Welcome to the Conservation Finance Guide. The overall goal is to provide practical tools to support the rapid expansion of sustainable finance mechanisms that generate long-term funding for biodiversity conservation.
Welcome to the Conservation Finance Guide. The overall goal is to provide practical tools to support the rapid expansion of sustainable finance mechanisms that generate long-term funding for biodiversity conservation.
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To navigate directly to a Category of Finance Mechanisms within “Public Financial Management”:
Public financial management is focused on how the public sector prioritizes, plans, and executes its national finances. It includes efforts to mainstream sustainable development (including conservation) into national and local government planning and budgeting processes as well as effective disbursement, different forms of fiscal transfers, reforming harmful subsidies, and earmarking revenues for nature. Assuring adequate allocations to conservation in national budgets can be challenging given competing demands on these budgets. Often, data driven approaches such as performance-based budgeting, identification of key performance indicators, and responding to strategic economic priorities (jobs, hard currency, etc.) can assist government agencies and partners to convince decision makers of the importance of investing in nature. National government budgetary allocations are the largest stable source of finance for nature globally and in most countries.
To navigate directly to a Class of Finance Mechanisms:
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National government planning, budgeting, and disbursement is historically the most important source of finance for nature conservation accounting for at least 60% of conservation expenditures worldwide (Parker et al. 2012). A wide range of actions can improve finance for nature through the public planning and budgeting process as well as through effective disbursement and implementation of annual work plans at public and quasi-public agencies and departments (also see financial efficiency). A useful guide to mainstreaming environment into planning and budgeting has been produced by UNDP-UNEP (2015). The Biodiversity Finance Initiative has identified many opportunities for improving public finance for nature and a useful methodology is provided in the BIOFIN Workbook (UNDP, 2018).
Lobbying for Public Budget Allocations
Lobbying for additional allocations (or retention of current allocations in case of public cuts) towards conservation and biodiversity by line ministries or national, regional and local authorities. This requires a profound understanding of the budgeting process, a strong business case, and awareness raising, advocacy and communication efforts. Lobbying strategies may target both earmarked and non-earmarked resources (e.g. emergency funds, special funds)
Influence the investment budget formulation
Investment projects in biodiversity and green infrastructure can be included in the rolling investment plan of the Government. Inclusion of biodiveristy and sustainable development in medium term or long term strategic plans is essential. Development banks and donors can often increase likelihood of financing by providing targeted co-financing for specific projects.
Enhance Public Budget Execution
Measures promoting quality spending of committed funds and removing related obstacles to effective spending. Effective budget execution (also termed delivery) is a percentage of annual public budget allocations that are actually spent by government agencies and can vary from as low as 40 percent to as high as 90 percent. Related obstacles are often due to delays in financial flows or capacity constraints. Incentives (e.g. staff incentives) and support (i.e. additional capacity) can be provided to increase the delivery. While not specific to biodiversity, these measures can and should be considered by conservation organizations.
Remove barriers for public budget execution-internal
Internal barriers for timely and effective budget execution are often related to financial planning capacity gaps, weak accounting systems, systemic corruption practices, and the absense or poor design or individual performance and incentive systems. These barriers can be addressed through organizational capacity development (people and systems). While not specific to biodiversity, these measures can and should be considered by conservation organizations.
Result based budgeting
Planning and strategic management tool seeking to link budget allocations with anticipated results. The introduction of result based budgeting (RBB) contributes to achieving cost-savings and better defining priorities in the allocation of scarce public or private resources. While considered a best practice world wide, only a few countries fully implement result based budgeting. It can also be referred to as performance based budgeting or outcome-based budgeting. Its introduction in conservation can help to mobilize additional public resources as well as to increase spending effectiveness. Results based budgeting is defined as a budgeting process which revolves around a set of predefined objectives and expected results, which, in turn, justify the resource requirements linked to outputs, and where actual performance is measured using objectively verifiable indicators.
Green procurement
A government, company or other entity establishes and enforces procurement rules that favor or require socially and environmentally responsible products such as efficient lighting, certified paper products, certified palm oil, etc. Large companies and governments can have a significant impact on the market through green procurement.
