SCALING UP ECOSYSTEM
RESTORATION FINANCE
A Stocktake Report
#GenerationRestoration
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Cover photo: Mangroves / © Gianfranco Vivi / Shutterstock
Report design: Katie Jacobs
SCALING UP ECOSYSTEM
RESTORATION FINANCE
A Stocktake Report
ACKNOWLEDGEMENTS
This report was written by the Finance Task Force Secretariat team - Fiona Stewart, Garo Batmanian,
Luis Diego Herrera Garcia, Samantha Power, Ines Angulo, Olga Gavryliuk, Muhammad Najeeb Khan,
Timothy Brown, Juliana Castano Isaza, and Sylvia Michele Diez – with support from Robin Mitchell.
The team benefited from regular discussions and inputs from the Finance Task Force members:
Citi – Courtney Lowrance, FAO—Paulo Lourenço Dias Nunes, First Rand Bank—Madeleine
Ronquest, Finance for Biodiversity Initiative—Jeremy Eppel, GIZ—Nina Bosom, HSBC—Marine
De Bazelaire, Just Climate—Justin Adams, NOW Partners—Merijn Dols, Olam—Christopher
Stewart, Rabobank—Hans Loth, UN Crop Trust—Jaspreet Stamm, UNEP—Ivo Mulder.
The team is grateful for the peer review provided by Valerie Hickey, Christian Albert Peter,
Anuradha Ray, Ruth Tiffer-Sotomayor, Stavros Papageorgiou, Shaun Mann, Hermione
Nevill. The authors received helpful advice and comments from Sean DeWitt, Carter
Brandon, Brenden Jongman, Boris van Zanten, Anderson Caputo, and Kanta Kumari.
The team would like to thank Katie Lauren Jacobs, Isabel Saldarriaga Arango and other members
of the Communications team for their valuable support in the preparation of this report.
The Finance Task Force is chaired by the World Bank with support from PROGREEN , a
global partnership that works on strengthening the management of forests, promoting
sustainable agriculture to reduce deforestation and land degradation, and seeking to
lessen the impact of sectors such as infrastructure, transport and mining on the land.
PREFACE
The UN Decade on Ecosystem Restoration is an initiative led by the United Nations Environment
Program (UNEP) and the Food and Agriculture Organization (FAO) of the United Nations,
which aims to drive the restoration of one billion hectares of degraded land between now and
2030. The UN Decade is a rallying call for the protection and revival of ecosystems around
the world, for the benefit of people and nature. Only with healthy ecosystems can we enhance
people’s livelihoods, counteract climate change, and stop the collapse of biodiversity.
The UN Decade Finance Task Force (FTF), chaired by the World Bank, aims to catalyze action
which can contribute to unlocking the capital needed to meet the Decade’s goals. ‘Scaling Up
Ecosystem Restoration Finance: A Stocktake Report’ is the first in a series of outputs of the FTF.
This report provides an overview of the current challenges to and opportunities for increasing
public and private investment in restoration. It looks at innovative approaches to financing
restoration activities taken by actors in the public, private, or non-profit sectors and the potential
for these to be replicated or scaled. The report also lays out a draft roadmap of actions the
FTF will take to overcome challenges and contribute to scaling investment in restoration.
The primary audiences of this report are governments and donors, the financial sector,
and real-sector companies – all the decision makers with a role to play in scaling up
finance for restoration. The scale of the converging climate change, nature loss, and
land degradation crises requires coordinated cross-sectoral action to develop systemic
solutions to these complex and pressing challenges. It is exactly this sort of collaboration
that the FTF aims to support through the publication and its broader efforts.
iii Scaling up Ecosystem Restoration Finance
CONTENTS
Prefaceiii
Acknowledgementsiii
Executive Summary 1
1. What is Restoration? 9
2. Why Scaling up Investments in Restoration is Critical 13
3. Reconciling the Investment Rationale and the Financing Gap 19
4. Emerging Solutions 25
5. Finance Task Force Roadmap 35
5.1. Government and Sectoral Policy Levers 37
5.2. Knowledge, Data and Tools 39
5.3. Financial Sector Regulations & Initiatives 43
References49
FIGURES & TABLES
Figure ES-1: The Restoration Continuum 2
Figure ES-2: The benefits of Restoration by Investor Sector 3
Table ES-1: FTF Roadmap Pillars 7
Figure 1: Ten principles that Underpin Ecosystem Restoration 10
Figure 2: Direct and Indirect Contributions of Investments Towards Ecosystem Restoration 11
Figure 3: Benefits of Restoration by Investor Sector 20
Figure 4: FTF Theory of Change 35
Table 1: FTF Roadmap Pillars (to be further developed) 35
Figure Box 1: Mangrove vs. Forestry Carbon Capture Potential 17
Figure-Box 2: Restoration Finance in the Broader Sustainable Finance Landscape 21
Figure-Box 12: Restoration benefits-cost ratio for Burundi 40
A Stocktake Report iv
EXECUTIVE SUMMARY
Humanity is embedded in nature and depends and agricultural soils or giving fisheries space
profoundly on the goods and services it to recover – benefits both people and the
generates. Future economic development planet. Restoration is ‘the process of halting
and well-being hinge on healthy and resilient and reversing degradation, resulting in improved
ecosystems that provide our food and raw provision of ecosystem services, and recovered
materials, drinking water, clean air, and the biodiversity’ (UN Decade 2021). Ultimately,
stability of the climate system. More than restoration reverses the decline in the quantity
half of the world’s gross domestic product and quality of the stock of natural assets.
(GDP) is generated in sectors such as Loss of these assets can reverse development
construction and agriculture that depend gains, aggravate fragility and conflict, and
on ecosystem services (WEF 2020), making exacerbate climate change and climate impacts.
nature relevant not only to policymakers, Conversely, recovering ecosystem functionality
but also business and financial leaders. through investments in restoration of degraded
natural, semi-natural, production, and urban
Humanity’s demands on nature currently far ecosystems is necessary to meet both the SDGs
exceed its ability to regenerate. This gap is and the targets set in the Paris Agreement.
widening (GFN 2022), leaving vast areas of the
planet degraded, and threatening provision The importance of restoration is increasingly
of key ecosystem services. Three-quarters of recognized, not least due to the challenges
Earth’s ice-free land surface and two-thirds of posed by climate change. However, more
its marine environment had been significantly action and funding are urgently needed to
altered as of 2019 and at least 20 percent of land scale up restoration. As climate change
surface is now degraded. Biodiversity is also in accelerates, healthy ecosystems will
steep decline, with nearly 1 million animal and serve as a critical buffer against climate
plant species (of 8 million recorded species) now impacts. For example, the soil on a farm
threatened with extinction (IPBES 2019). This has that has switched from conventional
taken a toll on nature’s ability to provide goods and to regenerative farming practices will
services – with 14 of the 18 assessed categories hold more water, helping to mitigate the
of ecosystem services, particularly regulating impacts of both flooding and drought on
services, declining since 1970 (IPBES 2019). crops. Likewise, a healthy mangrove can
Bringing back the services of once degraded reduce the impacts on communities and
ecosystems – for example by restoring forests infrastructure of a tropical cyclone.
1 Scaling up Ecosystem Restoration Finance
Figure ES-1: The Restoration Continuum (Source: adapted from Gann et al (2019))
Awareness about the value of nature and sources – and will not be sufficient to meet the
commitments to restore it by governments amounts required to address the scale of the
and the private sector are increasing – challenge. Moreover, there are large financial
particularly as the world prepares for the post- flows, including subsidies, that continue to drive
2020 global biodiversity framework to be agreed environmental degradation (Deutz et al., 2020)
upon at the CBD COP15. Governments, financial and which are at least an order of magnitude
institutions, and businesses have committed/ greater than those that are beneficial (OECD,
pledged themselves to increased restoration 2020; World Bank Group, 2020; 2021; Koplow and
efforts through several high-level global Steenblik, 2022). Mapping and monitoring private
commitments, such as the Bonn Challenge. sector investment in restoration is hindered by
However, as of 2021, land restoration initiatives definition and data challenges, but we know
represent/cover/encompass a small fraction this funding is currently very low in relation to
of the area of degraded land thought to be public spending and the overall need. Finance
suitable for restoration, and further areas needs to be mobilized across the full restoration
continue to be degraded (UNCCD 2022). continuum (see Figure ES-1) – through both
‘greening finance’ – i.e. making sure that
Importantly, many pledges remain unfunded financing does not flow to activities which
and financing restoration at scale remains degrade nature – and ‘financing green’ – i.e.
a challenge. Most of the financing for directing capital towards direct investments
restoration currently comes from public in restoration (see World Bank 2020a).
A Stocktake Report 2
Restoration has enormous potential derived from ecosystem services gained.1
to generate market and non-market Restoration can generate market benefits
benefits for different types of investors. in the form of financial returns or savings,
It is estimated that for every dollar spent as well as social and environmental non-
on ecosystem restoration, between market benefits to public, private, and
US$7 and US$110 in economic benefit is philanthropic investors (see Figure ES-2).
Figure ES-2: The benefits of restoration by investor sector
Note: Market benefits refer to those that typically generate financial returns or savings to investors,
while non-market benefits are public in nature and do not usually generate cashflows.
1 Range based on a series of studies including FAO and UNEP 2021, Verdone and Seidl
2017, UNEP et al. 2018, Blignaut et al. 2014, Groot et al. 2013, and WRI 2017.
3 Scaling up Ecosystem Restoration Finance
However, the economic and business case for • lack of sectoral and financial policy
different types of restoration projects has not and regulation that incentivize private
been convincingly made. This stems from the sector investment in restoration; and
concern that restoration is mostly an upfront
cost, with long-term social and environmental • land and sea tenure uncertainty
benefits which cannot be easily monetized. or insecurity and unequal
Key drivers of underinvestment include: distribution of derived benefits,
preventing sound governance and
• insufficient awareness about the management of the natural assets.
critical role of ecosystem services
in the economy and society; Now is the time to act - and solutions do
exist as market and regulatory dynamics
• lack of taxonomy of restoration activities and are increasing the potential for recognizing
standardized frameworks and institutions for nature’s benefits. The fall in supply of
managing a portfolio of restoration projects; ecosystem services coincides with growth
in the global population, incomes, and
• inadequate knowledge and data on the consumption, as well as climate change, and
costs and benefits of restoration; contributes to potentially higher monetary
values for ecosystem services. Monetizing
• the structure and timing of the costs and the value of these benefits is key to unlocking
benefits of restoration, which make the more sources of private investment, in
risk-return profiles of investments less various ways. For example, while the extent
competitive than other types of investments; of these interventions is still quite small,
governments and the private sector are taking
• lack of knowledge about bankable steps to develop and deepen payment for
business models for restoration projects; ecosystem services (PES) programs and
markets, including for carbon storage and
• difficulty monetizing the benefits sequestration, water provision, and biodiversity
of some types of restoration; credits, which can improve returns. Other
sources of revenue, such as from ecotourism
• taxes and subsidies that drive degradation services and sustainably manufactured
and fail to incentivize restoration; products, are also on an upward trajectory.2
2 Castro, M. 2022. The secret behind ecological developments that meet new sustainable tourism standards.
[Online] Forbes.com Available from: https://www.forbes.com/sites/forbesbusinesscouncil/2022/07/21/the-
secret-behind-ecological-developments-that-meet-new-sustainable-tourism-standards/?sh=4df434a87144
A Stocktake Report 4
Cost savings and life cycle benefits from financial sector regulation that encourages
restoration are being integrated into project financial institutions to shift to more
finance. Meanwhile, insurance markets nature-positive portfolios. Restoration
are also taking steps to better account involves a wide range of activities, including
for increased resilience from restoration, agroforestry, silvopasture, reforestation,
which can result in reduced insurance mixed species plantations, riverbank
premiums and ultimately cost savings. restoration, natural regeneration,3 assisted
natural regeneration, and farmer-managed
However, there is a need for actors in the natural regeneration. While many actions
public, private, and non-profit sectors to can be taken that improve the economics of
take steps to accelerate the shift in the restoration across the full spectrum, there is
economics of restoration and address a need for financing approaches, standards,
the barriers described above. Actors from and best practices to be developed for
across sectors can contribute to improving each category of restoration activities.
awareness about the important role of Projects and businesses operating in each
ecosystem services in our economies and category can then be aggregated together
communities. Additionally, these actors can within a given geography to increase the
take steps to design, expand, or improve size of investment, diversify risk, and
the environmental and social impact of PES reduce the cost of capital. An agreed upon
programs and markets. For example, steps taxonomy or classification of restoration
could be taken to better integrate biodiversity activities and associated investment
into the voluntary carbon market and improve opportunities could better enable this.
equitable benefit sharing. Additionally, countries
can develop and implement national water Developing and publishing information
PES programs. Governments have a critical on restoration costs, benefits, business
role to play in developing and implementing models, and best practices is critical to
nature-positive policy and regulation – urgently scaling investment in restoration. This
– by reforming fiscal programs to incentivize information, aligned with the taxonomy
investment and restoration and to disincentive described above, is needed to make a
activities contributing to degradation. compelling investment case to the range
Governments can also pursue sectoral of different actors, including governments,
regulation that mandates restoration, and that can contribute to restoration.
