Global finance is pivotal in harnessing nature, one of our most formidable allies against climate change, and in recognizing natural capital as a crucial asset class. Nature’s capacity to offset the impact of climate change while also boosting societal, economic, and biodiversity resilience is unparalleled. Research indicates that the protection, restoration, and sustainable management of ecosystems through nature-based solutions (NbS) could account for one-third of the global mitigation required to fulfill the Paris Agreement objectives.

NbS initiatives offer extensive sustainability impacts, benefiting people, the planet, purpose, and profits. These projects adopt a comprehensive approach because conserving natural habitats yields multiple advantages that include species protection, carbon sequestration, and socioeconomic opportunities for local communities. Yet, the financial returns from such investments often take time to materialize, with historical funding primarily coming from small-scale philanthropy or being predominantly public sector-driven.

The United Nations Environment Programme reports that investment needs to surge to USD 384 bn per year by 2025 and USD 484 bn per year by 2030 from the current USD 154 bn per year to achieve climate, biodiversity, and land degradation targets.

Shifting financial flows towards climate-nature projects is essential for our planet’s future

Financial institutions — a catalyst for change: Financial institutions are uniquely positioned to propel NbS projects forward by providing capital, crafting innovative financial instruments, and ins. products in addition to advising on risk management and performance structures. They also serve as crucial intermediaries, uniting stakeholders — governments, NGOs, private sectors, and international bodies — to foster NbS projects. While governments and multilateral development banks predominantly support non-revenue-generating environmental initiatives, private capital gravitates towards profit-yielding projects.

Achieving net-zero targets necessitates a collaborative effort among governments, financial institutions, and businesses. Public-private partnerships exemplify such collaboration, with government support bolstering confidence among private investors and financial entities to co-invest in NbS projects. Governments can further attract private investment through incentives, guarantees, or subsidies. Blended finance tools are instrumental in drawing diverse financial actors and increasing investments across the NbS spectrum.

Policy frameworks, co-developed by governments and financial institutions, can eliminate barriers to sustainable investments. Global policies are increasingly recognizing the importance of finance and impact investments in achieving set goals. For instance, the Mangrove Breakthrough Community of Action, supported by civil society, governments, and the private sector, aims to expand global mangrove cover by 15 mn hectares by 2030, necessitating USD 4 bn in financing.

The potential of Islamic finance: Islamic finance, with its ethical and sustainable core principles, aligns closely with NbS. By structuring shariah-compliant financial instruments, a new avenue of Islamic capital opens up, catering to investors seeking to support environmental and sustainable projects. This approach is particularly relevant in the MENA region in addition to countries like Malaysia and Indonesia where it can significantly accelerate NbS financing.

UAE’s flagship NbS project: HSBC, in collaboration with the World Resources Institute and WWF, has initiated the Nature-based Solutions for Climate, Biodiversity, and People project in the UAE. This project aims to enhance the resilience of blue carbon coastal ecosystems, thereby supporting climate mitigation, biodiversity, and community benefits. Through initial funding for pilot NbS projects, the initiative seeks to demonstrate commercial viability, spark entrepreneurship, and preserve natural capital, thereby attracting further investment.

The UAE’s leadership in setting net zero targets, a sustainable finance framework, and the recent hosting of COP28, has spotlighted climate issues in the region, potentially increasing the demand for sustainable finance solutions. HSBC’s commitment to this cause, through strategic partnerships and flagship projects, underscores the growing momentum towards integrating nature-based solutions in financial strategies for climate resilience.

By David Ramos, Acting Head of Sustainability at HSBC Middle East.

** This article is part of a wider series to raise awareness about the powerful benefits of nature-based solutions. It features prominent voices of leaders who are advancing the UAE’s flagship NbS project as a key pathway to restore natural ecosystems and enhance climate resiliency.

** The “Nature-based Solutions for Climate, Biodiversity, and People” project is funded by HSBC and implemented in partnership between the Ministry of Climate Change and Environment, the Ministry of Economy, the Environment Agency – Abu Dhabi, the Government of Umm Al Quwain, Emirates Nature-WWF, and the International Center for Biosaline Agriculture.

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