Mangrove Breakthrough: Financial Roadmap: how to mobilise capital for mangroves

Mangroves sequester carbon more effectively than any other terrestrial ecosystem on earth. These ‘blue forests’ defend our coastlines from waves and wind, supporting the resilience of some of the world’s most climate-vulnerable communities. For many in these communities, they are also a vital source of food and livelihoods.

Despite the extraordinary ecosystem services they provide, mangroves are under threat – half have already been lost. But an estimated $4 billion in investment between now and 2030 could secure their future.

The Global Mangrove Alliance in partnership with the UN Climate Champions and Systemiq have developed a new Financial Roadmap for the Mangrove in collaboration with the Financial Services Taskforce of the Sustainable Markets Initiative. This report offers in-depth analysis and detailed recommendations. It makes the case for using financial instruments in innovative and complementary ways; it also shows why creating the right enabling conditions will be key to their success. Taken together, these measures can mobilise private, public and philanthropic capital at speed and scale.

Mangroves provide critical ecosystem services that fundamentally underpin business models across multiple sectors, but this dependence also brings risks. Businesses are exposed to the potential loss of nature from extreme events, or longer-term shifts in the way that coastal and marine ecosystems function – or cease to function. As well as helping mitigate these risks, transitioning towards nature-positive business models can also unlock significant opportunities.

These risks and opportunities can result in a financial impact on a company by increasing or decreasing revenues or expenditures (income statement impacts) or by impacting assets, liabilities or capital (balance sheet impacts).

Mangrove Breakthrough: the crucial role of finance

The good news is that a new asset class of regenerative mangrove-positive business models is already emerging. Financing conservation areas will remain critical. But sustainable productive businesses also have a vital role to play in creating long-term, market-driven mechanisms to ensure mangroves are more valuable standing than destroyed.

Business models like blue carbon, sustainable aquaculture and fisheries, ecotourism, waste infrastructure, and technology enablers can generate real financial returns while building resilient coastal communities and creating a host of environmental benefits. The Mangrove Transition Curve – an investor tool – maps this diverse landscape of opportunities. Capital with different mandates and risk-return profiles will be required, and combining these sources of capital in “blended” mechanisms will be especially critical to mobilise investment for nascent business models and in emerging markets and developing economies (EMDEs).

Unlocking this opportunity at the speed and scale needed must tackle structural challenges and inefficiencies in deploying capital. Today, too little finance is flowing to mangroves. What capital there is comes predominantly from governments and philanthropic sources. But many EMDE governments – facing weak global growth, rising interest rates and increasing debt burdens – have limited fiscal space for investment in nature. Philanthropic capital is scarce, and development and climate finance has failed to meaningfully tackle the funding gap. Meanwhile private capital for mangrove conservation and restoration remains a drop in the ocean. Barriers to investment include a limited pipeline of projects, and real and perceived risks that raise the cost of capital and mean finance is unavailable, inaccessible, or unaffordable.

Despite these challenges, there are signs that the tide is turning for investment in mangroves. New markets and mechanisms, like blue carbon, are gaining ground, and natural capital investors are stepping up to capitalize on this opportunity. Innovative financial instruments that unlock new sources of investment in a sustainable ocean economy are building track record. At the same time, awareness is growing of mangroves as a low-cost solution to build resilience and reduce physical and financial risks for coastal communities.

“We can move further and faster”

Of the estimated $4 billion investment needed by 2030, around a third – $1.2 billion – could come from commercial sources.

Philanthropic, development and public finance will deliver the rest. Much of this commercial capital will need to be de-risked through blending with grant and concessional capital. Getting the sequencing right will also be critical: grant and concessional capital have an outsized role to play in the next few years.

“Unlocking capital at scale for mangroves will be critical…This Financial Roadmap offers a guiding hand. Its recommendations are both pragmatic and ambitious, identifying opportunities to convene diverse actors around a shared direction of travel and urgent joint priorities. I call on financial institutions, governments, and partners from NGOs, philanthropy, science, and local communities to collectively drive implementation of the Financial Roadmap.

H.E. Razan Khalifa Al Mubarak
UN Climate Change High-Level Champion for COP28