3 Adapted by WRI from Contemporary forest restoration: A review emphasizing function,
Elsevier B.V. 2014 and Sustainable Forest Management Toolbox, FAO 2017.
5 Scaling up Ecosystem Restoration Finance
Cost and benefit data should be as localized For example:
as possible – providing information specific • Corporations represent an important
to countries and bioregions. There is potential source for restoration finance
particular urgency for this data for low- through investment in resilient supply
and middle-income countries, where the chains for food and fiber-based
need for restoration investment is greatest products, (Bancilhon et al., 2018).
and costs tend to be lower. Tools that
enable governments, investors, and project • Institutional investors are looking for
developers to apply this data, and analytics opportunities with market returns
that map out investment opportunities, could that are compatible with or contribute
support restoration investment. The World to their net zero and sustainability
Bank’s analysis of the costs and benefits goals and commitments.
of large-scale mangrove restoration in
Indonesia provides an example for how this • Impact investors and philanthropic
could be approached (World Bank 2022). finance weight environmental and
Analysis of benefits should apply a broad social impacts more highly than
lens to provide a holistic picture of the impact traditional investors, and may
of restoration, and may include granular be willing to pay for impact.
data and local knowledge, including from
indigenous peoples and local communities. • Public and concessional finance can
Additionally, there is a need to develop case be blended with the sources detailed
studies demonstrating business models above to de-risk or credit enhance.
and best practices for developing bankable
restoration projects that generate positive A key challenge is enabling locally
economic and environmental impacts.4 Once led initiatives to access capital from
these steps are complete, public, private, large financial institutions and donors.
and non-profit actors can collaborate to Many of the most impactful restoration
link investment needs and opportunities interventions are being implemented
with appropriate funding sources. through small projects led by local actors.
4 An example is WFF’s Bankable Nature Solutions report. Available at https://www.
panda.org/discover/our_focus/finance/bankable_nature_solutions/
A Stocktake Report 6
India/ © Paulose NK / Shutterstock
Thus financing restoration at scale often The role of the UN Decade Finance Task
requires a coalition of investors and donors that Force (FTF) is to catalyze actions which
support a consortium of actors implementing can contribute to unlocking the capital
a suite of actions on the ground.5 It is critical to needed to meet the Decade’s goals. The FTF
improve the efficiency and standardization of will coordinate catalytical research, tools,
portfolio management so such financing can be datasets, projects, and partnerships and
scaled up. Lessons and best practices can be take steps to increase awareness and foster
drawn from programs such as Initiative 20x20, political will in the public or private sectors, in
AFR100, and the Great Green Wall Initiative. support of scaling up investment in ecosystem
restoration. This Stock Take report is the
These actors can also collaborate on developing first in a series of FTF outputs that will chart
investment vehicles for standardization the course of the Task Force efforts through
that enables replication and aggregation 2030. Based on the Stock Take, a Roadmap
to reduce the cost of capital for restoration will be developed which will lay out the work
projects. Standards and labels will be critical of the FTF in the coming years, covering
to enabling the flow of capital to often small- primary research which the FTF will conduct
scale projects. Compared with the engineering through its members and also using the FTF
standards used for infrastructure, restoration to showcase the work of others, relevant to
projects are likely to have more process- the financial sector. The Roadmap will be
focused standards or labels, as by definition structured around the following key pillars
restoration will require unique practices which of work, with initial workshops covering
will have a distinct impact in each bioregion. these topics kicking off in early 2023.
RIGHT: Table ES-1: FTF Roadmap Pillars
(to be further developed)
5 Sean Dewitt. WRI. Personal communication, September 2022.
7 Scaling up Ecosystem Restoration Finance
PILLARS FTF OUTPUTS PARTNER OUTPUTS
PILLAR 1: • Identification and • Research on how to create
GOVERNMENT promotion of relevant a supportive enabling
AND SECTORAL work by partners environment for restoration
POLICY LEVERS • Case studies on successful
subsidy reform/ PES programs,
frameworks, or regulation
• Case studies on successful
landscape-scale integrated planning
PILLAR 2: • Taxonomy of • Presentation of key restoration
KNOWLEDGE, DATA, restoration activities data sets to a group of relevant
AND TOOLS • Restoration cost/ benefit private sector actors and collect
database, analytics, feedback on additional data needs
tools, and training • Tracking and analysis of
• Restoration trade-offs restoration investment flows
assessment guide • Approach for integrating credits
for co-benefits with carbon credits
(i.e. biodiversity, water, etc.)
• Publications, guidance, and/or support
for countries and the private sector
on natural capital accounting
PILLAR 3: • Review of key financial • Workshops exploring how to
FINANCIAL SECTOR sector regulation, guidance, better integrate restoration
REGULATION AND and analytical tools to into financial sector regulation,
INITIATIVES ensure restoration is guidance, and analytical tools
appropriately accounted • Analytical papers assessing potential
for (i.e. taxonomies, credit to better integrate restoration
rating methodologies,
risk assessment
approaches, etc.)
PILLAR 4: • Templates for replicable • Case studies showcasing
FINANCIAL MARKETS or scalable investment restoration investment and
AND INVESTMENT structures (typology of regenerative business models
INSTRUMENTS restoration investments) • Provide input or technical assistance
• Publication assessing to investment platforms
Monitoring, Reporting • Support standardization of
and Verification investment contracts
(MRV) cost reduction • Standards/label for NbS projects
trends and barriers – building on FAST Infra’s
Sustainable Infrastructure Label
• Cooperation with the UN Decade
Best Practices Task Force to
implement the Capacity, Knowledge
and Learning Action Plan
• Guidance to UN Decade partners leading
A Stocktake Report 8
Restoration Challenge for Finance
1. WHAT IS RESTORATION?
The role of the UN Decade Finance Task ecosystems with enhanced ecosystem
Force (FTF) is to catalyze action which can services flows (e.g., restoration of
contribute to unlocking the capital needed urban areas and farmlands)
to meet the Decade’s goals.6 This Stock
Take report is the first in a series of outputs • from modified ecosystems towards
of the FTF outlining approaches that could healthy natural ecosystems,
unlock financing for ecosystem restoration, providing that the rights and needs
and charting the course of the Task Force of people who depend on that
efforts through 2030. This report provides ecosystem are not compromised
an overview of the current challenges and
opportunities for increasing public and private Ecosystem restoration encompasses a
investment in restoration and suggests a continuum of practices and goals, depending
pathway to overcome obstacles to scale on local conditions and societal choice
up financing. The primary audiences of this (UNEP, 2021a). Restorative practices can
report are governments and donors, the enhance ecological health actively or
financial sector, and real-sector companies passively (enabling natural regeneration),
– all the decision makers with a role to or through a combination of both.
play in scaling up finance for restoration.
The UN Decade on Ecosystem Restoration The ‘restorative continuum’ (Gann
defines ecosystem restoration as ‘the et al. (2019)) – see Figure 2 below -
process of halting and reversing degradation, groups the range of restorative actions
resulting in improved ecosystem services, into the following four classes.
and recovered biodiversity’ (UNEP 2021a,
p.7). Depending on objectives, restored i. Reducing degrading impacts –
ecosystems can follow different trajectories: transforming economies and production
• from degraded natural to more systems toward sustainable use.
intact natural ecosystems
ii. Remediation – bio-physical manipulation
• from degraded, modified ecosystems to reinstate basic ecological functions
to more functional modified such as hydrology regimes.
6 More information about the Finance Task Force is available at: https://
www.decadeonrestoration.org/task-forces/finance
Chaminda Silva
/ shutterstock
9 Scaling up Ecosystem Restoration Finance
iii. Rehabilitation – the progressive contexts through broad engagement with
repairing and enhancement of measurable SDG-aligned goals (Figure 2).
function and integrity to increase Investments in restoration repair ecosystem
ecosystem service flows. function or support native species recovery,
resulting in improved ecosystem services
iv. Ecological Restoration – representing and recovered biodiversity. Examples of
the highest ecological ambition, direct investments in restoration are those
with specific native biodiversity that promote sustainable management of
goals referencing a benchmark. farmlands or grasslands such as agroforestry,
silvopasture, or investments in forest, mangrove,
The 10 principles for ecosystem restoration or peatland restoration (through planting
adopted by UN Decade provide a framework of native species or natural regeneration).
for maximizing net gains for native These generate benefits to a diverse set of
biodiversity, ecosystem health, human stakeholders from the public and private
health and well-being, across all biomes, sectors.7 Investments that reduce societal
sectors and regions (FAO et al., 2021). They impacts or improve ecosystem management
emphasise a wide breadth of restorative contribute indirectly to ecosystem restoration.8
actions which need to be embedded in local
Figure 1: Ten principles that underpin ecosystem restoration (Source: UN Decade on Ecosystem Restoration 2021.)
7 Anderson, W. 2021. Pressing Questions About Ecosystem Restoration, Answered. [Online]
WRI.org. Available from: https://www.wri.org/insights/ecosystem-restoration-questions
8 Though indirect investments do not strictly adhere to the UN Decade restoration principles, they are
certainly part of the broader transition to nature-positive economic practices (Figure 2) (FAO et al., 2021).
A Stocktake Report 10
Figure 2: Direct and indirect contributions of investments towards ecosystem restoration, by stage of the restorative continuum
(Source: Adapted from Gann et al (2019))
Restoration is one in a set of interventions, address the drivers of degradation, and
often referred to as nature-based solutions conserve or create an enabling environment
(NbS) - where direct investments in restoration for sustainable resource management. Most
complement conservation and sustainable- NbS, no matter their primary objective, provide
use-related activities. NbS are defined by the an opportunity to contribute to restoration.
UN as actions to ‘protect, conserve, restore, Large-scale restoration is required to meet
sustainably use and manage natural or modified nature recovery 2050 goals,9 but it needs to
terrestrial, freshwater, coastal and marine take place in tandem with the conservation of
ecosystems which address social, economic critical ecosystems. Similarly, large investments
and environmental challenges effectively and in restorative natural climate solutions will
adaptively, while simultaneously providing be required to meet climate mitigation and
human well-being, ecosystem services, adaptation goals, but only in combination with
resilience and biodiversity benefits’ (UNEA, conservation and sustainable management,
2022). Direct investments in restoration which are often more cost-effective than
often build on other interventions that restoration (Cook-Patton et al., 2021).
9 Restoration is a ‘sought-after outcome’ in the 2050 Vision and 2030 mission of the Convention
of Biological Diversity, based on the first draft of the post-2020 Global Biodiversity Framework.
