By Rabi Thapa

The crisis of biodiversity, if not as front of mind as climate change, has troubled our collective conscience since at least the United Nations Conference on Environment and Development in Rio in 1992. Over the past 50 years, average wildlife populations have shrunk by 73 percent, with an astonishing decline of 95 percent in Latin America and the Caribbean. A million species face extinction in the coming decades—a crisis of planetary proportions.

The Kunming-Montreal Global Biodiversity Framework (GBF), adopted in 2022 as part of the Convention on Biological Diversity (CBD), calls for the cooperation of both public and private finance to correct imbalances with nature. Specifically, Targets 15 and 19 of the GBF urge financiers to assess, disclose, and reduce negative impacts on biodiversity while mobilizing $200 billion annually for biodiversity initiatives. Targets 14  and 22 call for the mainstreaming of biodiversity in decision-making and including all stakeholders, with access to justice for communities. The GBF recognizes the pivotal role of international financial institutions (IFIs) in halting and reversing biodiversity loss and, consequently, the need for strong independent accountability mechanisms (IAMs) to ensure proper application of safeguards.

The World Bank agenda for biodiversity

The World Bank’s updated vision—“a world free of poverty on a livable planet”—places the environment at its heart. The Planet Vice-Presidency, incorporating the Environment Department, runs multiple biodiversity-focused programs, such as Progreen and Problue. This commitment has parallels in other IFIs. The European Investment Bank (EIB), for example, has dedicated over 50 percent of its financing to climate action and environmental sustainability.

However, the World Bank Environment Strategy 2012-2022 “recognizes that while there has been notable progress in reducing global poverty, there has been significantly less progress in managing the environment sustainably.” The World Bank, as the leading multilateral financier of biodiversity, has an active biodiversity portfolio of $3.7 billion for FY23 (up 31 percent from the year before). As Trustee of the Global Environment Facility (GEF), the Bank also manages the donor resources that make up its $5.33 billion 2022-2026 replenishment. But its own estimates state that $700 billion in annual financing is needed to meet GBF goals.

Meanwhile, the World Bank committed $117.5 billion in FY24, across all sectors. “When we’re talking about the Bank’s impact on biodiversity, it’s important to look cross sectorally,” says Ladd Connell, former Environment Director at the non-profit Bank Information Center (BIC). “There are two sectors that are really important. One is agriculture, because most biodiversity loss is coming from the expansion of the agricultural frontier. That’s where land use change is happening, and that’s where forests are being lost. And then the second one is physical infrastructure.” An approach paper from the World Bank’s Independent Evaluation Group identifies the crux of the matter: “[T]he public good nature of biodiversity means that economic actors do not bear all the costs of biodiversity loss they cause or receive all the benefits from protecting it, so the value of biodiversity is not adequately reflected in their choices.”

Safeguards aplenty, but implementation is challenging

Public sector projects must apply the 10 World Bank Environmental and Social Standards (ESS), which include ESS6, Biodiversity Conservation and Sustainable Management. The Performance Standards (PS) of the International Finance Corporation (IFC) apply to private sector projects, and include PS6, Biodiversity Conservation and Sustainable Management of Living Natural Resources. PS6 explicitly references the CBD as a guiding framework and is highly aligned with international best practice in biodiversity impact mitigation. Research has found that of 155 development banks, 42 percent have biodiversity-specific safeguards, of which 86 percent were harmonized with PS6—solid acknowledgement on the part of the sector that biodiversity costs should not be externalized.

Gregory Berry, Senior Policy Associate for the non-profit Accountability Counsel, says that IFI safeguards are insufficient: “The GBF requires that projects be aimed to not only mitigate but to protect and restore biodiversity. To be more nature positive in development, we would require a re-envisioning of what those safeguards are.” As the European Union's “climate bank” committed to the Paris Agreement and the European Green Deal, the EIB has made progress with its 2022 Environmental and Social Standards, in particular Standard 4 on Biodiversity and Ecosystems. Vasco Amaral Cunha, head of the EIB Complaints Mechanism, explains, “The Standard is aligned with the similar standards of other IFIs and, in some cases, it is even more stringent.” Standard 4 states: “The EIB supports projects that are compatible with maintaining the integrity of areas important for biodiversity as well as the core natural functions, processes, and resilience of ecosystems to halt and reverse biodiversity loss, increase biodiversity and ecosystem benefits and, where required, achieve a Net Positive Impact on biodiversity.”

