Biodiversity finance reference guide
This reference guide builds on the Green Bond Principles and Green Loan Principles as well as related resources, including the ICMA Handbook for Impact Reporting. It also aligns with targets in the recently adopted Global Biodiversity Framework. Both the Green Bond Principles and Green Loan Principles list biodiversity as an eligible use of proceeds. However, they do not provide a granular description of the types of projects that fit this category. The purpose of this reference guide is to address this gap and provide an indicative list of investment activities that contribute to protecting, maintaining, or enhancing biodiversity and ecosystem services and sustainably managing living natural resources through the adoption of practices that integrate conservation needs and sustainable development.
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OVERVIEW
Introduction
Biodiversity underpins critical ecological and economic functions, with $44 trillion (half of global GDP) relying on natural capital. However, biodiversity loss has escalated due to factors such as unsustainable land-use practices, pollution, and climate change. Restoring biodiversity offers resilience against climate impacts and opens up significant economic opportunities, potentially creating $10.1 trillion in business opportunities and 395 million jobs by 2030.
Biodiversity Finance Framework
Building on the Green Bond Principles and Green Loan Principles
The guide aligns biodiversity finance with the Green Bond and Green Loan Principles, recognising biodiversity as a key category for sustainable investment. While these principles identify biodiversity as an eligible area for financing, they lack detailed project criteria. The guide addresses this gap by providing clear investment activities and components that protect biodiversity while promoting sustainable development. This approach ensures biodiversity finance contributes to the environmental objectives of pollution prevention, natural resource conservation, and climate change adaptation.
Use of proceeds
The guide categorises biodiversity investments into three areas:
Investment activities that seek to generate biodiversity co-benefits
This category includes activities integrated into existing business practices, such as climate-smart agriculture, regenerative farming, and biodiversity-friendly supply chains. For example, reducing synthetic fertiliser use by 20% or implementing no-till farming practices helps mitigate biodiversity loss. Innovations in traceability systems and efficient irrigation technologies also enhance biodiversity outcomes. Sustainable aquaculture and fisheries management practices ensure marine biodiversity protection.
Investments in biodiversity conservation and/or restoration as the primary objective
Direct investments focus on protecting and restoring ecosystems. Examples include establishing legally protected areas, rewilding projects to create biodiversity corridors, and wetland restoration to support water quality. Biodiversity credits, such as mitigation banking, offer financial incentives for conservation. Public-private mechanisms can encourage private landowners to create conservation areas adjacent to protected sites.
Investments in nature-based solutions to conserve, enhance, and restore ecosystems and biodiversity
Nature-based solutions (NBS) provide infrastructure-like services using natural systems. Investments include mangroves for flood mitigation, coral reefs for storm surge protection, and constructed wetlands for water treatment. Green urban infrastructure, such as green roofs and permeable surfaces, addresses urban challenges like heat and flooding while enhancing biodiversity. For example, forest buffers and agricultural strips can reduce nutrient runoff into waterways.
On project selection
Eligible projects must address key biodiversity drivers, such as habitat loss, pollution, and overexploitation, while adhering to stringent environmental and social safeguards, including the IFC Performance Standards. Projects are selected based on their alignment with Green Bond and Green Loan Principles, local and international biodiversity regulations, and their ability to provide measurable biodiversity benefits without introducing risks to other environmental priorities.
On management of proceeds
Funds raised through biodiversity finance must be ringfenced to ensure they are allocated exclusively to eligible activities that satisfy the framework’s criteria. Proceeds should be directed toward project components with clear biodiversity benefits, and components not meeting eligibility criteria must not contribute to negative biodiversity impacts. Transparent financial tracking mechanisms are essential for effective fund management.
On impact reporting
Issuers and borrowers must collect comprehensive data to measure and report on biodiversity outcomes. Impact reporting should include biodiversity-specific metrics (e.g., increases in natural forest cover) and indicators aligned with ICMA standards or certification systems. Projects should define measurable outcomes during the design phase, allowing for ongoing monitoring and third-party verification. Reporting should also assess social impacts, ensuring activities do not negatively affect local communities and their access to ecosystem services.