11 Scaling up Ecosystem Restoration Finance
Integrating restoration objectives more for meeting the SDGs in both cities and
prominently in investments into conservation rural areas (IPBES, 2019). With green
and sustainable use can considerably urban design and integrated strategic
strengthen their environmental and restoration planning in the wider landscape,
social benefits, and contribute to the there is a possibility to reconnect natural
sustainability of these investments. ecosystems across urban and productive
landscapes with mosaics of green-grey
Opportunities for restoration exist across infrastructure and natural habitats, and to
the urban, agricultural, and natural increase biodiversity in the most developed
ecosystems, and can be cost effective areas, where it is often most threatened.
Chad / © Andrea Borgarello-World Bank-TerrAfrica
A Stocktake Report 12
2. WHY SCALING UP INVESTMENTS
IN RESTORATION IS CRITICAL
Humanity is embedded in nature, and of ecosystem services, particularly regulating
depends profoundly on the flow of goods services, declining since 1970 (IPBES 2019).
and services it generates. Future economic
development and well-being hinge on healthy Global environmental risks such as natural
and resilient ecosystems that provide our resource crises, biodiversity loss, extreme
food and raw materials, drinking water, clean weather, human environmental damage,
air, and the stability of the climate system. and climate action failure have emerged
More than half of the world’s gross domestic among the top 5 risks perceived to be of
product (GDP)—is generated in sectors such the highest likelihood and have the greatest
as construction and agriculture that depend future economic impact in recent annual
on ecosystem services (WEF 2020), making WEF Global risks reports. In 2022, for the
nature relevant not only to policymakers, first time all the top five long term risks (5-10
but also business and the financial sector. years) were environmental risks (WEF, 2022).
Humanity’s demands on nature currently far Bringing back the services of once-degraded
exceed its ability to regenerate, and this gap ecosystems – for example by restoring forests
has been widening (GFN 2022), leaving vast and agricultural soils or giving fisheries space
areas of the planet degraded, and threatening to recover – benefits both people and the
the provision of key ecosystem services. planet. Ultimately, restoration reverses the
Three-quarters of Earth’s ice-free land surface decline in the quantity and quality of the stock
and two-thirds of its marine environment had of natural assets. The loss of these assets
been significantly altered as of 2019, and can reverse development gains; aggravate
at least 20 percent of land surface is now fragility and conflict, and exacerbate climate
degraded. Biodiversity is also in steep decline, change and climate impacts. Conversely, to
with nearly 1 million animal and plant species meet both the SDGs and the targets set in the
(of 8 million recorded species) now threatened Paris Agreement, it is necessary to recover
with extinction (IPBES 2019). This has taken ecosystem functionality through investments
a toll on nature’s ability to provide goods and in restoration of degraded natural, semi-
services – with 14 of the 18 assessed categories natural, production, and urban ecosystems.
PARALAXIS /
shutterstock
13 Scaling up Ecosystem Restoration Finance
Avoiding further degradation and building the optimistic scenario of economic growth.
resilience of natural assets to accelerating When the loss of nature’s benefits to people is
climate change is crucial. As climate change included, growth in global GDP by 2030 slows
accelerates, many natural environments will considerably (Johnson et al., 2021). Globally,
need restoration to remain resilient to - and land degradation is estimated to cause a loss
counteract any degradation driven by - climate in ecosystem service value of US$6.3 trillion
change, such as desertification or shifting each year. This loss is more than three times
species ranges (Morecroft et al., 2019). The larger than the entire value of agriculture in
loss and degradation of terrestrial and marine the market economy (Sutton et al., 2016).
ecosystems releases carbon, and can cause a
vicious cycle of carbon loss. For example, parts Countries such as Costa Rica and India
of the Amazon forest now emit more carbon demonstrate how restoration, conservation
dioxide than they absorb, due to deforestation and development can go hand in hand.
and climate change (Gatti et al., 2021). Costa Rica increased its forest cover from
26 percent in 198312 to 59 percent in 2020
Lack of investment in restoration will (FAO 2020), while more than doubling its GDP
create limits to sustainable prosperity per capita over this same period. A mix of
of companies and countries (Dasgupta, restoration and conservation interventions,
2021) because most assessed10 ecosystem including Payments for Ecosystem Services
services are already declining globally (PES), brought back biodiversity and
(IPBES, 2019). WEF 2020 estimates that ecosystem services that have become the
more than half the world’s GDP (USD 44 basis of a vibrant tourism sector, directly
trillion) is generated by sectors that are contributing an estimated 6.3 percent of
directly dependent on ecosystem services.11 Costa Rica’s GDP in 2018.13 In India, the
Despite a high degree of sector dependencies Mahatma Gandhi National Rural Employment
on nature, conventional economic models Guarantee, with 80 million participants, supports
do not account for the declining trends in irrigation, afforestation, soil conservation,14
nature’s services and thus provide an overly and watershed development, with potential for
10 14 out of the 18 ecosystem services assessed by IPBES showed declines since 1970 and modelling did not
account for many of the ecosystem service sources identified by the 2005 Millennium Ecosystem Assessment.
11 This is a conservative estimate because it excludes indirect dependence through supply chains.
12 World Bank. 2016. Accounting reveals that Costa Rica’s forest wealth is greater than
expected [Online] World Bank website. Available from: https://www.worldbank.org/en/news/
feature/2016/05/31/accounting-reveals-that-costa-ricas-forest-wealth-is-greater-than-expected
13 Based on data available from the Central Bank of Costa Rica website (https://www.bccr.
fi.cr/indicadores-economicos/cuenta-sat%C3%A9lite-de-turismo) The link directs you to the
Tourism webpage and the estimate included in the text is not readily available there
A Stocktake
14 Hallegate, S. et al. 2020. Thinking ahead: For a sustainable recovery from COVID-19 Report
(Coronavirus) 14
contributing to carbon sequestration.15 These The African Forest Landscape Restoration
types of programs, if carefully designed, can Initiative is another country-led effort to bring 100
facilitate long-term economic transformation. million hectares of land in Africa into restoration
by 2030. As of 2021, global commitments
Given the multiple economic and financial for land restoration by 2030 total one billion
benefits associated with ecosystem restoration, hectares, half the total are of degraded land
governments, financial institutions,16 and thought to be suitable (UNCCD, 2022).
businesses17 have committed to increased
restoration efforts through several high-level Scaling up investment in restoration, and
global initiatives. Restoration is incorporated NbS more broadly, has been signalled
in all three Rio Conventions – on Biodiversity, as a necessary part of meeting multiple
Climate Change, and Desertification. The Bonn sustainable development and business
Challenge (covering voluntary actions), launched goals.18 These include targets for climate19
in 2011, aims to bring 350 million hectares (Griscom et al., 2017; Cook-Patton et al.,
of the world’s deforested and degraded land 2021), food security and land degradation,20
into the process of restoration by 2030. many SDGs,21 and biodiversity.22
WB (Online). Available from: https://blogs.worldbank.org/climatechange/
thinking-ahead-sustainable-recovery-covid-19-coronavirus
15 Moudgli, M. 2021. Rural job scheme guarantees carbon sequestration. Mongabay (Online) Available
from: https://india.mongabay.com/2021/06/rural-job-scheme-guarantees-carbon-sequestration/
16 An example is the MDB Joint Statement released in 2021. Available
from: https://ukcop26.org/mdb-joint-climate-statement/
17 An example is the 2014 NY Declaration on Forests and One Planet Business for
Biodiversity. Available from: https://www.wbcsd.org/Projects/OP2B
18 Examples include the WBCSD setting science-based target for nature membership criteria,
the global coalition Business for Nature platform, and the Finance for Biodiversity Pledge
19 As mentioned in the Glasgow Climate Pact in the UNFCCC –Cop26, which “emphasizes the importance
of protecting, conserving and restoring nature and ecosystems to achieve the Paris Agreement temperature
goal, including through forests and other terrestrial and marine ecosystems acting as sinks and reservoirs
of greenhouse gases and by protecting biodiversity, while ensuring social and environmental safeguards”.
Available from: https://unfccc.int/sites/default/files/resource/cop26_auv_2f_cover_decision.pdf
20 UNCCD 2022
21 The Fifth Session of the United Nations Environment Assembly (March 2022) made
a resolution on adopting a multilaterally agreed definition of nature-based solutions (NbS);
recognizing the important role they play in the global response to climate change and its social,
economic and environmental effects. Available from: https://www.unep.org/news-and-stories/
press-release/un-environment-assembly-concludes-14-resolutions-curb-pollution
22 During the CBD COP15 many participants called for ambition and action to reach 2030 biodiversity
targets. Available from: https://www.cbd.int/doc/c/d707/6fca/f76569ac6b47ae9930a3b251/cop-15-04-en.pdf
15 Scaling up Ecosystem Restoration Finance
The Leaders’ Pledge for Nature23 marked a Leveraging its 110+ strong partner
turning point in political recognition of the network, the UN Decade plans to
need for scaling up restoration investment achieve this through a collaborative
through calls for biodiversity loss to be effort along three main pathways:
reversed by 2030 as a necessary foundation
for sustainable development. Many actors 1. A peer-driven, participatory
in the public, private, and non-profit sectors global movement that focuses
have already made pledges for significant on upscaling restoration.
investments in NbS. For governments, this
may come in the form of NbS for climate 2. Fostering political will so that
resilience, while for corporates this may leaders in the public and private
look like NbS carbon emissions removal sectors support the global movement
projects. A scaled-up implementation of NbS and champion restoration.
for climate mitigation was recognized at the
2019 UN Climate Action Summit as critical 3. Catalytical research and development
to slowing and reversing climate change.24 that generates the technical capacity that
is needed to restore ecosystems at scale.
To ensure that healthy ecosystems
contribute towards achieving the SDGs Through these collaborative pathways, the UN
by 2030, the United Nations General Decade will address six barriers to catalyze a
Assembly has proclaimed 2021-2030 the global movement for large-scale restoration,
UN Decade on Ecosystem Restoration. namely: public awareness, political will,
The primary aim of the UN Decade for legislative and policy environments, technical
Restoration is to prevent, halt, and reverse capacity, finance, and scientific research.
the degradation of ecosystems worldwide.
23 The Pledge is available at: https://www.leaderspledgefornature.org/wp-content/
uploads/2021/06/Leaders_Pledge_for_Nature_27.09.20-ENGLISH.pdf
24 It is estimated that ‘natural climate solutions’ with safeguards are estimated to provide
37 per cent of climate change mitigation until 2030 needed to meet the goal of keeping
climate warming below 2°C, with likely co-benefits for biodiversity (IPBES, 2019).
A Stocktake Report 16
BOX 1: DELTA BLUE CARBON PROJECT IN PAKISTAN
In 2015, Indus Delta Capital Private Limited joined forces with the Forest and Wildlife
Department of the Government of Sindh, Pakistan to launch the Delta Blue Carbon Project.
The world’s largest blue carbon project, Delta Blue Carbon is aimed at protecting and
restoring 350,000 hectares of tidal river channels and creeks, low-lying sandy islands,
mangrove forests, and inter-tidal areas on the south-east coast of Sindh. Mangrove forests
sequester 3-5 times more CO2 per hectare than upland tropical forests, and the project is
engaging in large scale mangrove planting across the delta. In total 220,000 hectares will
be planted, the largest restoration programme in the world. To date, over 70,000 hectares
have been planted. The project will operate over a 60-year lifespan, and will generate over
128.5 million high-quality credits and sequester 142 million tonnes of CO2.