As Branka Španiček, Finance and Biodiversity Strategic Area Lead for CEE Bankwatch Network, says, “Shifting from the concept of ‘no net loss of biodiversity’ to ‘halt and reverse biodiversity loss’ as a primary objective … is an important step”. However, she adds: “Safeguard policies are effective when national frameworks are well developed, biodiversity and human rights obligations are legally binding, and the responsible institutions are independent and strong. In many countries, the operational situation is very challenging. The more problematic a country is in terms of governance, the less it complies with safeguard policies. Governments often consider large investment projects strategic and try to bypass already ineffective national policy frameworks.”

Moreover, when an IFI finds that action is needed for compliance with its relevant biodiversity safeguard, it applies a mitigation hierarchy cascading down from avoidance, minimization, mitigation, and finally to compensation for or offsetting of impacts on biodiversity. Biodiversity offsetting, defined by the World Bank as “addi­tional conservation activities intended to com­pensate for the otherwise inevitable damage to species or ecosystems resulting from a develop­ment project”, is understood to be a last resort. Yet it is increasingly used in large infrastructure projects where it is challenging to mitigate biodiversity impacts in situ.

In 2020, the Inspection Panel reported that “almost 13,000 biodiversity offset projects in 37 countries have already been completed or are in the process of being implemented”. Offsetting is also included within the GBF and the framework of “nature credits” being adopted by the European Union. The Panel report concludes: “[O]ffsets can be an important mechanism for achieving biodiversity conservation but need to be well designed and adequately managed and funded to be able to achieve their objectives.” Evelyn Dietsche, Inspection Panel Member, adds: “Panel investigations have shown that local resource use and the context-specific institutional set-up and capacity need to be well understood to recognize potential risks to human security associated with managing protected natural resources.”  The Global Forest Coalition bluntly characterizes offsets as a “corporate social license to perpetuate biodiversity destruction”.

Community links with their biodiversity

In principle, IFIs are equipped to achieve the balance of nature-positive and rights-based development espoused by the GBF, as their standards include provisions to protect the rights of Indigenous Peoples and local communities (IPLCs). David Ainsworth, Senior External Affairs Officer at the GEF, the financial mechanism for implementing the CBD, says, “The GBF itself states that the protection of biodiversity is inseparable from respecting and guaranteeing the rights and needs of IPLCs. The overall framework for our work under the CBD is that we’re saving this biodiversity not for the sake of biodiversity itself as a primary purpose, but to provide the underpinnings for human wellbeing. They are intimately related.”

IPLCs themselves play a keystone role in achieving a balance with nature. “For a  number of these communities, biodiversity protection is at the heart of their culture, their identity, their wellbeing,” Ainsworth says. He explains that concerns about biodiversity and IPLCs are at the center of the GEF’s work, and are integrated from the project proposal stage onward: “Anything we do in our partnerships, we’re about accountability, transparency, and also meaningful stakeholder engagement. Doing this also brings in the knowledge and expertise of IPLCs, which supports their rights and also helps us to finetune project objectives and come up with with better results overall.”

Accountability Counsel’s Berry says that IPLCs “possess valuable on-the-ground knowledge about the local ecosystems to help manage and potentially improve biodiversity impacts. There’s a potential conflict between pursuing these ends and adversely impacting human rights, but there’s also an opportunity to more closely work with communities to make sure that the rights are respected and the greater goals are achieved.” Dietsche, of the Inspection Panel, agrees that the pursuit of biodiversity objectives can be at odds with the IFIs' do-no-harm principle, especially if projects involve protected areas that are governed, managed, and monetized in a way that can pose risks to IPLCs who rely on accessing natural resources for their livelihoods:  “Much remains to be learned about the role of IPLCs in the protection of biodiversity and their rights to resources, and great care needs to be taken when one-size-fits-all models are relied upon to promote benefit sharing, including as a means to compensate IPLCs for rights lost.”

