Nature-based solutions for adaptation are underfunded—but offer big benefits

New research finds that as little as 1.5% of all public international climate finance has gone to support nature-based solutions for adaptation in developing countries.

By Manish Bapna

Nature-based solutions are key to advancing climate adaptation. These are approaches that work with nature, not against it — from restoring wetlands, which can protect against storms, to conserving forests that stabilize soil and slow water runoff. Mangrove forests, for example, save an estimated $80 billion per year in avoided losses from coastal flooding globally, and could help to protect up to 18 million people. Additionally, nature-based solutions can provide many co-benefits — for nature, economies, communities, culture and health.

But despite these extensive benefits, new research finds that as little as 1.5% of all public international climate finance has gone to support nature-based solutions for adaptation in developing countries. Just a handful of major bilateral donors and multilateral institutions have driven public funding for these approaches.

The first-ever assessment of global funding for nature-based solutions for adaptation, produced by WRI and Climate Finance Advisors — in support of the Global Commission on Adaptation’s Nature-based Solutions Action Track — finds that while there is increasing awareness and interest in natural solutions for adaptation more broadly, this has not yet translated into adequate financial support for developing countries.

Public funding for these approaches is beginning to increase, but it’s not enough to meet the rising demand for nature-based solutions for adaptation. Bilateral and multilateral funding is also critical to mobilize much-needed private finance.

The Urgent Need to Fund Nature-based Solutions for Adaptation

As the Commission outlined in its Adapt Now report, nature-based solutions offer a “triple dividend.” This includes helping communities avoid losses from climate impacts by protecting against extreme weather events, saving countries billions of dollars each year. For example, restoring wetlands can absorb and filter flood waters and excessive rainfall, helping communities avoid asset loss and contamination.

Nature-based solutions also generate economic gains through immediate job creation, increased business productivity and tourism. Compared to traditional infrastructure, these solutions often deliver higher economic returns, and are faster to implement and more sustainable in the long run.

Additionally, they can deliver other social and environmental benefits, from cleaner air that improves human health to carbon sequestration to more habitat for endangered species. Most interventions that reduce climate impacts also increase carbon uptake and storage — natural climate solutions, for example, can provide one-third of the climate mitigation needed between now and 2030 to keep warming below two degrees Celsius.

Overcoming Financial Barriers to Achieve Scale

Despite the significant benefits that these approaches provide, access to funding is one of the key barriers to scaling up the use of nature-based solutions for adaptation, according to the Commission. Several related issues prevent countries from financing and implementing these approaches more widely.

First, there is not enough funding available to respond to the emerging interest in these approaches. To date, there have been repeated calls for all donors and development banks to increase the share of adaptation and resilience finance to at least 50% of their climate finance. The latest OECD report on Climate Finance Provided and Mobilised by Developed Countries shows that public adaptation finance has grown 85% in five years — from $9.1 billion in 2013 to $16.8 billion in 2018. However, adaptation funding still hovers at around 20% of global climate finance, and the portion of climate finance that flows toward nature-based solutions for adaptation is considerably smaller.

Second, development partners lack clear, common definitions and guidelines to consistently track funding for nature-based solutions, making it difficult to quantify and monitor these investments.

Third, a lack of standard metrics and methodologies to measure the benefits from nature-based solutions makes it difficult for countries and funders to compare them against other potential investment options.

Fourth, many developing countries lack the technical expertise to integrate nature-based approaches into their plans and investment strategies and to develop a strong pipeline of projects. Combined with a lack of clear guidance on how climate funding can support investments in these approaches, this hinders many countries’ access to financing.

To address each of these barriers, bilateral donors and multilateral development banks can consider acting on the following:

• Increase the mobilization of public finance. Ahead of COP26 in November, development partners could identify strategic opportunities to consider nature-based approaches as they formulate new commitments on adaptation finance. More public funding can also help catalyze much-needed investment by the private sector. For example, the U.S. and Canadian governments supported the Natural Infrastructure for Water Security project in Peru to scale up investments in watershed management and restoration with the aim of safeguarding water supplies and increasing climate resilience. Their investments have leveraged more than $30 million collected by the Peruvian government from utilities and other water users as part of a government program to strengthen water security.
• Improve tracking and reporting of funding to allow for more accurate and consistent assessments of how much funding is going to support nature-based solutions for adaptation. Donor countries and multilateral institutions already report their contributions to the OECD’s Development Assistance Committee (DAC), and could work with the DAC to develop common guidance on how to tag funding related to nature-based solutions.
• Identify better ways to measure the benefits of nature-based solutions for adaptation.  Capacity building support should be provided to help countries to develop, adopt and accelerate common approaches to quantify and value these benefits in ways that can inform policy and investment decisions. Otherwise, it will remain difficult for investors and other decision-makers to compare nature-based solutions with conventional approaches to, for example, infrastructure development.
• Support the mainstreaming of nature-based solutions into adaptation efforts. Technical assistance and capacity building support could be provided to help developing countries assess the costs and benefits of such solutions and to incorporate these approaches into their long-term national adaptation and development plans. Additionally, these countries should be provided support for the development of locally led projects that provide these benefits directly to communities.

With the growing global challenges of climate change and biodiversity loss, as well as the current global health and economic crisis, the interest and awareness in nature-based solutions have greatly increased in recent years — but much work is still needed to get these approaches adopted widely and at scale. As donor countries and financial institutions prepare their commitments ahead of COP26, they should not forget about the potential of nature-based solutions and the wide range of adaptation benefits they can deliver.