Enhance local budget execution
Local revenues, budgeting and spending impact biodiversity through managing land use, natural resource exploitation, local protected areas, and financing biodiversity supportive programmes and projects. Guidelines for increasing effectiveness and biodiversity impact of local budgets can enhance impact and direct funds to biodiversity.
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Intra-governmental fiscal transfers redistribute tax revenues among levels of government, from national and regional governments to local jurisdictions according to agreed principles and priorities. Ecological fiscal transfers involve integrating ecosystem services into allocation amounts making conservation indices (e.g. size/quality of protected areas) part of the fiscal allocation formula to reward investments in conservation and to incentivize the expansion of protected areas. (adapted from UNDP SDG Financing Solutions).
One example of a specific fiscal transfer initiative is Portugal’s Local Finances Law, which has resulted in increased significant increases in budgets for municipal areas with a large proportion of land under protection.
Ecological Fiscal Transfers
Intergovernmental fiscal transfers redistribute tax revenues across government levels-from national and regional to local jurisdictions-according to agreed principles and priorities. Integrating ecological services means including conservation indices (e.g. size/quality of protected areas) in the fiscal allocation formula-thus rewarding investments in conservation and incentivize the expansion of protected areas, forests or other natural capital.
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As part of public finance, governments often provide direct grants to a wide range of entities for specific activities that are prioritized by different levels of government and different government agencies. Generally, the grant amounts and overall objectives are set during the national and subnational budgeting process but the form of transfer is different from general budget allocations. Details of each grant’s objectives are set at the level of government that is issuing the grant. Grants are often issued competitively and seek to address specific issues. One example is in the USA, the Conservation Innovation Grants that are described as “competitive grants that drive public and private sector innovation in resource conservation” (USDA Website, 2020).
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According to the BIOFIN catalogue of finance mechanisms, this can be defined as, to “reform, green or phase out a subsidy that directly or indirectly harms biodiversity.” Government subsidies can be direct or indirect and may take the form of direct transfers, tax credits, and regulatory advantages that generate economic or financial benefits to the recipient. A broad interpretation of the term is often used and includes implicit subsidies which are defined by the failure to internalize negative externalities to the environment (e.g. pollution). Subsidies harmful to biodiversity include various financial and tax incentives for agriculture, fisheries, forestry, transport and infrastructure, construction, land used change, and energy. In some cases, subsidies that are intended to achieve specific social outcomes may impact economic efficiency to such a degree as to be economically harmful to the country – these are termed “perverse subsidies”. The economic and environmental impact of harmful subsidies is well captured by the report from the IMF that global fossil fuel subsidies can be estimated at roughly $5.2 trillion in 2017 (6.3% of global GDP, IMF, 2019). Understandably, these levels of subsidies discourage renewable energy investments and are slowing the response to climate change. Subsidies in the global fishing industry have been estimated recently at $35.4 billion (in 2018) posing a continuing risk to fish stocks due to overharvesting (Sumaila et al. 2019).
Biodiversity Friendly Subsidies
Government subsidies that favor biodiversity by supporting individuals, companies and organizations acting in biodiversity friendly ways. Subsidies can take many forms including tax relief, technical support, price support, etc. This can include biodiversity friendly businesses such as ecotourism, sustainable agriculture, non-timber forest products, reduced impact forestry, fisheries, etc.
Subsidies for Organic Agriculture
Government subsidies that support actors in the organic agriculture industry to encourage expansion of organic production or other sustainable agricultural system. Subsidies can take many forms including tax relief, technical support, price support and can support individuals, companies and organizations.
Reform subsidies harmful to biodiversity
Reform, green or phase out a subsidy that directly or indirectly harms biodiversity. Subsidies can take the form of direct transfers, tax credits, and regulatory advantages that generate economic or financial benefits to the recipient. A wider definition may include implicit subsidies which are defined by the failure of internalize negative externalities to the environment (e.g. pollution). Subsidies are usually set and organized within economic sectors. Subsidies harmful to biodiversity include various measures in agriculture, fisheries, transport and infrastructure, construction, land used change, forestry and energy. Reforming or reducing these harmful subsidies can result in government savings and reduced future environmental costs.