This does not mean that the interests of IPLCs and nature are always congruent. Swapnil Chaudhari, Founder CEO of the IPLC venture builder GroundUp Conservation says, “Oversimplification and romanticizing the roles of IPLCs alone will not work in the long run. It’s not black and white, but rather a gray space that shifts within country and local context. Conservation must go hand in hand with the prevailing laws that include protections for wildlife and non-human beings. Given that IPLCs often lack legal executive powers, and that biodiversity conservation remains largely a state subject in much of the Global South, placing full responsibility on IPLCs, and relying solely on sentiment, is a risky proposition we cannot afford to take.”  

However, Berry maintains, “Conflict between biodiversity and the rights of communities most commonly arises when conservation measures are implemented strictly from a top-down approach. And so when the expertise of IPLCs is relied on at the concept phase, at the design phase, then there’s an opportunity to harmonize rights and biodiversity protection.”

A voice for the voiceless

As most IAM rules state that complaints are only eligible if they are submitted by project-affected community members, there is a risk that biodiversity concerns will be neglected. Berry says, “The eligibility requirement of most IAM policies that complaints come from people experiencing harm directly imposes an overly legalistic issue of standing that obstructs full accountability for biodiversity obligations and commitments.” Bankwatch’s Španiček contrasts the widespread recognition of the intrinsic value of biodiversity with this apparent loophole in IFI policy.

The obvious solution would be to allow IAMs to “self-initiate” complaints. Indeed, the EIB-CM retains this option: self-initiated inquiries (to be handled by the EIB-CM) can be initiated by specific request either by the EIB President, the Management Committee or the EIF Chief Executive, or by the initiative of the Inspector General (either on their own initiative or following a reasoned proposal by the head of the EIB-CM). Building on this, Connell, formerly with BIC, suggests, “There should be an opening up of the opportunity to file a complaint to any civil society organization on behalf of biodiversity.” Currently, this is also permissible under EIB regulations, even for impacts beyond the project area.

The IFC’s sustainability framework, now under review, has influenced $4.5 trillion in emerging market finance over the past decade. Civil society groups are calling for stronger implementation, particularly when investing via financial intermediaries. Referring to the “no-go zones” for damaging projects designated by the Asian Development Bank and the European Bank for Reconstruction and Development, Španiček says, “The most endangered ecosystems should be no-go areas for financing of extractive, industrial and other environmentally, and/or socially harmful activities.” 

A paradigm for all life on earth

The bigger picture may be less about retrofitting designs for development projects to abide by safeguards and more about how development is conceived. When IFIs lean into the knowledge of communities by soliciting their engagement from the very beginning, then development becomes a joint enterprise that is much more likely to succeed.

In truth, even where stakeholder engagement takes place early and in good faith, communities are likely to be presented with near-final project plans. But the World Bank may already have a tool that, if applied across its portfolio, could transform the way country teams approach project design. Natural capital accounting, as implemented by the World Bank’s Global Program for Sustainability (GPS), helps countries measure how natural resources contribute to, and are affected by, the economy—informing strategies that balance growth and ecosystem services. GPS works to help countries develop natural capital accounting methodology, and in FY24 supported 19 investment projects worth about $3.7 billion in 13 countries. Connell says, “GPS has high leverage in terms of follow-on impacts and I think that’s extremely important in terms of producing systemic change.”

Finally, conceptions of biodiversity and its conservation may need to shift. According to GroundUp, biodiversity isn’t just a list of endangered species; conservation should incorporate IPLC’s customary frameworks alongside national laws. Chaudhari recommends advocating for biodiversity at key points as though it were a stakeholder: “When agreements are being signed, we should ask, what is the quantifiable thing we are going to do for biodiversity? Once you create the space to start to ask the right questions and find local champions, you will see the conversations develop very quickly, and many solutions will emerge. But there has to be an initiator or a catalyst.”

For biodiversity, IPLCs may be the first port of call. Civil society too has a crucial role to play and, along with IAMs, needs to monitor the impact of public and private finance. If IFIs acknowledge and empower these stakeholders while fundamentally rethinking how they value biodiversity—especially as climate finance expands—nature will have found the champions it deserves.