International Development Committee Call for Evidence:
The UK’s International Climate Finance - written evidence from
The Nature Conservancy

This submission of written evidence from The Nature Conservancy focuses on:

Section 1: the importance of nature within the UK’s future International Climate Finance (ICF)

Section 2: the need for improved accountability and transparency in ICF reporting

Section 3: the types of innovative finance mechanisms that the UK’s ICF should target to increase impact and value for money for UK taxpayers.

About TNC: The Nature Conservancy (TNC) is a global nonprofit organisation operating in over 80 countries to tackle the challenges of climate change, biodiversity loss, and sustainable development. TNC has 75 years of experience conserving nature, restoring biodiversity, building resilience, and mitigating climate change, working in partnership with national and sub-national governments, Indigenous Peoples and local communities, businesses and financial institutions. TNC is a science-based organisation, and a leader in innovative finance mechanisms to unlock large-scale, long-term finance from multiple sources (public, private, philanthropic) to protect and restore nature, tackle climate change and its impacts, and stimulate sustainable, climate-smart, nature-inclusive economies. 

TNC is proud to partner with the UK, which has long been a world leader in addressing the climate and ecological emergencies. We are pleased to bring our global expertise, experience, and partnerships to support the UK to deliver impact for our shared objectives for international climate and nature.

The below summarises the key points of the three sections of this written evidence.

Summary of responses and recommendations

• A reduction in the UK’s International Climate Finance (ICF) threatens to undermine other sustainable development and foreign policy objectives of the UK’s Overseas Development Assistance (ODA). The worsening impacts of the climate and biodiversity crises will reverse development, poverty reduction, education, and livelihood gains.
• The UK Government should maintain a prioritisation on climate and nature within the ODA budget, as outlined in the 2024 Spending Review, recognising the centrality of addressing the climate and nature crises to achieving other sustainable development goals.
• The next ICF round (ICF4), should retain the sub-pledge for nature-based solutions which was central to ICF3 (which committed £3bn of the total £11.6bn to nature, of which £1.5bn was for forests). A third of ICF4 should be committed to nature-based solutions to deliver impact and value for money in tackling climate change and biodiversity loss whilst supporting sustainable development (see page 2).
• ICF4 should allocate at least half of such a nature sub-pledge is again earmarked for forests, emulating the successful forests earmarks within all three previous ICF rounds. The nature programming should also prioritise grant finance and the direct protection and restoration of nature, including via supporting existing and expanded Protected Areas and direct financing for Indigenous Peoples and local communities.
• The next ICF round should be accompanied by a significant improvement in data transparency and accountability in order to facilitate more genuine international partnerships with countries in the Global South, and to enable greater accountability to UK taxpayers, who want to see government action on climate and nature (see page 6-7).
• It is not sufficient to only comply with obligations under the UNFCCC Paris Agreement: the UK also has obligations under the UN CBD and UN CCD, which ICF should address. Nature-based solutions can deliver outcomes across all three environmental conventions and the SDGs.
• ICF4 should continue the internationally agreed 50:50 balance between mitigation and adaptation. ICF4 should prioritise actions and investments that can deliver multiple outcomes for adaptation, mitigation, loss and damage, and sustainable development: investments in nature-based solutions such as forests, coral reefs, mangrove forests, and peatlands can often produce multiple co-benefits and value for money (see page 5).
• Within the ICF4 portfolio, the UK should proportionately recognise the importance of the ocean, with a new, strengthened and more targeted Blue Planet Fund.
• ICF4 should consider investments in innovative mechanisms which scale up the UK’s impact, such as blended finance to de-risk investments and mobilise private finance. The UK should invest in the Tropical Forest Forever Facility (TFFF) as a next generation finance mechanisms led by the Global South which shifts the climate finance paradigm towards investment and partnerships. However, any TFFF investment should be additional to ICF4 commitments (see page 7).

For more details, please contact Thomas Pickford: thomas.pickford@tnc.org

1. The Importance of Nature within ICF4

The Nature Conservancy applauds the UK’s world-leading commitment to allocate £3bn of the £11.6bn within ICF3 to nature. This commitment, which has inspired other donor countries, has been central the effectiveness and impact of ICF3 in addressing not only the climate crisis, but biodiversity loss and sustainable development.

We strongly recommend that the UK Government announces an ambitious ICF4 target for the coming 5 years well ahead of the March 2026 termination of the current ICF pledge, and that one third of ICF4 is committed to nature-based solutions.