Figure Box 1: Mangrove vs. Forestry Carbon Capture Potential
(Source: Reef Resiliance Network. (2020). Blue Carbon Introduction)
PARALAXIS /
shutterstock
17 Scaling up Ecosystem Restoration Finance
Mangroves in Sindh, Pakistan
© Danish Iqbal/Shutterstock
A Stocktake Report 18
3. RECONCILING THE INVESTMENT
RATIONALE AND THE FINANCING GAP
Restoration has enormous potential to in the model. The predicted reduction is even
generate market and non-market benefits for smaller when adjusted for the climate change
different types of investors. It is estimated mitigation co-benefits of natural areas.
that for every dollar spent on ecosystem
restoration, between US$7 and US$110 in Public, private, and philanthropic investors
economic benefit is derived from ecosystem have different but overlapping and often
services gained25. Restoration can generate synergistic investment rationales. Public
market benefits in the form of financial returns and philanthropic investors tend to have the
or savings, as well as social and environmental broadest investment rationales, inclusive
non-market benefits to public, private and of wider economic and public benefits,
philanthropic investors (see Figure ES2). whereas private sector parties are more
focused on financial returns and a smaller
Nature-smart policy pathways are less scope of economic returns driven by risk
financially and politically costly to implement management. However, none of these
than they are perceived to be. Restoration three broad investor types aim exclusively
policies are forecast to generate substantial for either economic returns or financial
economic and environmental benefits, with very ones. For example, a government fund may
little net negative impact on GDP growth. For invest in a natural asset company partly
example, the integrated ecosystem-economy to earn a financial return and partly to
modelling led by the World Bank (Johnson generate public goods. Public, private, and
et al., 2021) demonstrates that meeting philanthropic investors can be motivated by
the “30x30” target (30 percent protected or financial returns generated by investments
restored by 2030) of the draft post-2020 global in restoration, for example in sustainable
biodiversity framework may result in only a forestry. But they will also be interested in
0.1 percent decline of global GDP in 2030, broader economic benefits, including social
compared with business-as-usual, because of and environmental benefits, which may be
the enhanced provision of ecosystem services valued by public decision-makers but are
resulting from additional nature conservation not always monetized by private investors.
25 Range based on a series of studies including FAO and UNEP 2021, Verdone and Seidl
2017, UNEP et al. 2018, Blignaut et al. 2014, Groot et al. 2013, and WRI 2017.
Andrea Borgarello
/ World Bank 19 Scaling up Ecosystem Restoration Finance
Figure 3 shows a range of benefits, 2. Addressing climate mitigation, disaster
broadly classified into three main resilience or adaptation targets.
drivers of restoration investment:
1. Pursuing business opportunities 3. Meeting sustainable development
and/or risk management. and biodiversity goals.
Figure 3: Benefits of Restoration by Investor Sector
Note: Market benefits refers to those that typically generate financial returns or savings to investors, while non-market benefits are
those that are public in nature and do not usually generate cashflows.
A Stocktake Report 20
However, scaling up restoration action to large funding gap compared with levels
meet the many pledges made and reap implied by 2030 goals (ibid) (See Box 2).
the potential benefits faces significant
challenges, including a large financing gap. Currently available data on NbS and
While there are no comprehensive estimates biodiversity finance flows only partially
of either restoration finance spending or capture figures for restoration. This applies
cost to meet goals, available evidence from both to direct restoration investment,
analyses of biodiversity and nature-based and indirect restoration finance - where
solutions (NbS), or natural climate solutions expenditures and risk management activities
investments (Deutz et al., 2020), (UNEP, have restorative outcomes as a secondary
2021b) (Climate Policy Initiative, 2021) points objective, or a co-benefit. As of 2019, current
to low direct investment in restoration. spending on biodiversity conservation was
This shortfall in investment creates a between US$124 and US$143 billion per year
BOX 2. FINANCIAL SECTOR APPROACH TO RESTORATION FINANCE
Currently the financial sector does not distinguish restoration finance as a separate class
of investment. Restoration finance is considered a sub-set of nature finance, which is itself
a sub-set of sustainable finance (that considers environmental, social, and governance
‘ESG’ factors alongside conventional financial analysis) (see Figure 3).
Restoration is mentioned explicitly as a
‘qualifying activity’ in various definitions of
biodiversity finance, including those used
by BIOFIN (2018) and OECD (2020). Most
biodiversity or sustainable finance will have
restoration co-benefits that would ideally be
captured by investment data and decision-
making processes.
Restoration is also a sub-set of climate
finance given restoration efforts can mitigate
climate change and reduce its impacts (CPI
2021, IPBES 2019, Strassburg et al. 2020). Figure-Box 2: Restoration Finance in the
Broader Sustainable Finance Landscape
21 Scaling up Ecosystem Restoration Finance
(Deutz et al., 2020), an unknown amount of by silvopasture26 at US$ 193 billion per
which targeted restoration. About US$133 year, peatland restoration at US$7 billion
billion is spent on NbS more broadly, of per year, and mangrove restoration at
which sum a reasonable part would be US$0.5 billion per year (UNEP, 2021b).
restorative (UNEP, 2021b). Only a small
fraction (6 percent) of 2020’s estimated Critically, financial flows that are harmful
US$632 billion in climate finance flows went to nature, including subsidies, are at least
into land use or water-related activities, an order of magnitude greater than those
and only a smaller proportion of this into that are beneficial (OECD, 2020; World Bank
restoration (Climate Policy Initiative, 2021). Group, 2020; 2021; Koplow and Steenblik,
2022). Nature Finance ( previously F4B, 2021a)
The financing gap for investments in estimates the collective damage to nature of
conservation, restoration, and sustainable US$800 billion annually arising from the US$11
use of nature needed to reverse the decline trillion invested by Public Development Banks –
in nature loss by 2030 is estimated to be equivalent to 7 cents for every dollar invested.
between US$98 billion and US$824 billion Therefore, changes at the policy level and of
per year (Deutz et al., 2020). This means the practices of public financial institutions,
that a scaling up factor of at least several although not necessarily producing direct
folds is required. Annual financing needs restorative outcomes, is a vital component
to successfully implement the post-2020 of the nature recovery agenda, as it reduces
global biodiversity framework over the drivers of degradation that would otherwise
coming decade is estimated to be at least widen the recovery gap. A significant proportion
US$700 billion. Investment in NbS must of the financial gap could in fact come
at least triple in real terms by 2030 and from redirecting, repurposing, reforming, or
increase four-fold by 2050 if the world is to eliminating incentives harmful for biodiversity27.
meet its climate change, biodiversity, and
land degradation targets. This equates to The economic and business case for
a future annual investment rate of US$536 different types of restoration projects
billion. Forest-based solutions alone could has not been convincingly made, which
amount to US$203 billion per year, followed leads to this massive underinvestment.
26 Silvopasture is the deliberate integration of trees and grazing livestock operations
on the same land. These systems are intensively managed for both forest products
and forage, providing both short- and long-term income sources.
27 Based on CBD Secretariat (2021a); CBD Secretariat (2021b)
A Stocktake Report 22
This stems from the concern that restoration • lack of standardized frameworks and
is mostly an upfront cost, with long-term institutions for managing a portfolio
social and environmental benefits which of restoration projects; lack of a
cannot be easily monetized. Failure to capture taxonomy of restoration activities;
the value generated by improved ecosystem
services deriving from restoration interventions • taxes and subsidies that drive degradation
(especially the public benefits), will lower return and fail to incentivize restoration;
expectations, and thus reduce investment in
restoration (WRI 2017). Valuing and monetizing • lack of sectoral and financial policy
a wider range of the benefits of restoration, and regulation that incentivize private
including ecosystem services, are critical to sector investment in restoration; and
stimulating both public and private investment.
Key drivers of underinvestment include: • land and sea tenure uncertainty or insecurity
and unequal distribution of derived
• insufficient awareness about the benefits, preventing sound governance
critical role of ecosystem services and management of the natural assets.
in the economy and society;
Investments in restoration can generate
• inadequate knowledge about data on direct market returns through avoided costs
the costs and benefits of restoration; and markets for ecosystem services and
sales of sustainable products. They can
• the structure and timing of the costs and also generate non-market benefits that can
benefits of restoration, which make the be attributed significant value, but are not
risk-return profiles of investments less always monetized. Market and non-market
competitive than other types of investments; benefits from restoration investment often
exceed the initial capital requirements
• lack of knowledge about bankable (GCEC, 2014; Verdone and Seidl, 2017).
business models for restoration projects; For private investors, the business case
will depend on the time and risk adjusted
• difficulty monetizing the benefits financial returns (FAO, 2022)28 and how
of some types of restoration; inclusive it is of broader economic benefits.
28 For example, many agroforestry projects contributing to nature recovery at the rehabilitation
step of the restorative continuum do have a financial return but spread over a longer time horizon and
when risk-adjusted are often not attractive compared to other investment options (e.g., a profitable
return from agroforestry can take up to eight years compared with 1–2 years for annual crops).
23 Scaling up Ecosystem Restoration Finance
When both the market and non-market benefits longevity, and to optimize positive impacts related
of natural capital assets are accounted for, the to biodiversity, climate change mitigation and
benefits of restoration can far exceed the costs. adaptation, equity, and sustainable development
However, the lack of monetary value for many of (Girardin et al 2021). Additionally, project design
the provisioning ecosystem services resulting should consider and plan for the full range of
from investments, often partly provided to public costs over the lifetime of the project at the
parties, is an obstacle to scaling investment flows. outset, so far as possible, to ensure durability and
impact. The challenges of planning for costs over
Another challenge for restoration projects is long time horizons in both the public and private
that the benefits of restoration efforts can sectors, as well as the trade-offs associated with
take many years to accrue. To be effective, restoration interventions (see Box 3), should be
restoration interventions should be designed for acknowledged and managed (Sarabi, 2020).
BOX 3: RESTORATION TRADE OFFS
Restoration efforts involve trade-offs, which should be carefully assessed, and the impacts
managed. The net benefits of a restoration project and their distribution are dependent on
the objectives, degree of degradation, restoration costs, ecosystem type, location, proximity
of indigenous peoples and local communities, and the opportunity costs. Decision support
tools such as cost-benefit analysis and multi-criteria analysis can be used in the analysis and
comparison of benefits from a range of interventions and the design of a project that prioritizes
key benefits and manages distributional trade-offs. There are often trade-offs between
restoring ecosystem functionality holistically, focusing on carbon storage and sequestration,
or devoting land for productive uses, and creating jobs, inter alia. Additionally, the economic
and financial benefits of various interventions are changing as PES programs and markets
develop and deepen – modelling can take these changes into account. Moreover, since the
restoration of ecosystems often involves a combination of approaches that includes the
long-term protection of restored areas, trade-offs associated with forgoing land conversion
to agriculture in one location and the potential increase in the demand for farmland and
pasture elsewhere (leakage), should also be considered in the analysis and managed (UNEP
2020). Modeling can inform an effective strategy to manage the distribution of benefits and
costs to ensure all stakeholders affected by a project are made better off (see Ghermandi
and Nunes 2013, Shyamsundar et al. 2022 for examples of applications).
A Stocktake Report 24
4. EMERGING SOLUTIONS
Now is the time to act - and solutions do degradation, and there is great potential to
exist as market and regulatory dynamics use them to create incentives for restoration
are increasing the potential for recognizing and prevent degradation that would
nature’s benefits. The fall in supply of otherwise continue to increase the financing
ecosystem services coincides with growth needs for restoration (Ding et al., 2021).
in the global population, incomes, and
consumption, as well as climate change, • Since the extent of these markets is still
and contributes to potentially higher relatively small, governments and the
monetary values for ecosystem services. private sector can take steps to develop and
deepen payment for ecosystem services
Monetizing the value of these benefits is key to (PES) programs and markets, including
unlocking wider sources of private investment. for carbon storage and sequestration,
This can be achieved in various ways: water provision, and biodiversity credits,
which can improve returns (see Box 4).
