The Surge of Biodiversity Finance in Latin America

Latin America holds a crucial global position as it is home to over 40% of the world's biodiversity and nearly a third of its freshwater. The Amazon basin alone captures and stores billions of tons of carbon and generates atmospheric moisture that regulates continental weather patterns. In brief, if biodiversity collapses in the region, the effects will be global. Despite its immense value, this natural wealth is at risk, as deforestation, land degradation, and climate change are damaging these crucial ecosystems at an alarming and accelerating rate.

Historically, biodiversity has been treated as an externality, but not priced into financial decision-making. However, investors, regulators, and consumers are increasingly recognizing that biodiversity loss poses systemic risks to markets. But beyond risk mitigation lies a more compelling narrative: biodiversity as an investment opportunity. Nature-based solutions, such as reforestation, agroforestry, and sustainable agriculture, can deliver measurable returns while restoring ecosystems. In Latin America, where rural economies are deeply intertwined with natural resources, these solutions offer a pathway to inclusive, low-carbon development.

At Carbon Trust, we’ve seen firsthand how biodiversity is no longer a secondary concern, it is central to sustainable development. The challenge is not just ecological, but economic and financial. Biodiversity loss threatens food security, water availability, and the livelihoods of millions. Therefore, providing financing at scale is essential in efforts to curb organism loss. Unfortunately, the global biodiversity financing gap is estimated at hundreds of billions of dollars annually, and Latin America is no exception to this deficit.

Latin America is uniquely positioned to spearhead a new era of biodiversity finance, merging environmental protection with economic benefits. In recent years, we've witnessed a significant acceleration in the development and implementation of biodiversity finance mechanisms across the region. It is no longer solely about philanthropy or public funds, as the private sector and capital markets are beginning to mobilize resources on a larger scale, starting to slowly push biodiversity finance to a more relevant role, seeking to preserve this natural heritage and ensure long-term prosperity. No longer just a conservation issue, biodiversity is becoming a strategic lever for climate resilience, economic inclusion, and international investment. This context has stimulated financial innovation and collaboration, in search of more sustainable and scalable models that integrate nature, as a valuable asset, into investment decisions. 

This recent surge in biodiversity finance in Latin America could come from a confluence of factors:

1. Increased Awareness and Global Frameworks: A growing understanding that biodiversity loss is a systemic risk, comparable to climate change, has driven international commitments like the Kunming-Montreal Global Biodiversity Framework (COP15), which sets ambitious targets for finance mobilization.

2. Climate and Nature-Related Risks and Opportunities: The emergence of frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) is driving companies and investors to assess and disclose their dependencies on and impacts on nature. This transforms biodiversity from an environmental problem into a material consideration for financial risk and business opportunity.

3. Innovation in Financial Instruments: The success of green and social bonds has paved the way for more specific thematic instruments, such as biodiversity bonds and blue bonds. The sophistication of the sustainable finance market is enabling the structuring of products that channel capital directly towards positive nature outcomes.

4. Evolving Regulatory Framework: Countries like Brazil and Colombia have pioneered the integration of sustainability into financial regulation, and others like Mexico, with its sustainable taxonomy, are following suit. These regulations foster transparency and require financial institutions to consider environmental and social risks, including those related to biodiversity.

Within this context, the growth of biodiversity finance in Latin America has been evident on several fronts. Belize's debt-for-nature swap in 2021, which freed up US$180 million for marine conservation by refinancing US$553 million of its debt, was a landmark. More recently, in 2023, Ecuador executed an even larger debt-for-nature swap, using a "blue bond" to protect the Galapagos Marine Reserve. This operation generated over US$450 million for conservation over 18 years, highlighting these instruments' capacity to mobilize substantial funds for nature. 

In addition, an increasing number of green bonds in the region are explicitly incorporating biodiversity into their eligibility criteria. In Colombia, BBVA, with support and investment from IFC, issued the world's first biodiversity bond for US$70 million, with other entities like Banco Davivienda issuing similar instruments. In fact, very recently, the International Capital Market Association (ICMA) issued the “Sustainable Bonds for Nature: A Practitioner’s Guide,” which was created to help identify and report on nature-focused projects, making it easier to issue trustworthy nature-themed bonds. It also offers green bond issuers the choice to label their bonds as "Nature Bonds" if the funds are used solely for nature-related initiatives.

Investments in nature-based solutions are also gaining traction. This includes financing for regenerative agriculture, reforestation, coastal ecosystem restoration, and payments for environmental services (PES) programs. Countries like Costa Rica and Mexico have pioneered PES, and now mechanisms are sought to scale these initiatives, often through blended finance and private sector participation. The IDB's Natural Capital Lab, for instance, is incubating and accelerating finance solutions for conservation, landscape, regenerative agriculture, and marine ecosystems.

Complementarily, investment funds dedicated to biodiversity conservation and companies demonstrating measurable positive impact on nature are attracting capital. Initiatives like WWF's Landscape Finance Lab or The Nature Conservancy's NatureVest are structuring projects that draw impact investment.

Despite the momentum, biodiversity finance in Latin America faces several challenges. First, measurement remains complex. Unlike carbon, biodiversity lacks a single unit of account, standardized metrics for impact, and limited data availability. This complicates target-setting, reporting, and assurance, especially for private investors. Second, financial integrity is under scrutiny. Biodiversity credits and offset schemes risk becoming greenwashing tools unless backed by strong safeguards and science-based baselines. Third, inclusion is essential. Top-down finance must be balanced with local tailoring and appropriation, or risk repeating extractive models of the past. Finally, the perceived high risk of nature-based investments can deter private capital. To address this, regulatory frameworks and development finance institutions need to evolve to create enabling environments and risk mitigation instruments for biodiversity finance.

At Carbon Trust, we are helping to address these challenges, working with financial institutions across the region to integrate biodiversity into sustainable finance frameworks and programs, develop nature-related investment strategies, and build internal capacity. 

To realize the potential of biodiversity financing, we need bold leadership, innovative thinking, and cross-sector collaboration. We must move beyond pilot projects and isolated success stories to build a robust biodiversity finance ecosystem. Ultimately, biodiversity finance in Latin America is about more than just allocating more funds; it is about reshaping our relationship with nature, recognizing its intrinsic value, and building a resilient, prosperous future where nature thrives alongside human development.