chieving a sustainable future for both people and our environment will require financing of an appropriate scale to meet our environmental goals. This is particularly urgent now as efforts are in full swing to scale up financing for climate action, biodiversity, and other development related sectors.
We have reached a point where we understand that the consequences of climate change and environmental degradation are adversely impacting our lives. The list of bleak outcomes is long and expanding—everything from loss of livelihoods, land, territories, and cultural spaces; to food security, growing threats to health and well-being, and higher incidences of human–wildlife conflict.
The international community has begun to respond with greater urgency, through efforts to address climate mitigation and adaptation, and to conserve, restore and sustainably use biodiversity and ecosystems. For climate and biodiversity actions, the financial resources needed are respectively estimated at an annual $100 billion, according to the United Nations Framework Convention on Climate Change (UNFCCC), and $600–800 billion, based on United Nations Environment Programme (UNEP) estimates.
While big finance will certainly play an important role, there is a risk of competition for financing between the climate and biodiversity agendas. Given the deep linkages between them, are efforts being made to coordinate and rationalize fund-mobilization efforts? This is really a moot point because if we want to leverage synergies, it is important to re-focus on integrated implementation plans of different policies between them. For example, financing for green urban infrastructure can also have biodiversity, socio-cultural, and ecological considerations embedded in their plans.
The other important responsibility for the international community is to ensure that sufficient resources (whether financial, technical, etc.) are available where necessary. The concept of “nested governance” has been in vogue, seeking to ensure that decision makers at each scale of implementation have sufficient autonomy to act—while at the same time interacting across the different scales when needed. It relies on a mix of both decentralized and centralized approaches acting in tandem.
Which leads us to the key question: is there a way to mobilize scale-appropriate financing for socio-ecological resilience at the local level—while advancing national and international goals? A "nested” financial approach would involve financing at different levels of planning (intergovernmental, national, sub-national and local) that is designed to meet the needs, priorities, and challenges relating to specific contexts. It also further leverages particular factors (socio-ecological) specific to a context. Such a “nested” financial approach would allow the full and effective participation of various public and private investors, in addition to other actors who can make an impact at their designated scales.
At these sub-national scales, activities in every sector are interconnected (e.g. food, health, infrastructure development, cultural and conservation areas). Evidence shows that well-designed and integrated interventions can have positive outcomes for people and nature. At a recent meeting of the International Partnership for the Satoyama Initiative (IPSI) in Japan, members underlined the challenge various stakeholders face in accessing financial resources for activities on the ground. Waiting for big finance to trickle down is considered tedious and fraught with redundancies—including bureaucratic delays, ignorance of local priorities, unfamiliarity of local processes, etc.
The concept of "polylateral finance,” advocated by the Alliance for Financial Inclusion, fosters a decentralized form of goal prioritization and resource mobilization. Polylateral finance arises from the concept of polylateral development where countries or sub-national actors rely on multiple agencies for policy development and implementation. Rather, they set their priorities based on their needs, enabled by peer-to-peer learning and guidance from experts.
This may be explored for more agile, responsive, and coherent approaches in designing and implementing policies related to nature and human development. It aligns with the better-recognized concepts of nested governance, polycentric governance, community based natural resource management, and integrated landscape finance. These concepts acknowledge the diversity of contexts at different scales and the need for cooperation between multiple actors whose actions and consequent impacts are interdependent.
Scale-appropriate financing is not new. What is noteworthy is that such finance tends to be less onerous and more accessible to actors who ultimately need to make decisions related to the management and use of landscapes and seascapes. Identifying the consequences of different decisions (through environmental and social auditing methods) enables these actors to make more informed choices, satisfying the “fundability” requirements of financial institutions.
Although this is well understood, mainstream discourses on nested finance are yet to gain currency. While it is encouraging that this year’s 7th Global Environment Facility (GEF) Assembly highlighted the need for inclusive finance, central banks and governments must make conscious policy decisions to guide financial institutions towards creating decentralized financing policies. It is imperative that they use their influence to streamline delivery and access to funding at both the sub-national and local scales to advance the climate action, biodiversity conservation, and well-being agendas.
Editors’ Note: The views expressed in this article are those of the author and do not necessarily reflect the views of the United Nations University.
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“Nested Finance” is Critical To Achieving Environmental Goals
Image by Shameer Pk from Pixabay
October 6, 2023
One of the biggest challenges to meeting our climate change targets is financing on an appropriate scale—in the hundreds of billions of dollars annually. Big finance will have a role, but nested finance could be far more useful, writes United Nations University research fellow Suneetha Subramanian.
