Why is GCF investing in EBA and restoration

Ecosystem protection and restoration are highly cost-effective climate change solutions, and affect different GCF result areas, as shown in the table below. Ecosystem protection, restoration, and sustainable management are needed to safeguard the extensive benefits that ecosystems provide, including climate related benefits.

Many interventions in the GCF Ecosystems & Ecosystem Services result area support ecosystem services across multiple categories that can be achieved simultaneously and thus generate a higher impact. For example, wetlands restoration will not only promote carbon storage and reduce greenhouse gas emissions, but also enhance livelihoods and regulate water supplies. Simultaneous promotion of multiple ecosystem services can be seen as the hallmark of high-impact activities.

In GCF, the vision for a paradigm shiftin ecosystems is to secure their resilience, functionality, and the maintenance of ecosystem services under conditions of climate change. This can be achieved through large-scale protection, restoration, and adaptive management along two paradigm shifting investment pathways:

• Ecosystem-based management of terrestrial and freshwater ecosystems: maintaining or enhancing ecosystem function at scales sufficiently large to be sustainable and facilitate evolutionary potential to adapt to climate change. Interventions are based on the principle of joint management of the human-environmental system aimed at maximising potential for ecosystem service provision and supporting livelihoods and socio-economic development. Sequestering carbon and protecting ecosystems requires diverse, resilient and healthy (functional) ecosystems that deliver a range of ecosystem services that support human activity and environmental function. Peatland ecosystems (whether in wetlands or forests), are of particular importance given their large carbon sequestration and storage functions, as well as the close connection between their carbon and water cycles.

• Ecosystem-based coastal and marine zone management: integrating ecosystem protection and restoration into planning and development to provide resilience to climate change and retain ecosystem services. This includes mitigation planning, adaptation planning, disaster risk reduction (DRR) and infrastructure development (entailing integration of both green and grey infrastructure).

In both pathways, global adaptation and mitigation opportunities require ecosystem protection, restoration, and management. Protection includes actions to maintain the integrity of natural ecosystems and the services they provide in the short-term (near-scale). Management refers to the sustainable use, protection and conservation of resources through work with communities and society to provide alternatives to their use. Restorationrelates to actions that restore degraded ecosystems so that their effectiveness in providing services is enhanced in the long-term (century-scale). Ecosystem management involves actions that maintain healthy, functioning ecosystems while allowing the use of its products and services by human society.

Although protection, management and restoration are essential for low-emission, climate-resilient ecosystems, on the scale of regional landscapes and seascapes, these should be integrated with sustainable management of forest, agricultural and urban pathways. There is a continuum of appropriate interventions, depending on location, and context-specific benefits and trade-offs. Understanding this continuum is important for developing cross-sectoral interventions, which have the greatest potential impact in terms of cost-effectiveness and social and environmental co-benefits.

How does this investment in the research and practical solutions help to advance restoration initiatives?

GCF support to developing countries intends to overcome critical barriers for restoration investment. Some of these barriers relate to limitations in research and practical solutions to provide evidence and concrete guidance for restoration upscaling. Some of these barriers are listed below:

• Lack or incomplete knowledge regarding the state of degraded ecosystems and inventories present a barrier to implementation and investment and creates lack of confidence that ecosystem-based solutions will achieve desired outcomes;
• Lack of flexibility and progress evaluation hinders learning and feedback loops and results in lack of knowledge sharing;
• Lack of common indicators for monitoring progress across different ecosystem types, including lack of robust carbon accounting methods for different ecosystem types.
• Lack of common monitoring/evaluation frameworks for a wide variety of ecosystems across the world.
• Generic and imprecise methods to properly value ecosystem services
• High upfront costs of maintenance and restoration of ecosystem services versus lower costs of ‘business-as-usual’ activities, because valuation is based on short-term costs and benefits, ignoring the true cost of all externalities (e.g. emissions, loss of ecosystem services, etc.).
• Protection and restoration actions are subject to environmental, social, gender, political, technical, and economic risks and uncertainties, which may be perceived as higher than for other types of investments

What next steps are necessary to accelerate efforts on restoration?