• Subsidy reform and fiscal incentives by
the public sector have a large potential • Other sources of revenue, such as from
leveraging effect for direct restoration ecotourism services and sustainably-produced
investments from the private sector. products, are also on a growth trajectory.29
Environmental fiscal policies have been
severely underutilized, especially in the land • Cost savings and life cycle
use and forest sectors. While environment- benefits from restoration are being
related taxes make up 3–10 percent of total integrated into project finance.
tax revenues in Organisation for Economic
Cooperation and Development (OECD) • Insurance markets can also take
countries, almost all of these taxes relate steps to better account for increased
only to environmental problems caused by resilience from restoration, which can
fuel combustion (World Bank 2021). Fiscal result in reduced insurance premiums
policies are just starting to be used actively and ultimately in cost savings.
for addressing deforestation and forest
29 Castro, M. 2022. The secret behind ecological developments that meet new sustainable tourism standards.
[Online] Forbes.com Available from: https://www.forbes.com/sites/forbesbusinesscouncil/2022/07/21/the-
secret-behind-ecological-developments-that-meet-new-sustainable-tourism-standards/?sh=4df434a87144
25 Scaling up Ecosystem Restoration Finance
BOX 4. PAYMENTS FOR ECOSYSTEM SERVICES (PES)
PES programs provide a potentially scalable source of monetary benefits for restoration
(Vincent et al. 2021). PES can be implemented through government-sponsored programs
or through compliance and voluntary markets. Under a public PES program, the government
pays landholders to undertake actions that increase the supply of ecological services from
their land. PES can target restoration of forests that provide non-timber services (e.g.,
mixed native species forests), which markets do not typically reward landholders to supply,
as well as those that provide commercial opportunities (e.g., mixing timber forests and
native species). China’s Sloping Lands Conservation Program is the leading example of this
approach to restoration, as the largest PES program in low- and middle-income countries.
Governments can also develop and implement national PES programs that involve cost
sharing with subnational governments or private corporations, as Mexico has done
in its Fondos Concurrentes Program (a water provision PES market), and that leverage
compliance and voluntary markets. Compliance markets for PES include biodiversity
mitigation banks (e.g. the US and Australian markets). Voluntary PES include the rapidly
growing Voluntary Carbon Market (VCM) - which reached US$2.5 billion in 2021 - and the
forthcoming market for biodiversity uplift credits expected to launch in early 2023. It is
estimated that the VCM could grow to US$50-100 billion by 2030. Regulation and guidance
frameworks for these markets are under development.
Public, private, and non-profit actors between 1 and 1.5 percent of the total
can collaborate to map investment market value of sustainable products
needs and opportunities to appropriate in 2020, expected to more than
funding sources. For example: double by 2030 (Deutz et al., 2020);
• Corporations represent an important • Institutional investors are looking
potential source for restoration finance for opportunities with market returns
through investment in resilient supply that are compatible with or contribute
chains for food and fiber-based products, to their net zero and sustainability
(Bancilhon et al., 2018), representing goals and commitments;
A Stocktake Report 26
• Impact investors and philanthropic The implementation of insetting practices
finance give greater weight to is growing. The International Platform for
environmental and social impacts Insetting published a best practice guide
than traditional investors do, and may earlier this year that helps businesses
be willing to pay for impact; and develop carbon in setting practices.30
• Public and concessional finance There is a growing financing opportunity
can be blended with the above listed in sustainable value chains driven by
sources to de-risk or credit enhance. demand from companies with large global
soft commodity supply chains. Although
Corporations represent an important primarily driven by risk management these
potential source for restoration finance, investments are delivering direct economic
through investment in sustainable supply benefits and promote the financial stability
chains, which can increase the security and of the suppliers. Sustainable supply chain
value of supply for the whole value chain finance markets will reach one third of
(Bancilhon et al., 2018). In 2019, between the market, or US$660 billion by 2030,
US$5 billion and US$8 billion per year was representing a US$6 billion annual revenue
being invested into nature through the opportunity (Bancilhon et al., 2018). Many
financing of sustainable supply chains (Deutz business sectors rely directly on ecosystem
et al., 2020), representing between 1 and 1.5 services for their supply chains. For example,
percent of total market value for sustainable the agriculture sector relies on pollination
products. This is expected to rise to US$12 services, and the textile industry (among many
billion to US$19 billion per year by 2030 (ibid). other sectors) relies on sustainable water
These numbers are based on financial flows supply at multiple points across the supply
associated with certified forest products, chain (OECD, 2019). Further development
palm oil, agricultural goods, and seafood; of sustainable supply-chains holds the
they are not specific to any restorative potential for billions of dollars more in annual
activities potentially involved. As corporates revenue with the growth of new markets for
are major landowners and have a significant reduced biodiversity impacts (OECD, 2019).
influence on land through their supply chains, Box 5 provides an example of a sustainable
the potential for corporate ‘insetting,’ rather business model in the agricultural sector.
than - or in addition to - offsetting of carbon
or biodiversity impacts is significant.
30 The guide is available from: https://www.insettingplatform.com/insetting-guide/
27 Scaling up Ecosystem Restoration Finance
Other benefits may come from accessing new invest in restoration of environments in
sources of finance (e.g., via ESG investments) their value chain, they may be more likely
and / or lower capital costs (e.g., via to access concessional finance and avoid
sustainability linked instruments). Although delays in receiving permits, licenses, and
this is hard to quantify for businesses that regular non-concessional finance.
BOX 5: NEW FORESTS
New Forests is a global investment manager of nature-based real assets. New Forests’
US$120 million Tropical Asia Forest Fund 2 includes a diversified portfolio of sustainable
forest plantation assets in Malaysia, Indonesia, Vietnam, Thailand, Laos, and Cambodia that
generates timber, rubber and carbon to be sold to end markets. Alongside its core commercial
activities, New Forests manages its investments to implement 18 different impact activities,
closely aligned with the Paris Agreement and the UN Sustainable Development Goals,
focusing on climate mitigation, biodiversity enhancement, and community development. New
Forests’ objective with this fund is to demonstrate that asset management that integrates
commercial forestry investments with activities like ecosystem restoration, reforestation,
and community forestry will lead to better returns, as well as to long-term sustainability
outcomes. The fund blends commercial and concessional, impact-oriented equity. “Impact
investors are basically getting impact at scale by leveraging the capital commitments of
the commercial investors, while the commercial investors have the opportunity to invest in
impact at a greater scale than they could with a conventional fund, but are compensated for
doing so with impact-oriented investors’ equity,” says Radha Kuppalli, Managing Director,
Impact and Advocacy, at New Forests.31
Source: https://newforests.com/
A key challenge in financing restoration is finance adapted for smaller scale restoration is
getting capital from large financial institutions scarce, and social trade-offs associated with
and donors to locally-led initiatives. For larger restoration schemes must be considered
example, restoration is essential for the (Ding et al., 2017; World Bank Group, 2020).
mitigation of climate change, yet climate
31 Green Finance Institute. Tropical Asia Forest Fund 2. [Online] Available from https://
www.greenfinanceinstitute.co.uk/gfihive/case-studies/tropical-asia-forest-fund-2/
A Stocktake Report 28
Many of the most impactful restoration Improving the efficiency and standardization
interventions are being implemented through of portfolio management so such financing
small projects led by local actors. Therefore, can be scaled up is critical. Lessons and
financing restoration at scale often requires a best practices can be drawn from programs
coalition of investors and donors supporting such as Initiative 20x20, AFR100 (see Box 6
a consortium of actors implementing a suite for more details), and the Climate Investment
of actions on the ground (see Box 6 for an Funds Dedicated Grant Mechanism (DGM).
example of a coalition tackling this challenge).32
BOX 6: WRI’S AFRICAN FOREST LANDSCAPE RESTORATION INITIATIVE (AFR100)
AFR100 is partnership of 32 African governments and numerous technical and financial
partners, aiming to bring 100 million hectares of land in Africa into restoration by 2030. Key
goals of AFR100 include catalysing the market for restoration using instruments such as
debt, forward contracts, and guarantees, while also playing a broader enabling role through
technical assistance, planning and coordination, and monitoring capabilities.
TerraFund for AFR100 was launched in October 2021 with US$15 million of project
capital deployed, focusing on local-based restoration efforts with grant finance provided
to community non-profits and loan finance (low interest, 4 percent average) provided to
agroforestry SMEs. All of TerraFund’s projects are tracked for environmental and social
impact on WRI’s TerraMatch digital platform.
Of the 100 projects that have currently been financed through TerraFund, only a few had
access to international finance prior to participation. TerraFund plans to expand its funding
pool and cohort in 2023 under a larger financial architecture for AFR100 Phase 2, that will
introduce a concessional fund, offtake finance, and carbon credits.
Leveraging lessons learned for small ticket size grants and loans (between US$50,000 and
US$500,000), TerraFund will continue to provide finance to private enterprises with viable
business models, and grants to community organizations with tailored capacity-building
to harness the power of markets to support restoration activities.
Source: https://afr100.org/
32 Sean Dewitt. WRI. Personal communication, September 2022..
29 Scaling up Ecosystem Restoration Finance
These actors can also collaborate on developing focused standards or labels, as by definition
investment vehicles which create standardization restoration will require unique practices which
that enables replication and aggregation will have a distinct impact in each bioregion.
to reduce the cost of capital for restoration
projects. Standards and labels will be critical Equity investment33 volumes have seen a sharp
to enabling the flow of capital to often small increase in asset managers creating equity funds
projects. Compared with engineering standards that invest in shares of companies improving
that are used for infrastructure, restoration ecosystem condition through their products
projects are likely to have more process- or services (see Box 7 for an example).
BOX 7. BNP PARIBAS ECOSYSTEM RESTORATION
This fund invests in listed global equities across the capitalization scale, that offer
environmental solutions contributing to the restoration of ecosystems through their products,
services, or processes. Investments focus on three main themes: 1) aquatic ecosystems:
water pollution control, water treatment and sustainable packaging, aquaculture, efficient
irrigation systems and flood control solutions; 2) terrestrial ecosystems: technologies
relating to alternative protein, sustainable agriculture, forestry, and plantations; and 3) urban
ecosystems: environmental services, green buildings, recycling, waste management, and
alternative modes of transport. BNP Paribas Ecosystem Restoration consists of a high-
conviction portfolio of 40-60 holdings selected from 1,000 global companies focused on
aquatic, terrestrial and urban ecosystem restoration. The investment universe is diversified
by geography, size, and sector, with technology, industrials, and materials well represented,
and contains many highly innovative companies using complex technologies to address
environmental issues. The fund is managed using an active approach that combines
macro and fundamental research with proprietary quantitative screening, together with
integrated ESG criteria, to identify best-in-class companies.
Source:https://www.bnpparibasfortis.com/newsroom/press-release/bnp-paribas-asset-management-launches-ecosys-
tem-restoration-fund
33 The revenue model of restoration projects is a key determinant of the most appropriate financial instrument.
Equity is well-suited to projects with revenues expected in the medium to long-term. Loans and bonds are
suitable to projects that have revenues from the start, with bonds also more suitable for larger projects (greater
than US$50 million) given the upfront transactions costs to set up the arrangements. Grants are suitable for
projects with lower or uncertain revenue streams. Crowdfunding can be mobilized as either grants or loans.
A Stocktake Report 30
These funds often spread their investments Debt instruments are also showing potential
across companies active across the whole to support and scale restoration financing.
restorative continuum and whose activities Bonds are fixed-income debt instruments
include practices that reduce societal impacts that represent a loan made by an investor
and those that directly create a net gains to a borrower (typically corporate or
in ecosystem functions. Equity investment governmental). Bonds have the potential to
can be either on concessional terms or at be significantly scaled both as standalone
market rates. A key example is provided by financial instruments, and as part of blended
natural asset companies that maximize the finance described below. In particular,
flow of ecosystem services from natural or green bonds are a category of fixed-income
production ecosystems to which they have securities raising capital for projects with
both the rights and authority to manage and environmental benefits. Most green bonds
convert into financial capital. The public sector are not used to channel funds into restoration
can provide the founding equity for such projects at the moment, but there is scope for
companies, reducing risks for private investors this tool to be used as a source of financing.
and potentially providing capital returns for The Forest Resilience Bond (Box 8) is a public/
the public purse. For example, the world- private partnership developed by Blue Forest
leading Costa Rican National Bioeconomy Conservation and the World Resources
Strategy (2020)34 includes such measures. Institute which illustrates this approach.
