Sustainable Financing

Sustainable Financing

Despite its intrinsic value and the importance of marine and coastal biodiversity to human well-being and sustainable development, there is a lack of sufficient financial resources. The steady flow of sufficient financial resources is however a prerequisite for achieving long-term conservation goals – the conservation and sustainable use of marine and coastal biodiversity. One of the greatest challenges and one of the main obstacles to achieving the Convention on Biological Diversity’s objectives is to generate the funds needed for the implementation of conservation measures. Of course, all kinds of sustainable financing mechanisms are dependent upon sound land-use planning and coastal and marine management.

Financing conservation activities include a variety of finance mechanisms. Besides generating revenues for conservation, it is essential to effectively manage and allocate the funding. Critical elements of financial sustainability include the timing and duration of funding as well as the targeting, uses and sources of funding.

A range of general financing mechanisms has been developed. These can be grouped into the following categories (Parker et al. 2012):

  • Direct Market Mechanisms: All such mechanisms generate revenue for the provision of either biodiversity or ecosystem services. Revenue is generated through a payment from either the beneficiary (e.g. user fees) or the polluter (e.g. biodiversity offsets) to the provider of biodiversity and ES. Since revenue generation is directly linked to the provision of biodiversity and ES, these mechanisms tend to be voluntary and private sector in nature, in which end users find it in their economic (or social) interest to pay for the conservation or sustainable use of biodiversity and ecosystem services.
  • Indirect Market Mechanisms: These mechanisms generate revenue by linking the value of biodiversity and ecosystem services to traditional markets, such as fish, thereby creating indirect markets for ecosystem services and biodiversity. Revenue is normally generated through an additional payment (or premium) from the buyer of a product or commodity (certified fish) that is passed through the supply chain to the producer.
  • Other-Market Mechanisms: Such mechanisms generate revenue by imposing regulation on markets, sectors and industries that do not directly benefit biodiversity and ecosystem services. Due to the vast pools of finance that exist in global markets, sectors and industries, the range of other market mechanisms that have been proposed to serve biodiversity financing is extensive. One such mechanism is a natural capital levy. This is a fee, charge or tax that either places a price on the extraction of renewable natural resources (e.g. fee on diamond extraction in deep seas) or activities that negatively impact the provision of biodiversity or ecosystem services (e.g. development tax). Following the polluter-pays principal, natural capital levies attempt to internalize the cost of ecosystem degradation by placing a cost on activities that generate profit from that degradation.
  • Non-Market Mechanisms: These mechanisms generate revenue from traditional forms of finance, referred to as non-market based, or related, sources. With the exception of philanthropy, non-market mechanisms are public sector mechanisms relying on regulation for their implementation. These mechanisms include domestic budget allocation, Official Development Assistance (ODA) or Debt-for-nature-swaps.

Which financing mechanisms should be utilized to finance marine and coastal conservation depends on the assessment of the viability of the different funding ideas and needs.

Conservation Finance – Option Papers

Conservation finance generates new, long-term and diversified sources of revenue for conservation and goes beyond traditional government or donor funding by introducing innovative market-based approaches. There is typically no single solution to ensuring financial sustainability but a combination of mechanisms should be considered depending on the specific context.

Through a series of option papers, Blue Solutions hopes to help build capacity and awareness on the different financial pathways forward to enable conservation practitioners to feel more at ease integrating these concepts into their projects. The different option papers will explore several sustainable financing mechanisms and relevant success stories that have used those mechanisms.