Sri Lanka, a biodiversity hotspot
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Sustainable Development
Not many Sri Lankans have heard of Sri Lanka being a “biodiversity hotspot” on earth. The entire world has only 36 locations of biodiversity hotspots, according to Conservation International. It is, anyway, not a term to make us proud of, but frightened.
Biodiversity hotspots are exceptionally rich and unique in terms of their “life of species” that depend on biological diversity in the location, which have come under severe threat. Conservation International has introduced two criteria to classify such biodiversity hotspots in the world:
- First, it should be a geographical location for at least 1500 endemic vascular species, which is more than 0.5 per cent of the world’s total.
- Second, already there should have been a loss of over 70 per cent of the original native habitat of such endemic species in that location.
Sri Lanka qualifies under both. All the biodiversity hotspots in the world confine to an area size as small as 2.5 per cent of the earth’s land surface. Even though it looks too small by the geographical scale, surprisingly such small locations support over 50 per cent of the world’s endemic plant species, including endemic bird, mammal, reptile, and amphibian species.
Land or nature?
The issue that I am focusing on today is not about environmental conservation. It is much more fundamental for economics, finance, business competitiveness and market access than for environmental concerns.
On principle, economics deals with “creating value” in the production process, by making use of the stocks of resources – labour, capital, natural resources and technology. For a nation, all are available in “stocks” including technology which is also a “stock of knowledge” to transform inputs into outputs.
Although we have reduced the stock of natural resources into a term “land” in our textbook economics, today it is widely recognised that this particular productive factor means a given stock of natural resources. Biological diversity or biodiversity is the variation in genes, species and ecosystems which provide resources and services that are essential to mankind – climate, air, water, soil, and species.
Thus the stock of natural resources gets depleted and biodiversity is affected by human activities through their direct use in the production process or through indirect impact on them as negative externalities generated by other activities. Accordingly, human activities and economic development have been increasingly affecting biodiversity.
Someone else’s problem
Traditionally the focus on biodiversity has been a secondary issue outside their mainstream decision-making for both the government and the private sector. For the government, it was an additional social and environmental problem that separate government institutions must deal with. For the private sector, it was an additional cost component arising from regulatory barriers.
Historically it was difficult for the governments to acknowledge biodiversity as an integral part of the developmental achievements and human well-being. Similarly, for the private sector too it was difficult to accommodate biodiversity as an integral part of their performance and profits. Thus, it appears that the damage to biodiversity continued to exceed its recovery and restoration in the world. The result has been a widening financing gap, both globally and locally.
As per the Biodiversity Finance Initiative (BIOFIN) of the UNDP, the entire world has been spending no less than US$143 billion on biodiversity every year. But this is only about 17 per cent of the need, which is far below the estimated $824 billion needed to protect and restore nature.
This means the stock of natural resources on the planet has been depleting every year. And it has been more dangerously depleting in the so-called biodiversity hotspot regions than elsewhere. The world must finance the financing gap and slow down the depletion of its stock of natural resources.
UNDP Initiative
Over the last few decades, the world became increasingly sensitive to the issue of biodiversity loss and the depletion of the stock of natural resources. While the UN’s Sustainable Development Goals (SDGs) incorporated three main sustainability goals related to climate change, life below water and life on land, their many other goals indirectly linked to the conservation and sustainable use of natural resources.
Many multi-lateral and international non-governmental organisations, including the UN agencies, World Bank and the ADB intensified their focus on the issue. The governments ratified the international conventions and declared commitment to incorporate such actions into their national policies. Globally, consumers too increasingly began to demand for products which adhere to sustainable standards and such elements became an integral part of global exports, particularly to the Western markets.
In this context, the BIOFIN was launched by the UNDP in 2012 in response to the urgent global need to divert more finance not only from the government but from “all possible” sources towards global and national biodiversity goals. Moreover, this new approach to biodiversity financing is considered as an integral part of national policies, business activities and economic progress.
Such spending is no longer a “spending, but investment which generates “returns to investment” as well. Therefore, “investing in biodiversity” is no longer an additional cost, but part of the core business which improves their competitiveness in global markets, resulting in higher profit margin. Thus, investing in biodiversity actually supports job creation and income growth by enhancing growth prospects in a sustainable manner.
Innovative financing
With the objective of closing the biodiversity financing gaps in these countries, the BIOFIN programme commenced identifying and implementing innovative financing solutions, which fall under four types of resource mobilisation strategies: The first is avoiding future environmental expenditure through current investments in biodiversity. This strategy reveals that if sustainable elements are an inbuilt component in business plans and economic activities, then there won’t be a future need for additional spending on environmental recovery.
The second is delivering better outcomes through improved effectiveness, efficiency and synergies. This strategy is aimed at the outcome of an economic activity which is designed to deliver with an improved sustainability outlook. The third is re-aligning current spending either to reduce negative impacts on biodiversity or to improve positive outcomes.
This strategy is about fine-tuning the already existing expenditure on businesses and economic activities. While all these three strategies are concerned with innovative approaches to finance solutions, the fourth strategy is about actual mobilisation of finance from new sources beyond the government budget.
Business case for everyone
It is no longer an additional cost driver for the government to bear the burden of spending on the environment, but a business case for all stakeholders – the government, corporate sector, communities, and the nation as a whole. For a government often faced with narrow budgetary space, investment in biodiversity means bridging the gap between desirability and feasibility. Innovative finance solutions enable the government to ease its capacity constraint.
For the corporate sector enhanced investment in biodiversity means improving their competitiveness in global markets. Investment in biodiversity as part of the core business enables the firms to comply with international environmental standards and to improve the competitive market access. For the community, investing in biodiversity means enhancing people’s access to pleasant living and healthy life for themselves as well as for their children and children’s children so that it allows people to enjoy their pleasant living and healthy life by conserving and sharing nature.
For the nation as a whole, investing in biodiversity means the conservation and sustainable use of the stock of natural resources and ecosystems. It reduces the depletion and compensates for depreciation enhancing for the present and sustaining for the future.
Ten years later, the BIOFIN is now implemented in 40 countries worldwide, including Sri Lanka, while the number of countries is further expected to be more than double in the coming years. The Asian countries with BIOFIN presence are China from East Asia, Malaysia, Indonesia, Philippines, Thailand, Vietnam, and Cambodia from Southeast Asia, and India, Nepal, Bhutan and Sri Lanka from South Asia.
Investments in biodiversity improves business prospects for the private sector, reduces the financing burden of the government, and enhances growth performance of the country, while securing sustainable future for people and the planet.
(The writer is a former Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).
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