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chieving a sustainable future for both people and our environment will require financing of an appropriate scale to meet our environmental goals. This is particularly urgent now as efforts are in full swing to scale up financing for climate action, biodiversity, and other development related sectors.
We have reached a point where we understand that the consequences of climate change and environmental degradation are adversely impacting our lives. The list of bleak outcomes is long and expanding—everything from loss of livelihoods, land, territories, and cultural spaces; to food security, growing threats to health and well-being, and higher incidences of human–wildlife conflict.
The international community has begun to respond with greater urgency, through efforts to address climate mitigation and adaptation, and to conserve, restore and sustainably use biodiversity and ecosystems. For climate and biodiversity actions, the financial resources needed are respectively estimated at an annual $100 billion, according to the United Nations Framework Convention on Climate Change (UNFCCC), and $600–800 billion, based on United Nations Environment Programme (UNEP) estimates.
While big finance will certainly play an important role, there is a risk of competition for financing between the climate and biodiversity agendas. Given the deep linkages between them, are efforts being made to coordinate and rationalize fund-mobilization efforts? This is really a moot point because if we want to leverage synergies, it is important to re-focus on integrated implementation plans of different policies between them. For example, financing for green urban infrastructure can also have biodiversity, socio-cultural, and ecological considerations embedded in their plans.
The other important responsibility for the international community is to ensure that sufficient resources (whether financial, technical, etc.) are available where necessary. The concept of “nested governance” has been in vogue, seeking to ensure that decision makers at each scale of implementation have sufficient autonomy to act—while at the same time interacting across the different scales when needed. It relies on a mix of both decentralized and centralized approaches acting in tandem.
Which leads us to the key question: is there a way to mobilize scale-appropriate financing for socio-ecological resilience at the local level—while advancing national and international goals? A "nested” financial approach would involve financing at different levels of planning (intergovernmental, national, sub-national and local) that is designed to meet the needs, priorities, and challenges relating to specific contexts. It also further leverages particular factors (socio-ecological) specific to a context. Such a “nested” financial approach would allow the full and effective participation of various public and private investors, in addition to other actors who can make an impact at their designated scales.
At these sub-national scales, activities in every sector are interconnected (e.g. food, health, infrastructure development, cultural and conservation areas). Evidence shows that well-designed and integrated interventions can have positive outcomes for people and nature. At a recent meeting of the International Partnership for the Satoyama Initiative (IPSI) in Japan, members underlined the challenge various stakeholders face in accessing financial resources for activities on the ground. Waiting for big finance to trickle down is considered tedious and fraught with redundancies—including bureaucratic delays, ignorance of local priorities, unfamiliarity of local processes, etc.
The concept of "polylateral finance,” advocated by the Alliance for Financial Inclusion, fosters a decentralized form of goal prioritization and resource mobilization. Polylateral finance arises from the concept of polylateral development where countries or sub-national actors rely on multiple agencies for policy development and implementation. Rather, they set their priorities based on their needs, enabled by peer-to-peer learning and guidance from experts.
This may be explored for more agile, responsive, and coherent approaches in designing and implementing policies related to nature and human development. It aligns with the better-recognized concepts of nested governance, polycentric governance, community based natural resource management, and integrated landscape finance. These concepts acknowledge the diversity of contexts at different scales and the need for cooperation between multiple actors whose actions and consequent impacts are interdependent.
Scale-appropriate financing is not new. What is noteworthy is that such finance tends to be less onerous and more accessible to actors who ultimately need to make decisions related to the management and use of landscapes and seascapes. Identifying the consequences of different decisions (through environmental and social auditing methods) enables these actors to make more informed choices, satisfying the “fundability” requirements of financial institutions.
Although this is well understood, mainstream discourses on nested finance are yet to gain currency. While it is encouraging that this year’s 7th Global Environment Facility (GEF) Assembly highlighted the need for inclusive finance, central banks and governments must make conscious policy decisions to guide financial institutions towards creating decentralized financing policies. It is imperative that they use their influence to streamline delivery and access to funding at both the sub-national and local scales to advance the climate action, biodiversity conservation, and well-being agendas.
Editors’ Note: The views expressed in this article are those of the author and do not necessarily reflect the views of the United Nations University.
