The Paulson Institute Hosts Green Finance Event at COP 28

On December 4, 2023, in Dubai, UAE, the Paulson Institute, in collaboration with the Biosphere 3 Solutions Pavilion, co-hosted a special event titled Green Finance to Tackle the Dual Crises of Climate Change and Biodiversity. The event explored the challenges and opportunities of climate change and biodiversity financing by highlighting examples of sustainable businesses and private investment models. It also showcased new opportunities to use green finance in addressing the twin crises of climate change and biodiversity loss.

On this day, the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28) entered its fifth thematic day focused on "Finance, Trade, Gender Equality, and Accountability." The goal of this day was to build consensus among the Parties to negotiate diverse financial solutions that integrate resources from both the public and private sectors, close the climate finance gap, and accelerate action on climate change.

Henry M. Paulson Jr., Founder and Chairman of the Paulson Institute, delivered the opening address through a recorded video. In the speech, he underscored the severity of global climate change and biodiversity loss and the interconnections between the two. He called for strengthened synergistic governance at three levels:

1. The negotiation process of international conventions on climate and biodiversity,
2. National policymaking, and
3. Engagement of sub-national governments to capitalize on nature-based climate solutions and the unique position of cities in addressing climate and biodiversity challenges in an integrated way.

He stressed the need to fully unleash the private sector's potential in green financing and use effective regulatory policies and incentive mechanisms to guide private capital to invest more in areas and projects that reduce greenhouse gas emissions and protect and restore biodiversity. He also urged enhanced communication between businesses and governments to improve incentive mechanisms and regulatory frameworks that help align investment decisions with the climate and biodiversity goals while maintaining healthy corporate profitability.

Rose Niu, Chief Conservation Officer of the Paulson Institute, moderated the panel discussion on Maximizing Synergies in Tackling Climate Change and the Biodiversity Crisis. She highlighted the acute shortage of funding to address the interconnected challenges of biodiversity loss, climate change, and environmental pollution. Taking biodiversity conservation as an example, she cited a key finding from the Financing Nature report released by the Paulson Institute and its partners, i.e., biodiversity conservation and restoration globally faces an average annual funding gap of $711 billion. She emphasized the need for a two-pronged approach to closing this gap, which involves reducing the harm to biodiversity caused by existing economic activities and increasing funding for biodiversity conservation and restoration. She called for governments to play a critical role in this effort by reducing biodiversity-harmful subsidies, strengthening investment risk management in financial institutions, channeling private sector investment towards ecological conservation through effective incentive mechanisms, and creating an enabling policy environment for the development and application of innovative market-based financing mechanisms, such as nature-based climate solutions and biodiversity credit markets.

Erik Berglof, Chief Economist of the Asian Infrastructure Investment Bank (AIIB), reiterated the importance of valuing nature, protecting and wisely utilizing various ecosystem services afforded by nature, and avoiding the past pitfalls of wantonly exploiting and destroying nature. He pointed out that developing countries are generally more exposed to the impacts of climate change and other natural disasters, which makes addressing climate change a more pressing challenge for them. He urged the international community, particularly multilateral development banks, to step up support for these countries in financing and technological innovation because such support is critical to helping these countries better integrate the value of nature in their economic development decisions, explore and implement cost-effective nature-based climate solutions, and transition to a low-carbon and nature-positive growth model.

Fang Li, Country Director of the World Resources Institute’s (WRI) China Office, highlighted the need for an effective collaborative mechanism to pool resources from all parties to galvanize action to tackle climate and biodiversity crises. She shared the rationale behind and progress of the Partnership of Biodiversity and Finance (PBF), a global joint initiative co-launched by WRI, the Paulson Institute, and other partners. This initiative aims to help financial institutions incorporate biodiversity conservation into their investment decisions and narrow the funding gap for biodiversity conservation by pooling resources and leveraging key stakeholders' strengths, creating a productive collaboration platform, and sharing best practices.

Bai Yunwen, Vice President of the Institute of Finance and Sustainability, explained businesses’ dependency on ecosystems' products and services and their impacts on nature. As such, if not managed effectively, the climate and biodiversity risks faced by businesses can result in financial risks. She stressed the need for financial institutions to reduce their investments in projects that harm biodiversity and financial regulators’ responsibility to help facilitate nature-positive investments by optimizing incentive mechanisms, encouraging financial product innovation, and improving nature and climate-related financial disclosure.

Li Nuyun, President of the Chinese Institute of Green Carbon, discussed the limitations of existing carbon credit products and carbon markets that have not effectively considered associated biodiversity benefits. She shared her institute’s current effort to develop the Green Voluntary Emission Reduction (GVER) Standard System, a voluntary emission reduction system informed by VCS and designed to provide high-quality carbon credit products to meet the needs of businesses’ ESG goals and general public’s emission reduction actions. According to Li, what differentiates GVER from other voluntary carbon standards is its focus on supporting biodiversity conservation, promoting sustainable development, and improving income generation in local communities.

The event also featured a memorable dialogue on pursuing the goal of global net zero emission between Wang Shi, Founder of Vanke Group and DeepRock, and Simon Zadek, former Co-Director of the UNEP's Inquiry into the Design of a Sustainable Financial System.

In addition, business leaders, former government officials, and climate finance experts shared their insights at the event.