EIB Report Calls for Reforms and Financial Support to Boost Nature-Based Solutions in Europe

EIB Report Calls for Reforms and Financial Support to Boost Nature-Based Solutions in Europe

(IN BRIEF) A report by the European Investment Bank (EIB) highlights the importance of nature-based solutions in building resilient societies in the face of climate change. The report calls for regulatory and subsidy reforms and a more flexible range of financial instruments to support these solutions. It reveals that nature-based projects heavily rely on public funding, with minimal private sector involvement. The report identifies challenges such as limited awareness of the benefits, lack of technical expertise, and regulatory barriers. It recommends introducing incentives and regulations to encourage private sector engagement and mandatory consideration of nature-based alternatives. The report also emphasizes the need for diverse financial support, including seed funding, favorable loans, grants, and de-risking mechanisms. It calls for reforms to the common agricultural policy and increased involvement of institutional long-term investors. The report concludes that comprehensive reforms and financial support are necessary to unlock the full potential of nature-based solutions in Europe.

(PRESS RELEASE)  LUXEMBOURG, 8-Jun-2023 — /EuropaWire/ — The European Investment Bank (EIB), the lending arm of the European Union, announces release of a new report released that emphasizes the urgent need for regulatory and subsidy reforms, as well as a more flexible range of financial instruments, to promote nature-based solutions in Europe. Titled “Investing in nature-based solutions: State-of-play and way forward for public and private financial measures in Europe,” the report presents key findings and recommendations under the InnovFin mandate, a joint initiative of the EIB Group and the European Commission.

“The majority of nature’s benefits have no financial market value today,” said Ambroise Fayolle, EIB Vice President in charge of climate action and the environment. “However, an enormous part of our economies is dependent on them. If we want nature-based solutions to become mainstream, we must increase transparency and measurability, and provide the enabling conditions for both the private and public sector to develop them. Knowledge and incentives are key for investment decisions.

The report highlights that European policy must address the harmful subsidies that contribute to the degradation of nature and instead create incentives for nature-based solutions. Drawing on a database of over 1,300 projects across the European Union (EU), the report reveals that public funding overwhelmingly supports nature-based solutions, with only 3% receiving substantial financing from the private sector. Most projects are relatively small in terms of transformed area and investment costs, with four out of five projects requiring less than €10 million, and nearly half requiring less than €1 million. Furthermore, the implementation rate of nature-based solutions in Europe remains slow, although there is significant investment potential in sectors such as water management, urban development, forestry, and agriculture, which also have strong synergies with climate adaptation and mitigation efforts.

Various barriers contribute to the limited adoption of nature-based solutions, including the small scale of individual investments, long timeframes for financial returns, and distinct risk profiles compared to non nature-based options. The lack of awareness regarding the benefits of nature-based solutions and the technical expertise required for complex projects also hinder investment. Regulatory obstacles related to cooperation and co-financing further impede progress.

To address these challenges, the report proposes a comprehensive set of policy and financial recommendations. It calls on local, national, and European administrations to introduce regulations and incentives that encourage private-sector involvement and innovative actions by the public sector. This could involve implementing rewards for delivering nature-based solutions and establishing mandatory requirements to consider green alternatives before resorting to human-engineered or grey infrastructure. The report highlights the reform of the common agricultural policy (CAP) as an opportune moment to directly fund nature-based solutions and reduce practices that harm ecosystems.

On the financial front, the report emphasizes the need to cater to diverse project maturities, stages, sizes, and risks, with a particular focus on early-stage capacity building and financing. This includes improving access to seed funding, offering favorable loan terms, providing investment grants and subsidies, and developing de-risking mechanisms. The report suggests adapting financing techniques used in the innovation, infrastructure, and impact financing ecosystems to support nature-based solutions. It also advocates for the availability of sector-specific finance products rooted in local conditions and highlights the importance of deriving multiple revenues from the co-benefits of nature-based solutions. The report underlines the crucial role of the public sector in supporting early-stage investments and enabling institutional long-term investors, such as insurance companies, to contribute to nature-based solutions.

Background information

Nature-based solutions

Nature-based solutions are typically referred to as systems and processes that are inspired by nature or natural features and that help to achieve societal goals like the mitigation of climate change and the adaptation to its consequences, good human health, food and water security, or disaster prevention. They add resource-efficient and impactful alternatives to traditional, engineered solutions while at the same time protecting people, wildlife, and plants. Examples range from the reforestation or terracing of hillslopes to prevent floods and landslides to the renaturation of rivers, the installation of green roofs or climate-smart farming. According to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, nature-based solutions can provide more than a third of the climate change mitigation needed until 2030 to achieve the targets of the Paris Agreement. In 2021, a study of the World Economic Forum found that investing just 1% of global GDP in nature-based solutions would do a great deal to tackle climate change and the biodiversity crisis.

InnovFin

InnovFin – EU Finance for Innovators is a joint initiative launched by the European Investment Bank Group (EIB and EIF) in cooperation with the European Commission under Horizon 2020. InnovFin aims to facilitate and accelerate access to finance for innovative businesses and other innovative entities in Europe.

InnovFin Advisory assists eligible public and private counterparts to improve the bankability and investment-readiness of large, complex, innovative projects that need substantial long-term investments.

Media contact:

Antonie Kerwien
a.kerwien@eib.org
+352 4379 – 82175

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SOURCE: European Investment Bank