Closing the Biodiversity Finance Gap: A Comprehensive Review of Financial Mechanisms

Biodiversity and the ecosystem services it provides are essential to the functioning of life on Earth. However, with biodiversity in a steep decline across the globe it is crucial to catalyze financing into a variety of solutions. This study set out to identify the diversity of financial mechanisms available to close the large biodiversity financing gap, which has been estimated at $711 billion USD per year. Nine different mechanisms were revealed ranging from well known Payments for Ecosystem Services (PES) down to lesser known resilience insurance schemes and wildlife bonds. These mechanisms differed in the way they were funded with almost 50% coming from philanthropic and public sources, leaving room to improve private financing. The mechanisms also commonly targeted the broad ecosystem level of biodiversity, with a notable lack of focus on species and genetic levels.

This study underscores the potential of each financial mechanism for supporting biodiversity, while also revealing several limitations. These included limitations in the design of the mechanism such as short time frames, lack of regulation and policy, and limited community inputs. Other limitations consisted of the lack of private finance in the biodiversity financing realm and a need for integration of all levels of biodiversity into these mechanisms. A potential solution using a combination of PES and resilience insurance is suggested to mitigate some of these challenges. Although there is room for future research in this emerging area of literature, this study lays out the current state of the field while contributing to the discourse surrounding innovative financing solutions to conserve biodiversity and crucial ecosystem services across the globe.