BIOFIN

The Biodiversity Finance Initiative develops evidence-based Biodiversity Finance Plans and aids countries in the implementation of financial solutions to reach their national biodiversity targets.

Biodiversity includes living organisms and ecosystems that underpin human well-being and economies by providing the essentials to healthy and productive human life, such as clean air, food security, and fresh water. Investments in biodiversity are investments in sustainable development, contributing directly to the reduction of poverty, economic sustainability, and the full range of Sustainable Development Goals.

Biodiversity finance is the practice of raising and managing capital and using financial incentives to support sustainable biodiversity management. It includes private and public financial resources used to conserve biodiversity, investments in commercial activities that produce positive biodiversity outcomes, and the value of the transactions in biodiversity-related markets such as habitat banking.

Phase I started in 2012 and concluded in 2019. It focused on addressing governmental gaps in knowledge regarding the kinds of funds required to effectively implement the CBD's (Convention for Biodiversity) Strategic Plan, where they can be sourced, and how they can be effectively dispensed.

In the course of phase I, BIOFIN generated data on previous investments in the conservation and sustainable use of biological diversity, as well as the resources needed for the implementation of the Strategic Plans in each country. On this basis, the gap between demand and actual financing was calculated. Subsequently, the acquired data was integrated into the development of approaches that aimed to improve the financing of biodiversity conservation.

Phase II focuses on the development and implementation of financing solutions. It began in 2018 and had been originally projected to last until 2022 before being extended to 2025. BIOFIN Phase II was financed through the IKI Corona Response Package. It focuses on four signature solutions:

• Support of countries during the COVID-19 crisis

• Results-based budgeting for biodiversity

• Reduction of harmful subsidies and expenditures

• Greening of the financial sector

The BIOFIN Catalogue of Financing Solutions is a global database of existing financing mechanisms containing over 150 entries of instruments, tools, and strategies applicable to biodiversity financing, augmented with links to guidance material or case studies. This database can be utilized to support biodiversity conservation efforts.

Since 2014, numerous countries have started to develop national finance plans for biodiversity, including Belize, Cuba, Ecuador, Botswana, the Seychelles, Georgia, India, Indonesia and Fiji. Ireland became the first western European country to adopt this approach. The plans were developed in thirty participating countries, outlining between five to fifteen financing mechanisms that had been evaluated to hold the most potential to fill each country’s biodiversity financing gap.

The BIOFIN methodology prior to implementation consists of the Biodiversity Finance Policy and Institutional Review (PIR), the Biodiversity Expenditure Review (BER), the Financial Needs Assessment (FNA), and the Biodiversity Finance Plan (BFP).

• The Biodiversity Finance Policy and Institutional Review (PIR) examines the policy and institutional context for biodiversity finance in the country and establishes which stakeholders should be involved.

• The Biodiversity Expenditure Review (BER) is an analysis of public and private expenditures in the country that benefit biodiversity. The assessment establishes past, present, and projected expenditures on biodiversity.

• The Financial Needs Assessment (FNA) estimates the finance required to deliver national biodiversity targets and plans, usually described in the National Biodiversity Strategies and Action Plans (NBSAPs).

• The Biodiversity Finance Plan (BFP) identifies and prioritizes a mix of suitable biodiversity finance solutions to reduce the biodiversity finance gap.

Finance solutions contribute to the national targets through four main results:

• Revenue generation: i.e. any existing or new mechanism or instrument that can generate and/or leverage financial resources to allocate to biodiversity.

• Realignment of current expenditures: i.e. any measure that can redirect existing financial flows towards biodiversity.

• Avoidance of future biodiversity expenditures: i.e. any measure that can prevent or reduce future investment needs by eliminating or amending existing counter-productive policies and expenditures.

• More efficient delivery of financial resources: i.e. any measure or instrument that can improve cost-effectiveness and efficiency in budget execution, achieve synergies, and/or favor a more equitable distribution of resources.

A finance plan is a mix of solutions developed with the intent of closing the biodiversity financing gap in a particular country. They can include conservation trust funds, payments for ecosystem services, reduction of harmful subsidies, green bonds, park fees, debt swaps, and more. BIOFIN selects a combination of suitable solutions for a country in line with the following criteria:

1. The extent of positive environmental impact
2. The cost
3. The likelihood of success

Additional criteria considered by BIOFIN includes climate benefits, poverty reduction, and gender equality. BIOFIN gathers and analyzes data to tailor solutions to the specific needs of a country, beginning with an examination of the primary drivers of biodiversity gain and loss based on root cause analysis. This is followed by the creation of an overview of the existing finance mechanisms and a review of public and private national expenditure on biodiversity programs.

BIOFIN's biodiversity finance plans rely on a bottom-up approach engineered with ideas from national stakeholders and experts through several rounds of consultations. They aim to address the specific needs and pressures of each particular country and to contribute to global biodiversity targets.

The plans are developed by national teams with expertise in public and private finance and biodiversity conservation. These teams are embedded into existing governing frameworks, in particular ministries of finance and environment, to ensure they possess appropriate skills and knowledge. National steering committees involving other organizations, such as CSOs and UN partners, oversee the plan development teams.