The one third commitment to nature is critical because:

1. Nature is critical to the functioning of the global economy, including the UK’s economic, food and water security.
   With over half of the global economy highly or moderately dependent on nature, and ecosystem services valued at around $150trn annually to the global economy, [1] urgent investment in nature and nature-based solutions (NBS) is essential to safeguard the global and national UK economy.
   Around half of UK nature-related risks come from overseas, through supply chains and financial exposures. 56% of total upstream financial exposures have a high or very high dependence on ecosystem services. Exposures to international nature-related risks are most material in financial terms for the services and manufacturing sectors, with the highest risks associated with water.[2] 
   The UK imports 40% of its food,[3] leaving its food security and the stability of domestic food prices exposed to the impacts of climate and nature-shocks on other countries. We are already seeing this: the recent spikes in prices for cocoa, for instance, have been attributed to higher temperatures, extreme weather events fuelled by climate change, and loss of pollinators due to habitat loss.[4] Investing in nature restoration and protection on farms (such as agroforestry) and at the landscape level around farms can help bolster resilience to climate impacts and support improved productivity, safeguarding critical supply chains and reducing price volatility.
2. Biodiversity loss accelerates climate change and threatens to reverse development gains, whilst biodiversity restoration is an effective climate and development solution.
   1.2 billion people in tropical countries are highly dependent on nature for their basic needs.[5] Investing in sustainable use and management of nature is therefore critical for supporting improved livelihoods and avoiding livelihood losses due to climate and biodiversity loss impacts.
   A quarter of CO2 emissions are produced by humanity’s destruction of nature,[6] whilst conserving and restoring nature can provide around a third of the most cost-effective climate mitigation needed to keep temperatures to 1.5 degrees.[7] Three of the top five most cost-effective climate mitigation solutions are nature-based (ecosystem protection, ecosystem restoration and  improved farmland management).[8]
   Nature-based infrastructure such as wetlands, mangroves and forests, is on average up to 50% cheaper than traditional grey infrastructure to provide the same infrastructure service.[9] Not only is this highly cost-effective as development spending, but protecting and restoring nature can reduce the intensity of climate and weather-related hazards by 26%, thereby slashing adaptation/mitigation costs for developing countries by up to a quarter by 2030.[10]
3. Nature is a unifying issue across the political spectrum which can help ensure the long-term political sustainability of ICF4: funding nature polls as more popular with Labour, Conservative, Liberal Democrat, and Reform voters than international development or climate[11]

The following outlines why nature is critical in achieving various SDGs, and provides examples of how UK ICF is already helping to advance these outcomes.

Nature underpins the Sustainable Development Goals (SDGs). SDG1 (end poverty) requires action to prevent and reverse nature loss due to the importance of ecosystem services for economic activity in many developing countries. The UN estimates that climate change pushes 26 million people temporarily or permanently under the extreme poverty line every year, and that does not account for those already living in poverty.[12] The poorest 40% of the population experiences income losses relative to their wealth that are 70% higher than the losses of the average population as a result of climate change, including through extreme weather events, income losses from drought and failed harvests, and other impacts.[13] Addressing climate and nature loss together is therefore essential for tackling poverty. 

UK ICF is already working at the nexus of climate-nature-poverty reduction. TNC’s Darwin Initiative project in Indonesia supported the local community to develop new livelihood opportunities from restoring coastal mangroves which were endangered by unsustainable shrimp farming, but which were critical for coastal resilience and adaptation and supported carbon sequestration. By developing new livelihood opportunities and improving resilience to climate impacts, the project supported poverty reduction alongside habitat restoration and climate mitigation and adaptation.

SDG2 (zero hunger) is dependent on action to stop nature loss. All food systems are dependent on biodiversity and ecosystem services, and yet the food system is the primary direct driver of nature loss.[14] Food production is responsible for nearly one-third of greenhouse gas emissions, 90% of tropical deforestation, and 70% of water use.[15] This double materiality means that UK Government investment through ICF in the transition towards sustainable, climate-smart, nature-inclusive agriculture should be a priority. Despite agriculture’s vulnerability to climate change, its driving role in biodiversity loss and climate change, and the reliance of a third of the global population directly on agriculture for livelihoods,[16] only 4% of total climate finance is going towards agri-food systems.[17]

UK ICF managed by TNC has supported the development of state- and national-level bioeconomy plans in Brazil, a new model of production that rewards farmers and landowners for restoring and conserving nature alongside incentivising the development of nature-inclusive, climate-smart supply chains. This is supporting the shift towards sustainable production practices, biodiversity conservation, and reduced deforestation in the Amazon and other biomes of Brazil, while providing smallholders, local communities, and Indigenous Peoples with new, improved, resilient livelihood opportunities.

