Finance Against Nature: How $7 Trillion in Capital Destroys Biodiversity Each Year

# Finance Against Nature: How $7 Trillion in Capital Destroys Biodiversity Each Year

Each year, nearly $7 trillion of public and private capital supports activities that destroy ecosystems, completely overshadowing the sums allocated to nature protection. A report from the United Nations Environment Programme (UNEP) quantifies this abysmal imbalance and outlines ways to realign finance with the living world. Between the reform of harmful subsidies, green taxation, and the deployment of new economic instruments, solutions are emerging, driven by pioneering countries like Costa Rica and New Zealand.

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The Financial Abyss: $7 Trillion Harmful vs. $200 Billion for Conservation

The global economy operates on a destructive paradox: it finances its own ecological ruin. According to the UNEP's "State of Finance for Nature 2023" report, financial flows with a negative impact on biodiversity are estimated at nearly $7 trillion per year. This colossal figure includes private investments and public subsidies that encourage environmentally harmful practices. In contrast, funding dedicated to the conservation and restoration of nature, both public and private, is capped at around $200 billion annually [3]. The imbalance is overwhelming: for every dollar invested in protecting nature, thirty-five dollars are directed towards activities that degrade it.

Public subsidies constitute a significant portion of these toxic flows. An earlier OECD report, "Biodiversity: Finance and the Economic and Business Case for Action," had already highlighted several hundred billion dollars in direct aid that undermines environmental objectives. Support for fossil fuels, the main driver of climate change that devastates ecosystems, alone amounted to $370 billion in 2015. Intensive agriculture, encouraged by $100 billion in potentially damaging subsidies in OECD countries alone, promotes monoculture, the excessive use of pesticides, and the degradation of soil and water. The fishing sector, with $35 billion in global aid, is pushed towards overcapacity and the depletion of fish stocks [1].

Source: OECD, Biodiversity: Finance and the Economic and Business Case for Action, 2019. [1]

This financial hemorrhage only worsens the chronic funding gap for nature. Experts from the Convention on Biological Diversity (CBD) estimate the annual needs to be between $150 and $440 billion just to meet global conservation targets [1]. The numbers don't add up, and the cost of inaction—biodiversity erosion, loss of vital ecosystem services like pollination or water purification—amounts to trillions of dollars for the global economy.

Reforming Incentives: Green Taxation as the First Lever for Action

The first step to closing this gap is to stop digging. Reforming harmful subsidies is the most powerful lever for redirecting capital. It involves dismantling the mechanisms that make destructive activities artificially profitable. Switzerland has shown the way by reforming its agricultural policy to condition public aid on practices beneficial to biodiversity [1]. This reorientation not only reduces pressure on ecosystems but also frees up massive budgetary resources that can be reinvested in the ecological transition.

In addition, environmental taxation offers a dual advantage: it generates revenue while creating price signals that discourage pollution and the overexploitation of resources. Taxes on pesticides, synthetic fertilizers, or carbon emissions incentivize economic actors to adopt more virtuous practices. The revenue generated, estimated at $7.4 billion per year for biodiversity-related taxes in the OECD alone, can then be allocated to conservation programs. Similarly, fees for the use of natural resources, such as entrance fees to national parks or fishing permits, bring in $2.29 billion annually and are often directly reinvested in the sustainable management of the ecosystems concerned [1].

Paying for Nature: The Success of Ecosystem Services in Costa Rica

Beyond fiscal reform, new economic instruments make it possible to directly remunerate conservation. Costa Rica is a world pioneer with its "Pago por Servicios Ambientales" (PSA) program, launched in 1996. The principle is simple: landowners receive financial compensation for the services their forests provide to society, such as carbon sequestration, regulation of water flows, protection of biodiversity, and scenic beauty.

This program, partly financed by a tax on fuels, has created a viable economic model for conservation. In 2012, it mobilized $42.4 million, helping to increase the country's forest cover from 21% in 1987 to over 50% today [1]. Costa Rica's success has inspired many other countries. Similar large-scale programs now exist in China (with the "Grain for Green" program, which has mobilized $69 billion for the reforestation of marginal agricultural land) and the United States (the "Conservation Reserve Program," which pays farmers to set aside fragile land, with a budget of $1.8 billion in 2017) [1]. These Payments for Ecosystem Services (PES) demonstrate that it is possible to create economic value by protecting nature, and no longer just by exploiting it.

Towards a "Nature-Positive" Economy: The Example of New Zealand

Faced with the erosion of its unique biodiversity, with more than 4,000 threatened species, New Zealand has embarked on a profound overhaul of its economic approach. The country has launched a comprehensive assessment of its biodiversity-related financial flows through the United Nations BIOFIN initiative, led by the University of Otago. The vision is clear: to build a "strong and nature-positive economy" as a legacy for future generations [2].

This approach is based on a new indicator, the "Biodiversity Investment Ratio" (BIR), which relates investments in nature to GDP. The finding of a declining BIR served as an electric shock, prompting the government to actively seek levers to reverse the trend. The BIOFIN assessment does not just count expenditures; it analyzes their effectiveness, identifies institutional bottlenecks, and proposes a financing plan to close the deficit. By integrating the value of natural capital into the heart of its economic strategy, New Zealand is exploring a promising path to align prosperity and ecological sustainability, offering a model for other developed nations.

Mobilizing the Private Sector: The New Front for Biodiversity Finance

The transition to an economy that regenerates nature cannot happen without a massive mobilization of private capital. Investors and financial institutions have a crucial role to play in directing the $55 trillion in assets they manage in the OECD area alone [1]. Several green financial instruments are beginning to emerge, although they still remain marginal.

Impact investing, which aims for a financial return while generating a measurable environmental benefit, saw $6.84 billion in assets allocated to conservation in 2017. Green bonds, although mainly focused on climate, are beginning to integrate biodiversity criteria, as France did with its sovereign green bond, which earmarked €1.55 billion for conservation [1].

However, the biggest challenge remains to green all investment portfolios. This requires the systematic integration of biodiversity-related risks and opportunities into financial decisions, greater transparency from companies on their dependencies and impacts on nature, and the development of robust methodologies to measure the "biodiversity" performance of investments. The financial sector is at a tipping point: it can continue to finance the destruction of the ecosystems on which it depends, or it can become the engine of an economy that finally recognizes that the wealth of nature is the foundation of all other forms of wealth.

Ten Priorities for Large-Scale Action

The OECD report identifies ten priority action areas for governments to scale up their efforts. These recommendations aim to create a coherent political and economic framework capable of mobilizing all actors in society.

1. A robust post-2020 global framework: The adoption of global biodiversity goals that are specific, measurable, ambitious, realistic, and time-bound (SMART) is fundamental to galvanizing national action.

2. Mobilize non-state actors: The Sharm El-Sheikh to Kunming Action Agenda for Nature and People aims to bring together commitments from businesses, cities, and civil society.

3. Ensure public policy coherence: Biodiversity objectives must be integrated into all national strategies (economic growth, agriculture, energy, etc.) to identify and manage synergies and trade-offs.

4. Integrate biodiversity into economic incentives: This involves going beyond simply reforming harmful subsidies to create a system of incentives that systematically rewards nature-positive practices.

5. Establish transparent financial tracking: The implementation of comparable national and international tracking systems for biodiversity-related financing is essential to measure progress and ensure accountability.

6. Reform harmful subsidies: Determined action to identify, assess, and reform subsidies harmful to biodiversity is a top priority.

7. Facilitate private sector engagement: Governments must create an enabling environment for private investment in biodiversity, including by clarifying regulatory frameworks and developing risk measurement tools.

8. Assess and communicate socio-economic impacts: Better communication about the dependence of our economies on nature and the costs of inaction is necessary to strengthen public support for action.

9. Ensure a just and equitable transition: The transformation towards a nature-positive economy must take into account social impacts and ensure that costs and benefits are shared equitably.

10. Improve data and indicators: Investing in data collection and the development of robust indicators is essential for effectively steering biodiversity policies and measuring their results [1].

All of these actions form a comprehensive roadmap to break out of the current schizophrenia, where public policies finance both the problem and, to a much lesser extent, the solution. The biodiversity crisis is not inevitable, but the result of economic and political choices. By massively redirecting financial flows, it is still possible to build an economy that thrives in harmony with nature, and not at its expense.

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References

[1] OECD (2019), Biodiversity: Finance and the Economic and Business Case for Action, OECD Publishing, Paris, https://www.oecd.org/environment/resources/biodiversity-finance-and-the-economic-and-business-case-for-action.htm

[2] BIOFIN (2025), A shift in New Zealand’s economic policy today restores our children’s future, https://www.biofin.org/news-and-media/shift-new-zealands-economic-policy-today-restores-our-childrens-future

[3] United Nations Environment Programme (2023), State of Finance for Nature 2023, https://www.unep.org/resources/state-finance-nature-2023