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This strategy is based on ensuring that a range of government revenues - mostly those associated with natural resource use or environmental damages - are set aside or otherwise specifically allocated for nature conservation actions. This can be done through the use of Environmental Funds, retention of revenues at site or agency levels, or through accounting procedures that assign specific budgetary allocations based on revenues. This is especially important for fees and charges but has also been used successfully in the past for gasoline taxes (Costa Rica) and oil and gas funds. One special case worth noting here is the use of earmarked revenues to establish national “payment for environmental services” (PES, also known as payment for ecosystem services) programs. PES programs have been implemented mainly for watershed management objectives and are often associated with water funds – a type of environmental fund generating revenue from water tariffs (see Fees and Charges). In addition to the example from Costa Rica, Mexico has a national PES program for land restoration and management that combines national earmarked funds with local and regional water funds and other forms of public private partnerships.
Earmarking and retention of biodiversity revenues (self or “own” income)
Increasing the amount of taxes, fees, and other financial revenues derived (or not) from biodiversity related resources that are earmarked (ring-fenced), retained or returned for direct use on sustainable biodiversity management. The retention or return of these revenues can align incentives of various actors, increased funding available, and improve service provision. There is a risk that they produce an incentive to overuse resources for an organization's financial gain. This is often more politically feasible when revenue share partially goes to sustainable development. Examples - PA fees in Galapagos - all go to treasury then 50% back to municipalities, address livelihoods of artisanal fisheries to reduce pressure on biodiversity.
Lotteries
Governments and civil society groups using lotteries as a means of raising funds for benevolent purposes such as education, health, historic preservation and nature conservation. The lotteries are a form of gambling that involves the drawing of lots for a prize, and include instant games, lotto, and electronic terminals. In Europe and the USA, some wildlife trusts and conservation organizations receive a large part of their funding from the proceeds of lotteries.
Earmarking of taxes on financial transactions
Tax placed on a specific financial transaction, such as the purchase or sale of equity instruments, options and forward contracts, or foreign currency transactions. The revenues obtained maybe earmarked or guaranteed for biodiversity or related spending. For example, a share of the French financial transaction tax will be allocated to the capitalization of the Green Capital Fund.
Earmarking of taxes on currency transactions
Tax placed on a specific type of currency transaction. The most frequently discussed version is the Tobin tax which is intended to put a penalty on short-term financial speculation in the forex (foreign exchange) market. The revenues obtained may be earmarked or ring-fenced for biodiversity or related spending.
Conservation or wildlife themed items
Special commercial products featuring wildlife are sold at an extra price to costumers and the extra revenues are channeled to environmental causes and projects illustrated by the product/item, mostly related to conservation and the protection of wildlife. Examples include, license plates, special ringtones and screensavers (mobile communication), gifts sold at zoos, etc.
Conservation License Plates
Special license plates featuring wildlife images that are sold at a higher price to car owners. The extra income is channeled to environmental causes and projects illustrated by the plate, mostly related to conservation and protection of wildlife. This practice is used in many states in the USA.
Products sold for conservation or wildlife
A range of products from chocolate, water bottles, toys, cloths, etc. are developed and sold to help generate profit for conservation and endangered species. A significant percentage of profit should go to target NGOs or conservation efforts or the product may be seen as benefitting from marketing nature while not actually contributing (green washing).
Payment for Ecosystem Services – State Intermediation and/or fee
Beneficiaries/users of an ecosystem service make an indirect payment to the provider of that service through an intermediary such as the state where the public authority disburses the compensation to the service provider for conservation for maintenance. To fund the compensations , countries either rely on the general budget or introduce PES-like taxation systems with special-purpose taxes and fees, targeting the tourism, water, electricity, transport and extractives sectors (i.e. the beneficiaries of the ecosystem services). Mexico has a national level scheme that also encourages the establishment of private to private PES systems.
Oil and Gas and Other Natural Resource Revenue Funds
Legal vehicle (trust) that supports environmental priorities by mobilizing, blending, and overseeing the allocation of financial assets for generated from revenues or fees associated with non-renewable and renewable natural resources managed as a trust fund.