This Issue Brief repositions “payments for environmental services” schemes within a broader approach of co-investment for sustainable development. After examining the gap in investments for development in low income and lower middle-income countries, and the role and place of biodiversity in their development pathways, the paper discusses the nature of services provided by biodiversity and how they can be linked to payments, before looking at other financial sources that could contribute to a co-investment approach.

Key Messages

  • Investment needs are massive in least developed and lower middle-income countries, with a particularly acute investment gap for sustainable development in rural areas and in the land sector. Addressing this gap is essential to capture value added in the food and biomass sector, as well as to protect biodiversity as a production factor and a life support system.The National Biodiversity Finance Plans developed in the CBD framework are relevant tools to present these needs as an investment plan.
  • Maintaining natural capital intact in these countries is often presented as a case for payments for ecosystem services, although it would be more relevant to present it as justification for co-investment for sustainable development with these countries. Except for carbon capture, which is a global issue, ecosystem services are mostly local or national, often concerning water quantity or quality regulation. Their provision should not be the result of a “no-development” option that would need compensation, but the result of the investment in policies and measures that preserve biodiversity as an asset for the sustainable development pathway of the territories (productive investments as well as investment in institutions and rights for local communities and indigenous people).
  • National schemes for payment for environmental services (PES, see distinction with ecosystem services below) could play a role in attracting finance to invest in nature-positive and people-positive development pathways in these areas, but it is worth noting that they are intrinsically linked to national public policies and public investment flows, from international and national sources, hence the necessary co-investment framing.
  • A co-investment approach for sustainable development opens the way to other complementary sources, including national and international fiscal instruments, de-risking instruments, in addition to positive biodiversity impact or climate impact certificates (a more suitable formulation than “carbon” or “biodiversity credits”), that can be claimed by companies as a supplement (and not a substitute) to their efforts to reduce their own carbon or biodiversity footprint.
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