The role of the GCF in the Ecosystems and Ecosystem Services result area can be sharpened through a combination of two important dimensions: country priorities, and GCF comparative advantage. Until now, ecosystem loss and the resulting ecosystem services loss has been the result of incomplete knowledge regarding the true value of ecosystem services coupled with a lack of sufficient resources to bridge the funding for nature gap. Therefore, GCF will finance paradigm shifting projects and programmes that unlock knowledge and awareness, fosters innovation, and leverages resources for sustainable results.

Therefore, GCF funding in project and programme proposals in the Ecosystems and Ecosystem Services result area play a dual role: first, to provide financing unavailable from other sources that allows risk-taking, making such proposed interventions feasible; second, to allow for an expansion in the scope and scale of interventions to enable ecosystem-scale transformations, reaching a greater number of beneficiaries and facilitating an integrated, cross-sectoral approach. The approach should comprehensively address the diverse facets of climate change adaptation and resilience. GCF finance allows the adoption of cross-sectoral transformative pathways that address urgent climate hazards and mitigation opportunities at scale.

It is crucial to keep a mix of financial solutions for mechanisms for EbA and restoration. Many geographies and industries, countries and companies have a wide range of experience designing and implementing nature conservation and ecosystems management-related financial mechanisms and instruments. The menu of options needs to remain open and care should be taken in selecting a solution based on extensive assessment to understand the needs of climate finance for ecosystems-based approaches.

Domestic public budgets are increasingly made available for ecosystems and ecosystem services under climate change objectives. GCF funding can help to leverage these funds, together with Accredited Entities (AEs) and National Designated Authorities (NDAs), in ways that are sensitive to the capacity, needs and existing financial structures at the national level. Countries can use a number of fiscal policies such as taxes, fees, tariffs, royalties, charges, and subsidies to generate revenue to support biodiversity conservation and/or to disincentivise behaviour that may negatively impact biodiversity and ecosystems.

Private sector engagement: This is key to scaling-up investment, with corporate social responsibility initiatives and Payment for Environmental Services schemes being significant opportunities to engage the private sector in mitigation activities in developing countries. Whether used as a revenue generation or delivery mechanism, the value of PES schemes derives from the fact that they can be used to channel much needed funding to high-priority ecosystems and ecosystem services. Arrangements between private sector investors and developing countries could leverage investments or de-risk the investment of private sector parties. Barrier removal is critical for activities with high potential to conserve, restore and manage ecosystems and maintain or enhance ecosystem services.

Blended finance can create opportunities to scale up finance for ecosystems and ecosystem services, because it can help lift the apprehension that many impact investors still have for investments in the sector. The development of blended finance structures, through de-risking and aggregation, could stimulate the emergence of opportunities to finance landscape initiatives, within the context of achieving the climate goals.

We are interested in responding the following questions regarding the contribution of the GCF projects to the restoration agenda:

• Which are the ecosystems or Agricultural systems, or landscapes targeted? (e.g. forests, woodlands, watersheds, drylands, savannas, agricultural lands, river basins, coastal zones, mangroves, and wetlands, etc)
• What is the purpose of the restoration? (e.g. ecological restoration, increased connectivity, diversification of livelihoods, prevention of climate events, etc).
• Which are they top three ecosystem services associated with the restoration interventions?
• What are the key incentives for restoration?
• What approaches and methodologies are used for the restoration practices?
• What is the cost of restoration? (please include basic assumptions).
• What is the long-term financial strategy for the restoration practices?
• What is the role of the government in the restoration practices?
• What is the role of the private sector in the restoration practices?
• What is the monitoring strategy for the restoration practices?

Examples of GCF approved projects that can be featured ¹: