Conclusions and Recommendations for International Funding Institutions

More financing should be directed to biodiversity conservation because:

The following four points summarize the conclusions and recommendations to enhance biodiversity financing:

a) Concessional Funding

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Because the primary benefits of biological diversity are global in nature, from the viewpoint of equity the whole global community and not just the people in Latin America should pay for conservation. Hence the demand that concessional resources should be made available for biodiversity projects in Latin America with international funding.

This could be done either through grants or special credit programs. Grants are of vital importance to biodiversity conservation projects, notably during the design and start-up phases.

Although the bulk of international nonreimbursable funds are currently coming from the GEF, the European Union, bilateral assistance programs, and NGOs, loan resources are also used, especially in financing conservation and mitigation measures as part of larger development programs financed by multilateral banks. One possibility for facilitating grant funding would be to program GEF financing jointly with the regional and subregional development banks in Latin America and the Caribbean.

More widespread use of various guarantee mechanisms, specifically serving the needs of biodiversity-based businesses should be offered through government programs and multilateral institutions. They can improve access to credit and facilitate the formation of venture capital funds in the region.

b) Multiple Sources for Biodiversity Financing

For the purpose of reducing risk, several sources of funding should be considered for biodiversity conservation. International financial institutions could seek to play a more active role as catalysts or facilitators. For example, the IDB is launching a study to analyze what its future action should be in the area of environmental funds (IDB, 1998). Annex 4 shows the potential sources of public funding for Colombia’s environmental programs for 1998-2007.

Several new mechanisms are being developed in the region, but they may be financially inefficient (because of the high costs of raising funds and other reasons) and insufficient. For that reason, traditional sources, such as government budget funding, should be maintained in order to secure resources for conservation purposes. Some of the government funds may be collected through self-financing mechanisms such as entrance fees, user charges, royalties, taxes on property rights, various kinds of leases, licenses, and bonds. Securitization is a promising mechanism for packaging small environmentally friendly investments in order to attract financing from international capital markets.

Market-based instruments such as credit and tax incentives, deposit refund schemes, and tradable permits are being established in Latin American and the Caribbean as potential sources of stand-alone financing, or counterpart funding for externally supported biodiversity projects and should be actively used by governments and financial institutions.

c) “Greening” of Banking Practices

In order to mainstream biodiversity considerations into their regular operations, the international financing agencies should aim to proactively “green” their own public and private sector operations through the adoption of a regional version of Brazil’s Green Protocol (IDB, 1997; NC-IUCN and TransGlobal, 1998). The mainstreaming should incorporate more favorable loan conditionalities and guarantees for financial operations that promote sustainability and compliance with the objectives of the CBD.

Subsequently, biodiversity could be mainstreamed into public and private banking institutions throughout the countries in the region. Conditionalities to financial-sector loans by the international banks could be one vehicle in this direction. However, environmental standards should not be forced by the international banks upon their intermediaries haphazardly. They should be applied carefully. There is the danger that local banks will penalize themselves or their clients by requirements that they might not be able to put into practice, thus causing less and not more financing for biodiversity conservation.

Training of bankers is needed. The financial institutions in Latin America would need to be strengthened, for example, in the following areas: the preparation of manuals for bankers relating to “green” investments, training through modules in each participating bank, and conferences on eco-business addressed to entrepreneurs (Salazar, 1998).

d) Building Partnerships

Strategic alliances and partnerships between different stakeholders such as NGOs, indigenous communities, the private sector, and civil society as a whole should be strengthened. Seminars, such as the one on Sustainable Development in Latin America and the Caribbean: Policies, Programs, and Financing organized by the OAS, at which the current paper was presented in October 1998, may help in the process of cooperation for the benefit of the Latin American and the Caribbean countries. Improved coordination between funding agencies at the country level, led by the recipient countries, would avoid duplication and facilitate the dissemination of information. Moreover, if done effectively, it would promote complimentarity. Partnerships are needed also to adjust the existing instruments and develop new ones suited to the dynamic situation of the region and the specific circumstances of the individual countries.