Financing a sustainable global bioeconomy
This report highlights the role of bioeconomy finance in addressing climate, nature, and equity goals. This report analyses challenges, instruments, and opportunities for financing the bioeconomy globally, advocating for integrated strategies and international collaboration. It emphasises equitable development, biodiversity conservation, and the potential for job creation and economic growth.
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OVERVIEW
Objectives and approach
The report addresses the financing gap in the bioeconomy, focusing on nature-positive solutions. This research is motivated by the need to integrate bioeconomic activities into climate, equity, and nature frameworks. The report draws on global collaborations, particularly the G20’s bioeconomy initiatives, to inform its analysis.
What is the bioeconomy?
The bioeconomy leverages biological resources and eco-industrial processes to create sustainable products and services. It emphasises equitable resource use and sustainability, benefiting various stakeholders, including Indigenous communities, small-scale farmers, and local populations.
How big is the bioeconomy?
The global bioeconomy is currently valued at approximately US$4-5 trillion, with growth potential reaching up to US$30 trillion by 2050. This projected growth is driven by climate and environmental concerns, which are increasingly influencing market preferences and regulatory developments. Countries like Brazil, India, and the EU are developing ambitious bioeconomy strategies to harness this potential. The high-tech bioeconomy, including sectors like biotechnology, is expected to grow significantly, with bioplastics, bioenergy, and biochemicals showing compound annual growth rates (CAGR) of 18.8%, 9.4%, and 8.6%, respectively.
Financing challenges
Three key financing challenges for the bioeconomy are outlined:
Nature-intensive bioeconomy: Sectors such as certified bio-products (e.g., food, chemicals, and plastics) face adverse market conditions due to high costs and competition with subsidised fossil fuels. Investors are hesitant due to the limited scale of projects and the commercial risks linked to traditional knowledge.
Advanced bioeconomy: This segment often requires blended finance (a combination of public and private funding) to mitigate risks. The challenge lies in aligning public funds with private investment to enable scaling of projects, particularly in the Global South, where such support is limited.
High-tech bioeconomy: High-tech sectors, such as biotechnology and bioplastics, struggle to attract capital due to their early-stage nature and the need for significant risk capital. Public finance remains essential in de-risking these investments and encouraging private sector participation.
Financing the bioeconomy
The report stresses the importance of a mix of public and private investment to fund bioeconomy projects. Blended finance solutions, sustainability-linked debt instruments, and performance-based financing mechanisms are highlighted as crucial tools to attract private capital. Additionally, nature-based solutions such as carbon and biodiversity credits can provide long-term revenue streams, reducing investment risks. Public finance is particularly critical for early-stage funding, while development finance institutions play a vital role in de-risking these investments for private stakeholders.
Accelerating financing of the bioeconomy
To accelerate bioeconomy financing, the report recommends establishing stable regulatory frameworks, fostering international cooperation, and utilising innovative financial instruments. Off-take agreements can help mitigate risks by ensuring stable revenue streams. Furthermore, international collaboration, particularly through platforms like the G20, is essential for scaling bioeconomy financing and knowledge sharing globally.
Conclusions and recommendations
The report concludes that while the bioeconomy offers vast potential for growth and sustainability, significant effort is needed to develop financing frameworks that balance risks and returns. It recommends:
- Developing regulatory environments that encourage private investment.
- Strengthening international cooperation to bridge financing gaps, particularly in emerging economies.
- Fostering public-private partnerships to share risks and enable scaling.
- Prioritising job creation, particularly in rural and developing regions, to support equitable economic growth
The bioeconomy is seen as a cornerstone for future sustainable development, with the potential to create significant economic opportunities and advance global climate and equity goals.