Innovative Financing For Ecosystem Management in Africa

The nature of goods or capital normally addressed under the umbrella of ecosystem management and services poses a critical problem regarding their capability to generate revenue and therefore be financially attractive for novel financing mechanisms and structures. Despite this difficulty, it is recognised that much more finance must be attracted to ecosystem management activities in order to bridge and fund the financing gap for addressing ecosystem’s-based Sustainable Development Goals (SDGs) as public funding will not meet the demand. In this, the issues facing funding for ecosystem management are not dissimilar to the water and sanitation sector where, according to a technical report by the World Bank, investments in water, sanitation and hygiene sectors should at least triple to somewhere between US$ 74 billion to US$ 166 billion/year, so that nations can achieve SDG targets 6.1 and 6.2 .

The protection of other ecosystem functions such as terrestrial and aquatic biodiversity suffer from a similar gap, and face even greater hurdles to find ways of financing their activities. The challenge is exacerbated when we focus the analysis on the African continent, where a large number of low and low-middle income countries suffer from problems such as poverty, which, in turn, means that possible interventions towards monetising ecosystem services are even more difficult. Despite being the main contributor towards achieving the SDG ecosystem goals, the public sector cannot fill in the entire gap alone, requiring innovative structures, channels and sources to be developed to support the provision and preservation of essential ecosystem functions and services.

In early 2018, PlanAdapt conducted an economic study, commissioned by the African Development Bank, in preparation of the World Water Week 2018 in Stockholm. The study report was presented during the seminar ‘Is there such thing as innovative financing for ecosystems management?’ at the WWW and lays down the principles for financing ecosystem management, debating normative concepts around the nature of goods and developing, through empirical assessments, the role of different enabling conditions for the practice ecosystem’s financing implementation. It uses the management of water functions as a by-proxy sector to illustrate the challenges and opportunities in the financing debate, however, without claiming to share exact characteristics with the management of other ecosystem functions. It further builds on the debate around the necessary enabling conditions for ecosystem management financing, with an aim of leaving the purely theoretical arena and finding a way into more tangible recommendations.

Moreover, the report explains the construction and interplay of different financing criteria in the specific field of water services and how this might by applicable to financing ecosystem management. It also launches the specific debate around innovative financing mechanisms and structures, presenting a list of ten instruments (e.g. environmental impact investing, green levies, results-based financing, green bonds and pooled financing) with varying natures as both public and private approaches. Finally, the report brings the whole issue of ecosystem services’ financing into the context of climate change, presenting how sensitivities and vulnerabilities might play out against shifting enabling conditions and novel financial needs. It builds on scientific findings about vulnerabilities and impacts of climate change in Africa to look into the future of how adaptation and loss and damage might be brought into the debate about the future of ecosystem management financing.