• by Umar Manzoor Shah (nairobi & srinagar, india)
• Thursday, January 22, 2026
• Inter Press Service

NAIROBI & SRINAGAR, India, January 22 (IPS) - The world is pouring trillions of dollars each year into activities that destroy nature while investing only a fraction of that amount in protecting and restoring the ecosystems on which economies depend, according to a new United Nations report released on today  (January 22).

The State of Finance for Nature 2026 report by the United Nations Environment Programme finds that finance flows directly harmful to nature reached USD 7.3 trillion in 2023. By contrast, investment in nature-based solutions amounted to just USD 220 billion in the same year. The imbalance means that for every dollar invested in protecting nature, more than USD 30 is spent degrading it.

“Globally, finance flows continue to be heavily skewed toward negative activities, which threaten ecosystems, economies and human well-being,” the report titled Nature in the red. Powering the trillion dollar nature transition economy says. Nearly half of global economic output depends moderately or highly on nature, yet current financial systems continue to erode what the authors describe as humanity’s collective nature bank account.

Nathalie Olsen of the Climate Finance Unit at UNEP  and the report’s lead author said that the barriers to reforming environmentally harmful subsidies are primarily political and structural, rather than economic.

“Our report identifies several key challenges in this regard. On the political front, entrenched interests pose a significant obstacle. Many harmful subsidies benefit powerful industries, such as fossil fuels and industrial agriculture, which actively resist change,” she said in an exclusive interview with IPS.

She added subsidy reform often leads to increased costs for consumers or producers in the short term, making such reforms politically unpopular, even when the long-term benefits are clear. Furthermore, many subsidies are deeply embedded within tax codes and budget structures, making them difficult to isolate and reform.

According to Olsen, structural challenges also play a crucial role. She says that the subsidies tend to create path dependency, establishing business models and infrastructure investments that lock in nature-negative practices.

“For instance, free or underpriced water can lead to the depletion of aquifers for irrigation, while fossil fuel subsidies artificially lower energy costs across the economy, including for products like fertilizers. Despite international commitments, such as the Global Biodiversity Framework (GBF) Target 18—which aims to reduce harmful incentives by at least USD 500 billion per year—implementation remains weak due to a lack of political will.”

Economically, however, the case for reform is strong, according to Olsen.  She says that reforming harmful subsidies would free up government resources for nature-positive investments and reduce economic risks.

“Currently, the USD 2.4 trillion in public environmentally harmful subsidies far exceeds the USD 220 billion invested in Nature-based Solutions.

Successful reform is feasible.

As highlighted in our Nature Transition X-Curve framework, it requires just transition strategies to support workers and businesses during the shift, clear communication about long-term economic benefits, concurrent investment in nature-positive alternatives, and gender-responsive approaches to ensure equitable outcomes,” She said.

Olsen  says that notable examples, such as Costa Rica’s fossil fuel levy financing reforestation and Denmark’s energy taxes supporting the transition to wind energy, demonstrate that reform is politically achievable when accompanied by visible investment in sustainable alternatives.

The report warns that business as usual will deepen ecosystem degradation and expose economies to rising risks. It argues that governments, businesses, consumers and investors still have the power to redirect capital flows and unlock resilience, equity and long-term growth if they act quickly.

In 2023, public and private finance that directly damaged nature totaled USD 7.3 trillion. About USD 2.4 trillion came from public sources, mostly in the form of subsidies that hurt the environment. These included USD 1.1 trillion for fossil fuels, about USD 400 billion each for agriculture and water use, and significant support for transport, construction and fisheries.

Private finance made up the larger share, at about USD 4.9 trillion. A small number of high-impact sectors received the majority of these flows. Utilities alone accounted for around USD 1.6 trillion, followed by industrials at USD 1.4 trillion, energy at about USD 700 billion and basic materials, including fertilizers and agricultural inputs, at a similar level.

The report notes that public subsidies and private investment often reinforce each other, locking capital into nature-negative sectors. Below-market prices for water, energy and other government-provided goods encourage overuse of natural resources and increase financial risks over time.

Against this backdrop, finance for nature-based solutions remains limited. Total global spending on nature-based solutions reached USD 220 billion in 2023, a modest five percent increase from the previous year. Public finance dominated, accounting for about USD 197 billion, or roughly 90 percent of the total.

“Our Nature Transition X-Curve framework shows these tools work best when deployed together—combining regulatory “push” (disclosure, subsidy phase-out) with financial “pull” (de-risking, incentives). Over 730 organizations representing $22.4 trillion in assets have adopted TNFD, showing willingness exists when clear frameworks are provided. The challenge isn’t lack of tools—it’s political will to deploy them at scale,” Olsen said.