TNC recommends focusing a greater proportion of ICF4 on supporting the agricultural transition, through investments in sustainable agricultural practices, traceability and monitoring within supply chains, and developing innovative financing models such as payment for ecosystem services which support and reward farmers and ranchers in transitioning to regenerative food systems. UK ICF is also supporting initiatives such as Catalytic Capital for the Agricultural Transition (CCAT) in Brazil through P4F, and should continue to fund similar programmes.[18]

SG5 (gender equality) and SDG10 (reduced inequalities) are imperilled by lack of action to address the joint nature and climate crisis. The climate and nature crisis impacts the poorest and most vulnerable first and hardest, exacerbating inequality. Women and girls are also often most affected by ecosystem breakdown and climate impacts. For example, women farmers account for 60-80% of all food production in developing countries:[19] impacts on productivity from the loss of ecosystem services hits women's livelihoods more than others. Biodiversity loss affects access to education and gender equality as it often requires increased time spent by women and children to perform tasks such as valuable resources such as food, fuel, and water.

UK ICF has delivered good outcomes for women and marginalised groups, with a world-leading focus on gender equality. TNC’s Darwin Initiative project in Guatemala aims to build capacity of women within sustainable management of natural resources, develop women’s skills in sustainable coffee production, and provide wood-saving stoves to reduce time spent by women and girls in fuel collection, while delivering locally-led training on women’s rights and leadership, recognising women’s critical role in improved management of biodiversity.

SDG13 (specifically adaptation and resilience). The recent changes in ODA have drastically impacted adaptation and resilience progress well beyond what is captured in climate finance allocations. Development gains are so deeply interconnected with adaptive capacity and community resilience that sound investment in one, will yield returns in the other.

Nature-based solutions and ecosystem-based adaptation cost around 50% less than equivalent grey infrastructure while delivering the same outcomes. Nature-based infrastructure tends to be cheaper to maintain and more resilient to climate change. Furthermore, nature-based infrastructure also generates on average 28% more added value than built infrastructure, as it can bring environmental benefits like reducing air pollution or capturing and storing carbon dioxide from the atmosphere; social benefits like providing pleasant spaces to relax; or economic benefits like boosting tourism.[20]

While adaptation and loss and damage have long been paired, doing so has (at times) stifled progress on both agendas compared to mitigation. Loss and damage is a distinct challenge, and with the Fund for responding to Loss and Damage now operational and having launched the first call for proposals at COP30, we encourage UK ICF to fund these hard-won mechanisms and make them as effective as possible.

2. Improved accounting and transparency

The UK Government should improve its reporting and transparency within the new ICF4. This is important not only for building strong partnerships of trust and collaboration with partners in the Global South, but for maintaining the public’s confidence in how the Government allocates its international development budget. 

The methodology used to measure ICF4 should reverse the accounting changes made to ICF3 by the previous Government to build trust with, and demonstrate transparency to UK taxpayers and the Global South. In particular, the Government should reverse the change whereby 30% of all humanitarian spending in the poorest countries is automatically counted as climate finance, even though it may for instance all be emergency food aid. Such an approach made Afghanistan one of the largest single recipients of UK “climate finance” in 2022, despite receiving zero specific climate-related programming. UK taxpayers should be able to know that finance dedicated to climate and nature will deliver climate and nature outcomes, along with the development potential they bring. 

The Government should minimise the use of a ‘co-efficient approach’ in its ICF accounting, whereby it deems a certain percentage of various budget lines to automatically count as climate or nature finance, irrespective of the actual content of those programmes. Whilst the ICF3 pledge to spend £1.5bn of the £3bn nature pledge on forests is clearly traceable, it appears that a significant portion of the remainder has been accounted for via co-efficients. The IDC could request that the Government provide a list of the ODA programmes that contribute to the ICF3 £3bn pledge, and which of those programmes were designed with nature-based solutions as a primary outcome, and which are designed for other purposes.

To support improved transparency for ICF4, we recommend publishing an itemised list of all UK ICF spend (including the funding allocated under the nature and forests commitment) by programme and budget each calendar and financial year in a timely and accessible manner. The data should be accompanied by information denoting type of financial instrument (grant, concession loan etc.), type of support (mitigation, adaptation, loss and damage, biodiversity, cross-cutting), and spending ringfence eligibility (e.g. nature, forest, climate).