BOX 8. FOREST RESILIENCE BOND
The FRB Yuba Project I LLC, or the Forest Resilience Bond (FRB), is a financing mechanism
developed by Blue Forest Conservation in partnership with the World Resources Institute
(WRI). The FRB raises private capital to fund the upfront costs of forest restoration. Multiple
beneficiaries of restoration, including the US Forest Service, State of California, and Yuba
Water Agency, will share in the cost of reimbursing investors over time. Investments
through the FRB support forest restoration using ecologically-based tree thinning, meadow
restoration, prescribed burning, and invasive species management—all specifically designed
to reduce the risk of severe fire, improve watershed health, and protect water resources.
Source: https://www.blueforest.org/forest-resilience-bond
34 UN. 2020. Costa Rica launches National Bioeconomy Strategy. [Online] Cepal website. Available
from: https://www.cepal.org/en/notes/costa-rica-launches-national-bioeconomy-strategy
31 Scaling up Ecosystem Restoration Finance
Addressing risks will be an important driver policy shifts requiring payment for those values,
for unlocking significant private capital. will be critical. Grants – both standalone and
As noted, most monetary benefits from in blended finance models - are likely to be
restoration projects do not always generate needed until there are broader systematic
a high enough risk-adjusted revenue stream shifts in policies and incentives that make
to attract private debt and equity finance. debt and equity financing more attractive or
Upstream analytical work on capturing the feasible (see Box 9 for a fund using de-risking
financial value of these activities, along with instruments in the agriculture sector).
BOX 9. RABOBANK AGRI3 FUND
The AGRI3 Fund enables commercial and development banks to take a leading role in
kicking off the transition to more sustainable agriculture. The Fund offers banks guarantees
to partly de-risk projects, the ability to offer longer tenors, and provide grant money for
technical assistance. The Fund is part of a Rabobank and UN Environment Partnership,
which was launched in 2017 to unlock US$1 billion in capital for the transition towards
sustainable agriculture. The Fund provides de-risking financial instruments and tailor-
made technical assistance to enable the transition towards Integrated Crop-Livestock-
Forest (ICLF) systems.
Source: https://agri3.com/about/
Grants, which may comprise a portion of the restoration and conservation projects,
blended finance, are provided by the public while the total volumes of funding from
and philanthropic sector for a range of development cooperation or philanthropy
restorative projects. Historically, most of the is relatively small. Climate finance has
funding for forest and landscape restoration provided the biggest volume of development
has been provided by national environmental cooperation finance; REDD+ donor countries
grants, development cooperation, and climate have pledged more than US$4 billion35 in results
finance streams (FAO and UNCCD, 2015). for payments grants to support emission
NbS funding analysis (UNEP, 2021b) indicates reduction forest protection and restoration
that national grant schemes fund most of programmes in about 50 partner countries.
35 Norway’s International Climate and Forest Initiative – Evaluating for Success. 2020. [Online] OECD
website. Available from: https://www.oecd.org/dac/evaluation/Norad-Factsheet-interactive-final.pdf
A Stocktake Report 32
BOX 10. WORLD BANK ETHIOPIA LANDSCAPE MANAGEMENT PROGRAM
The World Bank’s decade-long program in Ethiopia brought around 900,000 hectares of
land under sustainable land management practices and benefitted 2.5 million people. Two
projects within the program treated more than 860,000 hectares of degraded landscapes
in 1,820 micro watersheds, supporting agroforestry activities and effecting area closures
to limit free grazing. This led to a 5.2 percent increase in vegetation cover and moisture
retention in the targeted watersheds. The program also supported the issuance of
landholding certificates, benefiting smallholder farmers and landless youth. Integrated
watershed and landscape management, and the conservation and restoration of degraded
land were implemented to raise land productivity.
Source: https://www.worldbank.org/en/news/immersive-story/2020/05/21/investing-in-nature-pays-off-for-people-and-biodiversity
Blended finance is a vital tool to leverage Blended finance investment vehicles
private investment in restoration (Sarabi are used in various combinations. These
et al., 2020; Girardin et al., 2021). Blended include concessional capital, guarantees,
finance refers to the mixing of finance from grants, market rate debt or equity, junior
multiple sectors using a range of vehicles equity,36 flexible term loans, results-based
in an investment model that reduces risks transfer37 and technical assistance facilities.
and smooths capital returns to overcome Financial risk mitigation tools employed in
outcomes time lags. It often involves a mixture blended finance for restoration to account for
of public, philanthropic, and private investors, environmental political and social risks include
which have a crucial role to play in the early re-insurance, parametric insurance, and bonds.
development of markets and market blueprints.
It is likely to be an important investment Disaster risk avoided through restoration
approach in closing the finance gap, as a translates to lower insurance pay-
high proportion and volume of public or outs, which can be monetized in lower
private benefits from restoration will remain premiums and lead to further innovative
non-monetizable in the foreseeable future. restoration investment mechanisms.
36 Subordinate to other stocks issued by an entity and will be paid out last in a liquidation scenario.
37 Results-based financing includes a range of financing mechanisms where financing
is linked and provided after the delivery of pre-agreed and verified results, including output-
based aid, impact bonds, indicator-linked loan disbursements, and results-based climate
mitigation or adaptation. The World Bank hosts an e-learning portal https://www.gprba.org/
knowledge/e-learning-results-based-financing-approaches-key-concepts-principles
33 Scaling up Ecosystem Restoration Finance
For example, evidence for the Western United BOX 11. USING PARAMETRIC RISK
MODELS TO SUPPORT NBS
States shows a 41 percent reduction in residential
insurance premium when ecological forestry A hurricane risk model for coral reefs was
management, including thinning and prescribed developed by Willis Towers Watson for the
burning, is applied (Willis Towers Watson and TNC, Mesoamerican Reef (MAR), to underpin a
2021). The Coalition for Climate Resilient Investment parametric insurance program that supports
is developing a set of ‘Systemic Resilience recovery of the MAR after a hurricane. The
Metrics’ which aims to enable better integration of model itself leverages the techniques applied
physical climate risk into infrastructure investment in estimating the probability of damage in the
decision-making. These metrics are designed to built environment by looking at the coral reef’s
be used by governments, credit rating agencies, hazard, exposure, and vulnerability to define
institutional investors, commercial banks, MDBs, the probability of damage from hurricanes of
and international organizations. The metrics different magnitudes. Such an analysis quantifies,
will support the restoration investment case by for example, the likelihood of a tropical cyclone
demonstrating the financial benefits of NbS. hitting a specific section of the reef and the loss
that the reef would sustain, to provide an estimate
Insurance is an emerging source of funding for of damage per hectare.
restorative NbS for natural disaster resilience Combining ecological action with financial
and climate adaptation, which reduce risk for protection can make good economic and
built infrastructure and populations. It has the financial sense and help overcome the pricing
potential to scale significantly although more work issues associated with risks such as wildfire. For
needs to be done to verify cost-benefit ratios of example, an ecological forestry approach linked
different NbS and reduce outcomes uncertainty, to parametric wildfire losses could reduce losses
as well as to develop the market models for for the insurance and reinsurance sector. A study
monetizing avoided losses (World Bank 2022). by The Nature Conservancy (TNC) and Willis
Insurance mechanisms implemented thus far use Towers Watson found a 41 percent reduction in
parametric risk models to support a range of NbS residential insurance premiums was possible
(see Box 11), which could be adapted to support when ecological forestry techniques such as
large-scale restoration. Underwriting models forest thinning and prescribed burning were
and policy recommendations are currently under
applied to a relevant area. Without such ecological
development that can be adopted by the insurance
measures, the risk of wildfire continues to grow.
industry, policymakers, and regulators, and that
Source: https://www.financialprotectionforum.org/publication/
will enable the inclusion of the value of natural insuring-natures-survival-the-role-of-insurance-in-meeting-the-
assets in insurance policies (Earth Security n.d). financial-need-to
A Stocktake Report 34
5. FINANCE TASK FORCE ROADMAP
Based on the challenges and emerging enabling environment is required to scale up
solutions outlined in this stock take, the restoration finance to the degree necessary
FTF will coordinate catalytical research, to manage public and business risk, meet
tools, datasets, projects, and partnerships, sustainable development goals, and realize
and take steps to increase awareness and business or investor opportunities. Based
foster political will in the public or private on this Stock Take report, the FTF has
sectors in support of scaling up investment identified the following theory of change and
in ecosystem restoration. Rapid development actions needed to scale restoration finance
of investment opportunities and their sufficient to meet the UN Decade’s goals.
BELOW Figure 4: FTF Theory of Change RIGHT Table 1: FTF Roadmap Pillars
(to be further developed)
To address the challenges identified, the TF mobilize private finance. These priorities areas
identified the following key pillars of work: will form the basis for the Roadmap of the
1) Government/sectoral policy levers; 2) FT through 2030, as outlined in the following
Paulose NK/ Shutterstock
Knowledge, data, and tools; 3) Financial sector table, to be further developed. The FTF will
regulations and initiatives (taxonomies etc.); kick off the agenda for each Pillar with a
and 4) Financial markets and instruments to workshop to identify key topics and partners.
35 Scaling up Ecosystem Restoration Finance
PILLARS FTF OUTPUTS PARTNER OUTPUTS
PILLAR 1: • Identification and • Research on how to create
GOVERNMENT promotion of relevant a supportive enabling
AND SECTORAL work by partners environment for restoration
POLICY LEVERS • Case studies on successful
subsidy reform/ PES programs,
frameworks, or regulation
• Case studies on successful
landscape-scale integrated planning
PILLAR 2: • Taxonomy of • Presentation of key restoration
KNOWLEDGE, DATA, restoration activities data sets to a group of relevant
AND TOOLS • Restoration cost/ benefit private sector actors and collect
database, analytics, feedback on additional data needs
tools, and training • Tracking and analysis of
• Restoration trade-offs restoration investment flows
assessment guide • Approach for integrating credits
for co-benefits with carbon credits
(i.e. biodiversity, water, etc.)
• Publications, guidance, and/or support
for countries and the private sector
on natural capital accounting
PILLAR 3: • Review of key financial • Workshops exploring how to
FINANCIAL SECTOR sector regulation, guidance, better integrate restoration
REGULATION AND and analytical tools to into financial sector regulation,
INITIATIVES ensure restoration is guidance, and analytical tools
appropriately accounted • Analytical papers assessing potential
for (i.e. taxonomies, credit to better integrate restoration
rating methodologies,
risk assessment
approaches, etc.)
