Potential for Biodiversity Offsets as a Biodiversity Finance Mechanism in India

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Can CSR Provide Biodiversity Finance in India?

In the third edition of its Global Biodiversity Outlook, the Convention on Biological Diversity confirmed that the global community had failed to meet the 2010 Biodiversity Target.

 

The failure was attributed in large part to insufficient finances. The same year, parties to the convention met in Nagoya, Japan (COP 10) to agree upon renewed goals to stem the burgeoning tide of global biodiversity loss, which according to a European Commission study, is costing the world economy USD 740 billion per year in lost ecosystem services. At Nagoya, the parties set for themselves the more ambitious and far-reaching Aichi Biodiversity Targets to be achieved by 2020 (as a part of CBD’s Strategic Plan for Biodiversity adopted during COP-10 in Nagoya).

The 11th Conference of Parties (COP-11) held in Hyderabad inherited from COP 10, the unfinished business of mobilizing financial resources for the Aichi Biodiversity Targets. During the conference the international commitment to fund the targets were doubled from USD 6 billion to USD 12 billion – the amount pledged still fell short of the investment required by an entire order of magnitude.

Funding for biodiversity conservation comes broadly from two sources:

  1. International flows of financial resources including both the Official Development Assistance or ODA (i.e. official aid from developed to developing countries – this includes both bi-lateral transfers and multi-lateral transfers e.g. those channelized through GEF) and the non-official funding provided by international NGOs and foundations
  2. Domestic funding including government budgetary outlay of various departments and funding from private sector

In its review of the progress towards the Aichi Biodiversity Targets, the CBD maintains that the funding gap continues to be serious. Over the past few years, the growth in Biodiversity-related ODA and GEF funding for biodiversity focal area has remained sluggish and the doubling of funding is nowhere in sight.

biodiversity oda

gef biodiversity focal area

 

 

 

India has done pioneering work among the signatories in making a detailed assessment of its domestic funding for biodiversity. Although the MOEF budget for biodiversity has increased, the funds are clearly not enough to meet the national-level targets.

India Domestic Biodiversity Funding

Source: Progress Towards the Aichi Biodiversity Targets

The sheer magnitude of the funding gap, both internationally and nationally, calls for raising funds from all possible sources. Private sector funding for biodiversity conservation offers a promising opportunity to bridge this gap. Countries have been exploring feasible mechanisms to mobilize this hitherto untapped source. Referred to broadly as Innovative Financial Mechanisms, the ones that involve private sector funding include Biodiversity Offsets and Payment for Ecosystem Services.

In 2013, India became the first country to mandate Corporate Social Responsibility(CSR) through its new Companies Act. The provisions of the act require all companies of a certain net worth/turnover/net profits to set aside 2 per cent of the annual net profits for CSR activities – an estimated 3 billion USD of capital will be generated by the 16,000 companies that come under the ambit of the Act.

Among the nine areas outlined by the Indian Ministry of Corporate Affairs, on which the CSR budget can be spent, one is ‘Ensuring environmental sustainability, ecological balance, protections of flora and fauna…’ – thus there is a clear mandate from the government that corporates invest a part of their CSR kitty on biodiversity conservation. The Companies Act, 2013 encourages companies to focus their CSR efforts in the local regions of their operation. Thus biodiversity conservation as a sector for CSR intervention becomes relevant for companies operating in areas of high conservation value and those that have a high-biodiversity footprint.

One modus operandi for making CSR investments in biodiversity conservation is through individual company-level projects, something that a few companies have already been doing voluntarily. The other method of operationalizing this is for a group of companies to pool resources to reach a scale, an idea for which there are provisions in the Companies Act.

Whatever the modus operandi, companies are expected to have a CSR strategy in place, specifying their geographies and issues of intervention. With companies reporting on their 2 percent CSR targets for the first time this year, it would be interesting to see which companies have included biodiversity conservation in their CSR strategies and whether the CSR spend can make significant contribution to the much-needed biodiversity finance in India.

CSR Biodiversity

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