Nature Positive Financing the Tranisition in Cities

Executive summary As the trend towards urbanization increases throughout the global economy, population growth is straining outdated urban infrastructure and resources are ever more limited. Cities are the world’s economic hubs, contributing 80% of global gross domestic product (GDP).1 Yet close to half (44%) of that contribution is at risk due to nature loss. This global economic threat underscores the significance of safeguarding cities and their inhabitants from nature-related risks through preserving and enhancing biodiversity and natural ecosystems. At present, a mere 0.3% of global urban infrastructure spend is allocated to nature-based solutions and on average less than 10% of total approved project expenditure from multilateral development banks (MDBs) between 2018 and 2023 was directed towards urban nature projects. Urban nature spend has decreased between 2018 and 2023, and only 37% of the world’s 500 most populous cities have specific strategies in place to sustainably manage and protect nature. The lack of investment in nature fails to reflect the values that nature provides to our society. Nature offers critical services and physical outputs such as clean air, water, climate regulation and biodiversity, as well cultural, recreational and emotional interactions that are directly or indirectly important for human health, well-being and economic stability. Increasing the volume of investment in nature is crucial, but it is not enough if investments in environmentally harmful practices are not concurrently addressed. Close to $7 trillion is invested globally each year in activities that have a direct negative impact on nature from both public and private sector sources. Without redressing this trend, cities risk losing out on the long-term environmental, social and economic advantages that nature can provide. There is a significant opportunity to expand nature-positive action beyond financing models such as green bonds, and explore new opportunities to transform and make use of common sources of capital. This approach offers a way to drive more sustainable investments in biodiversity and create lasting nature-positive financial structures to support conservation efforts in cities globally. As cities continue to invest in local development, they must simultaneously integrate nature into urban governance policies and directly invest in ecosystem conservation to ensure resilient urban environments. This can be achieved through: Nature mainstreaming: integrating a nature lens into all financial flows and urban investment decisions to ensure that projects promote sustainability and resilience, rather than compromising them. Nature-positive finance: identifying and expanding new financial opportunities for nature conservation, mobilizing additional resources and diversifying funding sources to complement existing public-sector- dominated financial flows for nature. At present, cities are dependent on public sources for most nature financing. Current biodiversity financial flows amount to $208 billion per year, up from $166 billion in 2021. Public finance contributes 83% of this total ($173 billion). Private finance accounts for $35 billion. There is an undeniable opportunity for cities to use development finance as a catalyst for greater private sector participation in urban development priorities. This report aims to advance the discourse on urban nature finance to overcome critical challenges faced by cities and promote sustainable city development driven by committed and well-defined multistakeholder action. It serves as a call to action for city leaders, financial institutions and businesses to embrace the transformative potential of urban nature finance for a sustainable future. Investing in nature means investing in cities that are livable, sustainable and adaptable to future challenges.Nature finance is a no-regret solution to mounting pressures in cities such as ageing infrastructure, water security and human health. Nature Positive: Financing the Transition in Cities 5