PILLAR 4: • Templates for replicable • Case studies showcasing
FINANCIAL MARKETS or scalable investment restoration investment and
AND INVESTMENT structures (typology of regenerative business models
INSTRUMENTS restoration investments) • Provide input or technical assistance
• Publication assessing to investment platforms
Monitoring, Reporting • Support standardization of
and Verification investment contracts
(MRV) cost reduction • Standards/label for NbS projects
trends and barriers – building on FAST Infra’s
Sustainable Infrastructure Label
• Cooperation with the UN Decade
Best Practices Task Force to
implement the Capacity, Knowledge
and Learning Action Plan
• Guidance to UN Decade partners leading
A Stocktake Report 36
Restoration Challenge for Finance
5.1. GOVERNMENT AND SECTORAL POLICY LEVERS
To make restoration initiatives investment- planning; and underdeveloped financial
ready, or ‘bankable’, creating a supportive risk mitigation or adaptive management
policy environment is crucial. All sectors, strategies. Key to improving alignment
including government, multi- and bilateral between policies and stakeholders is
organizations, the private sector, and the establishment of national and sub-
NGOs, need to collaborate to create a national targets for restoration that
governance conducive to investment in are clearly stated and understood.
restoration (Gheyssens et al., 2020). While
the roles and responsibilities of MoFs differ • Fiscal policies need to be geared
across countries, they all control levers towards creating positive incentives
that can make a significant contribution for those involved in restoration
to reducing and reversing nature loss. A activities. As outlined by the Coalition
supportive policy environment for restoration of Finance Ministers for Climate Action,
investment will include the following: MoFs can support environmental fiscal
reform through assessing and raising
• Policies and stakeholder objectives need awareness of the nature-related risks
to be aligned at different levels. Policies associated with harmful subsidies and
that are unaligned between sectors can offering recommendations on phasing
be a barrier for achieving restoration out these subsidies (Power et al 2022).
objectives, with adverse incentives and a In addition, the integration of the value
mismatch between short- and long-term of nature in decision-making can be
ecological and economic goals often in supported through incentives or enabling
play. Specific legislation to initiate and mechanisms such as environmental
sustain restoration programs is often taxes; tradable permits; payments for
lacking, or poorly understood. Barriers ecosystem services programs; circular
frequently include policy misalignment economy solutions; debt for nature
between sectors or arms of government; swaps; and providing blended finance.
legal and institutional frameworks National nature investment plans, the
unsuited to long-term governance or provision of data, modelling and decision
multiple owners and beneficiaries; low support tools for private sector actors are
levels of dedicated capacity; insufficient also key. Research is needed on what the
coordination between actors on land-use key characteristics are that allow certain
37 Scaling up Ecosystem Restoration Finance
results-based payment schemes to work • The necessary data should be provided.
- for example measurable and financially MoFs (together with other relevant
quantifiable benefits (i.e., there is an ministries and agencies) can use evolving
agreed upon market price), clear roles for geospatial, artificial intelligence, machine
those undertaking the action and those learning, and environmental DNA
receiving the benefit to enable payment technology to support the implementation
flows, and the ability to track actions. of natural capital accounting (NCA)
practices. They also need to ensure this
• Clear land tenure, benefit-sharing, information is integrated into national
public participation, and safeguard accounts to be considered in budgeting,
policies are necessary elements of policy, and planning alongside other
achieving impact from restoration economic information to ensure effective
interventions. Tenure security is a major ‘asset management’ of all forms of
challenge for restoration programs a nation’s capital (Power et al 2022).
in many countries. In areas slated for Macroeconomic and financial modeling
restoration, there may be existing claims could give MoFs information on the
on land, overlapping tenure systems, fiscal implications of nature loss, and
or insufficient data and information to enable evaluation of potential tradeoffs
clarify tenure rights. Because of the and complementarities of different
levels of investment and returns involved, nature-related policy instruments (ibid).
as well as the possibilities for failed or A greater awareness of the economic
perverse outcomes, laws and regulations benefits of natural capital, shared among
are required on specific issues such ministries of environment, agriculture,
as land tenure, resource management, finance, and other sectors, would lead to
environmental and social impact greater public funding and the creation
assessments, access to information of economic incentives for restoration.
and grievance redress mechanisms. In
some contexts mechanisms such as With better systems of natural capital
Common Asset Trusts (CATs) can also accounting in place, ministries of
be considered for the management finance can leverage cross-government
of common pool resources.38 opportunities to incentivize better
38 Common Asset Trusts (CATs) to allow for mixed private and community property rights. Costanza
et al. (2021) propose the use of CATs to build investment portfolios of wetlands because they meet
the needs of multiple investors, permit bundled payments, and provide flexibility to invest in the
restoration of numerous services/values, all using a coordinated, and transparent process.
A Stocktake Report 38
management of nature-related risks. landscape visions and planning processes
Adoption of natural capital accounting (Mansourian, 2016). Such planning exercises
based on the UN System of Environmental should involve all relevant stakeholders
- Economic Accounting (SEEA) framework and facilitate dialogue over trade-offs
would assist building whole-of-government and synergies. Landscape restoration
investment cases and coordination. planning and implementation processes
must also be empowered by higher levels
• Market aggregation of projects at the of government, informed by scientific
landscape level must be established data and local knowledge, and inclusive
to attract investments at scale. Many of all stakeholders in target landscapes.
restoration projects are small, often
pilot projects, not sufficiently large to • While policy issues are beyond the
be attractive to institutional investors. scope – and capacity – of the FTF, the
Several examples39 suggest a landscape group will work with partners, including
approach could be the basis for making other UN Decade Taskforces, to raise
investments in restoration more suitable awareness of these issues, and highlight
to large financial actors. There is a need the supporting policy environment
to link restoration activities to large-scale needed to scale restoration finance.
5.2. KNOWLEDGE, DATA AND TOOLS
Vastly improved knowledge and data analyses. In emerging markets, where
resources on what restoration interventions reforestation, afforestation, and sustainable
work where, with which co-benefits, on what forest management is most needed, the
timescales ,and at what cost effectiveness lack of data deepens investors’ concerns
are required to scale up finance. As with around natural disasters such as fires, and
monitoring of restoration finance flows, reputational risks resulting from potential
there is to date a lack of systematic data on negative social and environmental impacts.
restoration costs to enable reliable estimates Restoration can be considered especially risky
at the project or investment scale. This can when there is no investment track record. Large
limit investment and investor confidence, as cost uncertainties remain for many ecosystems
well as optimization based on cost-benefit and restorative interventions or goals.
39 Examples include Indonesia’s Ecosystem Restoration Concession (ERC), a ‘market-oriented governmental
instrument to incentivize private sector investment in restoration’ – restricted to lands designated as
production forests. Brazil’s Atlantic Forest Restoration Pact, and the Landscapes for 1 Billion Partnership
39 Scaling up Ecosystem Restoration Finance
BOX 12. SE.PLAN TOOL TO ASSESS RESTORATION SUITABILITY
Developed by UN FAO, Spatial Informatics
Group (SIG), Duke University, Peking
University, SilvaCarbon with support from
the Government of Japan, the Se.plan online
tool identifies areas where forest restoration
is economically suitable for low and middle
income countries. The tool uses publicly
available high-resolution data to identify
locations where the benefits of forest
restoration (biodiversity conservation, carbon
sequestration, local livelihoods, and wood
production) are high relative to restoration
implementation or opportunity costs, subject
to biophysical and socioeconomic constraints
that users select. “Figure-Box 12: Restoration
benefits-cost ratio for Burundi” illustrates
Figure-Box 12: Restoration benefits-cost ratio for Burundi
areas with low to high restoration suitability
Source: https://docs.sepal.io/en/latest/modules/dwn/
seplan.html?highlight=se.plan in Burundi under a specific set of constraints
(darker green indicates higher benefit-cost ratio).
Several initiatives are running to fill this gap on restoration costs per ecosystem can
and more effort and coordination in this field provide estimates for large scale restoration
is an urgent need. Better access to spatial targets (Groot et al., 2013). For example,
planning and decision-making tools which the Society for Ecological Restoration is
can visualize landscapes and model cost- leading a comprehensive assessment of
benefit scenarios is vital for investment due restoration costs per ecosystem type, with
diligence, decision-making, and assurance.40 a first release expected in late 2022.41
Extrapolation of small scale information
40 The well-established Forest Landscape Restoration programme has shown the quality and
availability of data on costs and benefits – both for market and non-market values – to be a limiting
factor for attracting the potential range and volume of investors (FAO and UNCCD, 2015).
41 Bethanie Walder, SER Executive Director, Personal Communication
A Stocktake Report 40
The Economics for Ecosystem Restoration require further research. In addition to further
(TEER) initiative is building a database/ development of the data and tools, there is a
clearing house of cost information linked to need for intermediaries and information service
benefits information from the Ecosystem providers to provide analytics to investors
Service Valuation Database, with a first release and planners on where and how the highest
also scheduled for late 2022.42 A partnership returns for desired benefits can be achieved
between UN FAO, Spatial Informatics Group for the lowest costs (e.g., biodiversity gain,
(SIG), Duke University, Peking University carbon sequestration, climate adaptation).
and SilvaCarbon has developed an online Nature-related disclosures and standards are
tool to provide cost and benefits data lagging in data and metrics development.
for restoration intervention planning at
high resolution (see Box 12 above). Better knowledge of likely restoration success
in supplying benefits is also required. Evaluating
More work is required to develop universally net benefits of restoration is dependent on
comparable biodiversity metrics and increase many factors - including stakeholders’ valuation
the accuracy of ecosystem service valuation. of benefits, restoration intervention costs, and
Data sources, metrics, and tools to measure or the opportunity costs of any natural resource
build valuation models for natural capital (the use or production displaced by the restoration.
biodiversity ‘stocks’ and ecosystem services Multi-criteria analysis tools for transparently
‘flows’) are now available at low-resolution global evaluating trade-offs among potential benefits44
level and can be tailored to specific regions are required at scales relevant to ecological
and services of interest.43 However, because conditions and beneficiary needs.45 Better
nature dynamics are complex, nonlinear, and data and analytical tools can also inform
at times unpredictable, the prevailing data how landscape restoration and strategies
gaps still pose modeling challenges that to empower local stakeholders and tackle
42 Luke Brander. Personal Communication
43 For example, the ENCORE risk explorer tool biodiversity module, the eBio Atlas; IUCN Species Threat
Abatement and Restoration (STAR) metric, the GLOBIO database, the Biodiversity Intactness Index,
and the ARIES for SEEA natural capital accounts tool, the ISO 14008:2019 methodological framework
for Monetary Valuation of Environmental Impacts, the Ecosystem Services Valuation Database.
44 For example, biodiversity enhancement versus certain provisioning ecosystem service flows,
or among ecosystem services.
45 Trade-off analysis tools should incorporate risk and sensitivity analyses; for example, forgoing land
conversion to agriculture in one place has the potential to increase the demand for farmland and pasture
elsewhere (leakage) (UNEP, 2020), and climate change may affect success (Von Holle et al., 2020). The
UNDP analyzed 45 toolkits to identify best practices in cost-benefit analysis for NbS in Latin America and
the Caribbean and published a report which provides guidance to identify the full range of social, economic,
and environmental benefits and costs resulting from NbS. The report is available from: https://cssh.
northeastern.edu/policyschool/ wp-content/uploads/sites/2/2021/07/Northeastern-NbS-report-final.pdf
41 Scaling up Ecosystem Restoration Finance
gender disparities can reinforce each other. • Restoration goals built into climate
The UN Decade Framework for Ecosystem and nature finance tracking.
Restoration Monitoring (FERM), led by the
Monitoring Task Force and launched at the • Sustainable taxonomies and
World Forestry Congress 2022 will make an disclosure standards extended to
important contribution to outcomes information eligible restoration activities.
through the systematic measurement
of over 70 consultative and analytical • Collection of data on investment
indicators covering a range of SDG targets. flows (ideally distinguishing
active/passive restoration).
Governments, and MoFs in particular, can
play a key role as data providers. They can • Integrated reporting as a framework for
ensure that national NCA data is accessible company reporting on the balance of
to the public and in a geospatial format that physical, human, and natural capital.
can be disaggregated by administrative region
(Power et al, 2022). This will allow subnational • Corporate standards, targets, disclosure,
governments and the private sector to consider and product labelling for food/clothes/
this information in their planning, operations, consumer goods companies
and decision-making. Additionally, it will allow
citizens to ensure good environmental quality • Nested standards on NbS and ecological
in their communities. MoFs, statistics offices, restoration: existing frameworks provide
ministries of environment, and central banks good principles and indicators for
might jointly develop a national data hub successful NbS (where the information
that provides NCA data in a usable format does not meet the needs of investors)
for financial institutions that need to use
this information to better understand and The development and provision of
manage their nature-related risk exposure information on restoration costs, benefits,
and risk management opportunities (ibid). business models, and best practices is
critical to scaling investment in restoration.