Public domestic expenditure was the single largest source of funding, reaching USD 190 billion in 2023, as per the report. Spending on biodiversity and landscape protection grew by 11 percent, although support for agriculture, forestry and fisheries declined. Even so, public spending on nature-based solutions remains small compared to the more than USD 2 trillion governments spend each year on environmentally harmful subsidies.

Official Development Finance targeted at nature-based solutions reached USD 6.8 billion in 2023. This represented a 22 percent increase from 2022 and a 55 percent rise compared to 2015. The report describes development finance as a critical enabler for scaling nature-based solutions in developing countries, while warning that geopolitical pressures could constrain future budgets.

Private finance for nature-based solutions reached USD 23.4 billion in 2023. Although small in absolute terms, the report says these flows show positive momentum. Biodiversity offsets channelled more than USD 7 billion, certified commodity supply chains attracted over USD 4 billion, and biodiversity-related bonds and funds mobilized around USD 5 billion. Nature-based carbon markets accounted for about USD 1.3 billion.

“With the right enabling environment, standards and risk-sharing instruments, private capital could scale rapidly and become a game changer in closing the nature-based solutions finance gap,” the report says.

To meet global commitments under the three Rio Conventions on climate change, biodiversity, and land degradation, the report estimates that annual investment in nature-based solutions must rise to USD 571 billion by 2030. This would require a two-and-a-half-fold increase from current levels. The report projects that annual investment needs will reach approximately USD 771 billion by 2050.

The report frames investment in nature-based solutions as a form of essential maintenance for natural infrastructure. It highlights evidence that restoring degraded land can yield returns of between USD 7 and 30 for every dollar invested, if ecosystem services such as water regulation, soil fertility and disaster risk reduction are taken into account.

A review cited in the report found that in 65 percent of disaster risk reduction projects, nature-based solutions were more effective at reducing hazards than traditional engineering approaches. Floodable wetlands and permeable pavements in cities are two examples. They soak up stormwater and take some of the stress off drainage systems.

Despite these benefits, the authors contend that increasing investments in nature won’t suffice unless they eliminate harmful finance. Nature-negative finance, they say, remains the single biggest obstacle to a transition toward nature-positive outcomes.

The report introduces a new analytical framework called the Nature Transition X curve. The framework illustrates the dual challenge facing policymakers and investors. On one side, harmful activities and finance flows must be reduced and phased out. On the other hand, investment in nature-based solutions and other nature-positive activities must be scaled up rapidly.

Olsen said that the X-Curve is a diagnostic tool helping policymakers identify context-specific leverage points, sequence reforms to build political support, and ensure coherence between phasing out harmful finance and scaling up nature-positive alternatives.

“This is not just an environmental agenda but an economic transformation,” the report says. Redirecting harmful subsidies, integrating nature into fiscal frameworks and mobilizing private finance are described as central to building resilient and inclusive economies.

Olsen told IPS news that there is a need for a “Big Nature Turnaround” that repurposes trillions of dollars currently flowing into destructive activities. Key priorities include reforming environmentally harmful subsidies, aligning national budgets with biodiversity and climate targets, and mandating disclosure of nature-related risks and impacts.

More than 730 organizations have now adopted the Taskforce on Nature-related Financial Disclosures framework, representing assets under management worth USD 22.4 trillion. According to the report, this growing awareness of nature-related financial risks is starting to influence corporate and investment decisions, although progress remains uneven.

The report also points to rising legal and regulatory pressures. In some jurisdictions, courts are increasingly questioning whether financial leaders are meeting their fiduciary duties if they ignore environmental risks. At the same time, the authors warn that regulatory rollbacks in other regions could create uncertainty and delay action.

While the scale of the challenge is daunting, the report strikes a cautiously optimistic tone. Better data, a clearer framework, and growing awareness are creating conditions for faster action. The transition to a nature-positive economy, the authors argue, could unlock a trillion-dollar nature transition economy across sectors ranging from food and agriculture to construction, energy and urban infrastructure.

“Turning the wheel towards nature-positive finance is essential,” the report concludes. Without a decisive shift in how money flows through the global economy, the gap between what nature needs and what it receives will continue to widen, with profound consequences for ecosystems, livelihoods and long-term economic stability.

IPS UN Bureau Report

© Inter Press Service (20260122090419) — All Rights Reserved. Original source: Inter Press Service

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