3. Investing in innovative new mechanisms alongside ODA

ICF3 has demonstrated large-scale positive impacts. The UK Government can achieve an even greater impact for climate, nature, people, development, and security through investing in innovative mechanisms that generate long-term outcomes, and which can leverage other sources of finance. Examples such as Partnerships for Forests (P4F) have demonstrated that public funding can leverage large sums of private finance: P4F boasts a leverage ratio of 1:11, mobilising £1.35bn in private finance. Innovative finance mechanisms such as blended finance facilities offer new ways to scale impact and mobilise funding from new sources. 

A new mechanism that promises long-term protection of forests is the Tropical Forests Forever Facility (TFFF), pioneered by Brazil. The TFFF is a next generation finance mechanism led by the Global South which shifts the climate finance paradigm towards partnerships and investment. It marks a transition away from aid to investment and public-private partnerships. The TFFF will generate long-term, reliable finance to reward tropical countries for protecting their forests. At COP30, the UK’s peers including Norway, Germany, Indonesia, and Brazil announced investments into the TFFF.

The UK helped to design the fund through technical assistance and funding from UK PACT but has not yet announced an investment into the TFFF. Alongside a new ICF4 commitment with a sub-pledge for nature, the UK Government should additionally invest in the TFFF. Doing so would attract private finance, provide opportunities for the City of London where TFFF bonds would be traded, and signal the UK’s commitment to its vision of moving towards genuine global partnerships and investment. 

Other innovative finance mechanisms include:

• Debt for nature and climate transactions: TNC’s Nature Bonds programme is expected to mobilise over their lifetime $1.92 billion for nature and climate, while reducing debt burdens and supporting sustainable development goals. In 2024, the Government of the Bahamas launched a $300 million Nature Bond project, replacing outstanding commercial debt with a lower-cost loan. The transaction is projected to unlock $124 million for marine conservation over 15 years, plus an estimated $8 million in conservation endowment returns, with a target of $20 million by 2039.[21]
• Public and philanthropic capital to de-risk investments and mobilise private finance: the UK has committed to support projects like CCAT through P4F. Similar approaches can be adapted for other ecosystems and finance mechanisms. TNC’s SolNatura+ impact investment fund in Colombia blends grants and private investment to unlock capital for nature-based adaptation projects, demonstrating how concessional finance can mobilize resources for climate resilience and biodiversity.
• Project Finance for Permanence: PFPs are long-term financing plans for nature at scale. They see governments, stakeholders, and rightsholders come together to identify biodiversity and climate priorities at a landscape scale (or larger) and the finance mechanisms to achieve sustainable management, protection, climate and development goals. Finance is then raised from public, philanthropic, and private sources at a single close (just as in infrastructure project financing) for long-term financing. Examples include Costa Rica, Peru, Colombia, Brazil, Bhutan, Canada, and Mongolia. The Mongolia PFP dedicated 15 years of conservation investment and unlocks $198m to deliver durable, community led conservation to 30% of Mongolia’s territory.[22]
• Direct finance for Indigenous Peoples, local communities and frontline groups: evidence shows that some of nature’s best stewards are local communities and Indigenous Peoples,[23] and yet many continue to face uncertain land tenure and the undermining of their rights and ways of life. Direct finance for Indigenous Peoples and local communities can support them to effectively manage nature for biodiversity and climate outcomes as well as to improve livelihoods, reduce poverty and maintain traditional ways of being and knowing. FCDO has shown positive progress in increasing direct finance through programmes such as AMCAT, but more can be done.
  TNC has successfully partnered with Indigenous communities in Mongolia and the Amazon to support community-led finance models, such as Village Savings & Loan Associations (VSLAs) in Mongolia to channel direct finance to local communities and support adaptation and sustainable livelihoods across millions of hectares; and through Enterprise Catalyst, an initiative that has empowered local stewards and ensured equitable benefit-sharing. 
• Country platforms: such initiatives see the development and enhancement of national coordination mechanisms and platforms to mobilise nature-positive climate finance, foster cross-sector collaboration, and translate country’s priorities for nature, climate and development into pipeline of bankable projects. They began with the Just Energy Transition Partnerships (JETPs), but there is now growing movement towards nature-inclusive climate country platforms, which would see donors coalesce around the self-identified needs of partner countries (potentially outlined in NDCs, NBSAPs, NAPs, and development plans), to mobilise long-term finance and technical assistance. The UK can lead such efforts through mechanisms like the Climate and Development Ministerial, and through its partnerships with nature-rich countries in the global south.[24]

8