Bridging the financing gap for biodiversity in emerging and developing markets – A case study on Brazil

Abstract

Biodiversity loss is one of the greatest long term threats to humanity with 55% of the global GDP being directly linked to nature and its essential services. Despite its critical importance, a substantial biodiversity financing gap persists. The public sector provides most funding, but it is insufficient to close the gap alone, highlighting the need for private sector investment. Blended finance, through combining public, philanthropic sources, serves as a catalytic mechanism to mobilize private capital through de-risking and improving risk-return profiles. Blended finance requires a clear understanding of context-specific market failures to be applied effectively. Therefore, through a five-week in-depth case study in Brazil, we identified barriers and persistent market failures for private sector participation in biodiversity conservation and restoration. We identify weak collective action, asymmetric information, institutional failure, country risk, and misalignment between private investors and biodiversity projects. Taking this into consideration our thesis explores the Environmental Kuznets Curve (EKC) and finds a correlation where the early stage of economic growth leads to biodiversity degradation in emerging and developing countries, further reinforcing the need for innovative financial mechanisms.