There is also a need for better tracking This information is needed to make a
and quantifying financial flows investing compelling investment case to the range
in restoration. The following challenges of different actors, including governments,
will need to be overcome to achieve this: that can contribute to restoration.
A Stocktake Report 42
Cost and benefit data should be as localized data and local knowledge, including from
as possible – providing information specific to indigenous peoples and local communities.
countries and bioregions. There is a critical need Additionally, there is a need to develop case
for this data for low- and middle-income countries, studies demonstrating business models
where the need for restoration investment is and best practices for developing bankable
greatest and costs tend to be lower. Tools that restoration projects that generate positive
enable governments, investors, and project economic and environmental impacts.46
developers to apply this data and analytics that
map out investment opportunities could help A key focus of the FTF will be on
support restoration investment. The World Bank’s improving restoration data and
analysis of the costs and benefits of large-scale analytics. This will include supporting
mangrove restoration in Indonesia provides an the development and standardization of
example for how this could be approached (World cost benefit methodologies, coordinating
Bank 2002b). Analysis of benefits should apply data initiatives, and making data sets
a broad lens to provide a holistic picture of the available for investment analysis by
impact of restoration and may include granular the corporate and financial sectors.
5.3. FINANCIAL SECTOR REGULATIONS & INITIATIVES
A taxonomy of restoration activities across the full spectrum of restoration
can help identify – and ultimately scale activities, financing approaches, standards,
- appropriate financing approaches. and best practices need to be developed
Restoration involves a wide range of for each category of restoration activities.
activities, including agroforestry, silvopasture, An agreed-upon taxonomy of restoration
reforestation, mixed species plantations, activities can better enable this. Projects and
riverbank restoration, natural regeneration, businesses operating in each category can
assisted natural regeneration, and farmer- then be aggregated together within a given
managed natural regeneration.47 While geography to increase the size of investment,
there are many actions that can be taken diversify risk, and reduce the cost of capital.
to improve the economics of restoration
46 An example is WFF’s Bankable Nature Solutions report. Available at https://
wwf.panda.org/discover/our_focus/finance/bankable_nature_solutions/
47 All forms of regeneration should use native species where possible.
43 Scaling up Ecosystem Restoration Finance
Ecosystem restoration is not currently Developing standards for nature-related
distinct in emerging sustainable finance reporting should ensure that opportunities
taxonomies and reporting frameworks.48 For for restoration activities and restoration
example, the EU Taxonomy lumps ecosystem co-benefits are identified and disclosed by
restoration with nature protection, and does companies so that investors can assess and
not subdivide climate mitigation or adaptation engage with companies on these criteria.
activities to identify the contributions of The Task force for Nature-related Financial
ecosystem restoration. MDBs have since Disclosures’ (TNFD) Beta Release (V2) in
2015 issued joint Common Principles for June 2022 builds on the success of the TCFD
Climate Mitigation Finance Tracking49 and CBI and is complementary to ISSB work on nature
issues a detailed, sector- based taxonomy50 reporting. The framework is widely expected
to complement its Climate Bonds Standard to transform private sector motivation to
– but similarly these do not identify when reduce nature impacts, and to focus on
restoration has been an outcome. Likewise, ecological restoration as a competitive
the Green Bond Principles framework way of attracting investors seeking low
nature impact and dependency risks.51
(assessed by a range of standards) and
non-financial reporting frameworks like the The restoration finance sector can also
Sustainability Accounting Standards Board benefit from support to companies and
(SASB) and the GRI (the Global Reporting investors to use emerging frameworks
Initiative) do not provide the basis for to evaluate and report on their nature-
tracking restoration finance volumes. If the related risks and dependencies, and
UNFCCC were to provide guidelines for NbS to set targets toward regeneration.
accounting, then NDCs could be important
reporting sources for restoration investments.
48 The eight broad categories of the IUCN Global Ecosystem Typology (IUCN, 2020) can be used
as a base taxonomy to describe restoration interventions: farmlands; forests; freshwater; grasslands,
shrublands and savannahs; mountains; oceans and coasts; peatlands; and urban areas.
49 The report Common Principles for Climate Mitigation Finance Tracking, published in 2021 is available
from: https://www.eib.org/attachments/documents/mdb_idfc_mitigation_common_principles_en.pdf
50 The Climate Bonds Initiative (CBI) taxonomy is available from:
https://www.climatebonds.net/standard/taxonomy
51 To support the testing and implementation of the TNFD, the Agence Française de
Développement (AFD) will lead and convene a ‘Development Finance Hub’ to convene and
coordinate the global public development finance contribution to the TNFD.
A Stocktake Report 44
Nature-related risks, dependencies and societal goals.This includes the Network for
impacts are increasingly being applied to Greening the Financial System (NGFS) – made
investment and business models as a lens up of banks and financial sector regulators.53
to assess their environmental and social MDBs54 and national development banks are
performance and risk profile.52 Several also playing a key mainstreaming role.55
finance sector working groups are focusing
their attention on the mainstreaming The FTF will work with partners leading
agenda, which aims to include impacts and these initiatives to ensure restoration
dependencies on nature more upstream is fully incorporated and supported by
in the investment-deal process, and work the developing international sustainable
towards aligning total institutional impact with finance regulatory architecture.
5.4. FINANCIAL MARKETS AND INVESTMENT INSTRUMENTS
Blended finance instruments have the counterparties, and ii) creating market
greatest potential to scale up private intelligence platforms to bring different
restoration finance in the near term. Priority investor counterparties together to make
actions enabling this potential to be realised deals. Existing examples that could be
involve: i) supporting and duplicating scaled include sustainable forestry funds
innovative blended models to suit a range with mixed equity and debt investment
of programmes, risks and benefits, and from a variety of investor sectors including
52 There is an increasing shareholder, market, and regulatory push for companies
to understand their whole value chain. Technological advances such as blockchain
are making full supply chain transparency increasingly feasible
53 NGFS issued a statement in March 2022 following the completion of work by the Study Group on
‘biodiversity and financial stability’ underlining the significant macroeconomic implications that could
result if nature-related financial risks are not fully accounted, mitigated, and adapted for. They recommend
following key action areas for central banks and supervisors to address biodiversity-related financial
risks: build capacity for scenario analysis and stress-tests; develop supervisory expectations for financial
institutions’ governance, risk management, strategy, disclosure, and financial conduct and consider
monetary policy operations and non-monetary policy portfolio management. The group has signaled the
need for forward-looking economic models to capture to physical and transitional risks of assets and
lending and some central banks have already incorporated climate risk exposure exclusion frameworks
or are creating preferential terms for green lending. The statement is available from: https://www.ngfs.
net/sites/default/files/medias/documents/central_banking_and_supervision_in_the_biosphere
54 The MDB Joint Statement, released in 2021, is available from:
https://ukcop26.org/mdb-joint-climate-statement/
55 Finance for Biodiversity research (F4B, 2021b) shows G20 countries’ collective stakes in
development banks are worth nearly USD 7 trillion, and that they collectively have the majority
of board votes in seven out of the eight largest multilateral development banks.
45 Scaling up Ecosystem Restoration Finance
philanthropy56 and public57 seed money; conservation money to plant more than
sustainable agriculture funds that are de- 1 million trees (U.S. Government, n.d.).
risked through guarantees and subordinated
loans and provided technical assistance by Improved market platforms are needed, to
donors; or grants providing concessional verify, aggregate, and deliver nature-related
loans and equity that restoration projects investment opportunities. Rapid developments
or natural asset companies can leverage are taking place in investment models, business
upon to gain private equity investors.58 59 models, funding pipelines, and blueprints for
restoration projects. Some key innovations
In addition to the creation of blended include the NbS workstream of HSBC Climate
finance instruments, scaling potential can Solutions Partnership, the Coalition for Private
be derived from dedicated entities which Investments in Conservation (CPIC) investment
facilitate joint ventures that underpin such blueprints, and the Intrinsic Exchange Group’s
instruments, or which actively seek to collaboration with the New York Stock
aggregate and blend finance to support Exchange to link natural asset transactions to
an investment portfolio. For example, capital markets. Critical to the development of
Earth Security builds joint ventures with aggregation facilities is sustainable labelling
companies, investors, and governments (and supporting data) to identify qualifying
for mangrove restoration, including many projects (such as that provided by the FAST
examples of subnational investments using Infra label for natural infrastructure projects).60
different investment structures – insurance, Some carbon offset certifying bodies such
bonds, impact funds etc. The U.S. private as Plan Vivo61 already provide standards that
company Quantified Ventures have blended enable the aggregation of smaller projects to
carbon credits income with public regional enable them to access the carbon market.
56 E.g., the US$100 million Terraformation and Bankers without Boundaries sustainable
forestry fund will target both debt and equity investors as well as philanthropic capital.
57 World Bank’s Multilateral BioCarbon Fund Initiative for Sustainable Forest Landscapes
(ISFL) establishes partnerships between several countries and the private sector to reduce
AFOLU GHG emissions with silvopastoral and other regenerative agriculture methods.
58 As an example, Mirova’s Nature+ Accelerator Fund released in March 2022 its first
request for proposals which deploys initial GEF grant to offer concessional finance.
59 De-risking through blended finance will introduce new investors and demonstrate commercial
viability of investment so blended finance can be phased out over time (Apampa et al. 2021).
60 FAST-Infra Platform participants are IBM, SIF-SOURCE, Scale, EPPF, InfraClear,
Liquidnet, Refinitiv, Hitachi, Standard Chartered and HSBC. More information is
available from: https://www.climatepolicyinitiative.org/fast-infra-platform/
61 More information about Plan Vivo is available from https://www.planvivo.org/
A Stocktake Report 46
Scaling up of restorative NbS finance is a key A consistent classification of NbS in capital
opportunity, with consistent classifications markets will help to create the asset class
in capital markets needed to create the asset (Swann et al 2021). A variety of definitions
class. NbS have a significant role to play in and disclosure frameworks are being
solving multiple global challenges, including developed (see scaling priority 1) that can
climate change mitigation, biodiversity loss, contribute to NbS market classification.
desertification, disaster resilience, climate
change adaptation, food and water security, Improving Voluntary Carbon Market (VCM)
human development, and health issues. co-benefits measurement, standardization,
Private sector NbS finance has been most and pricing should increase private investment
associated with voluntary carbon markets flows into climate mitigation NbS. The
and sustainable supply chains, but other Integrity Council for Voluntary Carbon
investment categories include thematic private Markets will produce core carbon principles
equity impact investment funds, co-finance to set a framework for co-benefit accounting
for development banks and public climate that the Task Force for Voluntary Carbon
funds, and payments for ecosystem services. Markets will implement. While voluntary
Because of the broad nature of restorative NbS carbon markets provide immediate scaling
benefits, funding of interventions is well- potential due to the demand for premium
suited to blended finance that enable multiple offsets with co-benefits, improvements
stakeholders and investors to share risks in co-benefit considerations of regulatory
and benefits. To support scaling up public markets would also increase investments
sector funding of NbS as solutions to climate into restorative climate mitigation activities.
adaptation and disaster risk reduction, the
Global Program on NbS for Climate Resilience, The FTF will work with partners to develop
housed and funded by the Global Facility for the biodiversity credit markets which can
Disaster Reduction and Recovery (GFDRR), is unlock restoration financing. The Taskforce
developing targeted knowledge and tools will also showcase emerging good practices
to leverage the voluntary carbon market to in blended finance and restorative NBS.
fund NbS for climate resilience projects.
47 Scaling up Ecosystem Restoration Finance
A Stocktake Report
Chad / © Andrea Borgarello-World 48
Bank-TerrAfrica
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57 Scaling up Ecosystem Restoration Finance