emissions" (which are now standard terms in the climate finance vernacular). 

However, as global actors continue to look for ways to establish a more equitable climate finance relationship between the Global North and South, ‘nature-based solutions’ are starting to find their foothold in the global financial system. Given that COP27 seems especially concerned with building on the principle of "common but differentiated responsibility and respective capabilities,", managing nature-related risk by deploying fiscal support has been a focal talking point. 

Inter-organisational initiatives such as the Taskforce on Nature-Related Financial Disclosures (TNFD) will play an essential role in supporting the shift of global capital flows towards nature-positive outcomes, which will in turn protect the long-term economic health of climate-friendly investments. 

Through collaborative action; governments, financial institutions, and corporations will be able to improve market usability and further cement the climate-nature nexus that will need to underpin truly equitable climate finance solutions going forward. By also integrating science-based and purpose-driven parameters through which to evaluate the potential impacts on nature, adequate economic consideration will finally be given to conservation, disaster-risk management, and human health. 

Relying on market-based solutions alone will fail to account for the damage the climate-crisis promises to impose on habitats as well as local-communities. Therefore, by continuing to bring nature-based solutions into the fold, climate finance will provide a more holistic global transition as we work to limit global temperature rises and adapt to future climate impacts.

09/11/2022 10:00:00 am

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