Carlos Manuel Rodríguez’s passion for nature restoration and conservation is matched only by his pioneering spirit and professional commitment to the cause, starting with a succession of roles in his native Costa Rica and now as CEO and chairperson of the Global Environment Facility (GEF).
The GEF is a multilateral fund dedicated to combating biodiversity loss, climate change, and pollution, among other assaults on nature. Through a combination of grants, blended financing, and policy support, it assists developing countries in addressing their environmental priorities and complying with international environmental conventions. Over the past three decades, the GEF has provided more than $22 billion in financing and mobilized another $120 billion for more than 5,000 national and regional projects.1
In a conversation with McKinsey partner Duko Hopman, Rodríguez shared his perspectives on the Kunming-Montréal Global Biodiversity Framework (GBF), actions governments can take to implement it and achieve their targets, the future of biodiversity markets, and the responsibilities of the private sector in combating the climate crisis. The following is an edited version of their conversation.
McKinsey: What is the significance of the GBF?
Carlos Manuel Rodríguez: Once a decade or so, the parties at the Convention on Biological Diversity agree on a new set of goals.2 This past December in Montréal, the parties agreed on a set of 23 targets for 2030—a “Paris Agreement moment” of sorts—to change the curve on the negative effects of climate change and loss of biodiversity in genes, species, and ecosystems.
Among the targets is to restore—through a wide range of conservation initiatives and measures—30 percent of the planet’s oceans and land that have been degraded by human activity. We humans have already done a lot of good restoration on a small scale, but we have the technology, resources, and experience to do much more. Another target is recognizing the need for sustainable use of biodiversity in domesticated domains. The agricultural sector, for example, is responsible for managing biodiversity of species such as coffee, cocoa, and pineapples that have been domesticated for commercial purposes.
The GBF also encourages us to address market failures by recognizing the 20 or 30 essential environmental services—for example, air and water filtration, erosion prevention, and climate stabilization—that nature provides but that owners or stewards of intact ecosystems are currently not rewarded for. Through market incentives, owners can be encouraged to manage these resources in sustainable ways.
Phasing out investments, subsidies, and incentives that go against conservation goals is another target. Humans invest $500 billion annually in subsidizing economic activities that are harmful to biodiversity.3 The financial need to protect nature will decrease dramatically if we curtail those activities and reinvest in the transition to nature-positive.
Finally, the GBF sets a goal of securing a commitment by all countries to mobilize $200 billion in annual nature conservation funding by 2030 and for developed countries to increase annual funding to developing countries to $30 billion. Importantly, by defining the target in this way, the GBF underscores the need for North-to-South funding and the responsibility of countries to increase their domestic funding of nature. A cross-cutting element in the finance agreement states that all parties, including developing countries receiving international financial support, will more efficiently mobilize resources to protect nature, despite having many competing priorities.
McKinsey: Based on your work in Costa Rica, what advice do you have for government leaders as they craft policies to implement the GBF?
Carlos Manuel Rodríguez: All countries—without any exemptions—would need to invest more to revert climate change and protect nature. This is in their own interest: increased investments in nature yield outsize socioeconomic, biodiversity, and climate benefits. Yet they are often seen as trade-offs, for example, with the expansion of extractive industries.
Government institutions such as a ministry of environment, forest service, and national park service are effective in dealing with specific problems, but they tend to be very rigid. Costa Rica has found it necessary to adjust its institutions every ten years or so as the problems—and our understanding of them—evolve. The country’s current institutional framework helps to effectively deal with specific problems ranging from deforestation to dependency on oil in the energy sector; it also helps to eliminate the conflicting agendas and incoherence that can arise when multiple agencies with different visions manage natural resources.
Costa Rica also understood the need to create innovative financial mechanisms such as payments for environmental services to private industries—for example, the forest and land-use sectors. The country also confirmed through extensive analysis that it could not rely on public funds for private-sector incentives because they could disappear with, for example, a change in government or fiscal crisis.
Costa Rica innovated debt swaps for nature and sustainability endowment funds and was successful at preserving protected areas but was losing unprotected areas, such as forests, to revenue-generating uses, including cattle farming. The government addressed this market failure by imposing a tax on fossil-fuel consumption and earmarking the funds for payments for environmental services to landowners. Today, 400,000 hectares of forest have been protected through this payment scheme. Farmers receive $78 per hectare per year to protect the forest, which is higher than the $42 per year they could earn from cattle ranching. The opportunity cost of cattle ranching served as a benchmark to inform other sustainability initiatives.
Policy coherence—aligning public and private investments globally with sustainability goals and positive externalities—is a major issue. We, as GEF and World Bank Group, may need to do a better job of advising countries and sectors on the energy transition, with an emphasis on human needs, especially in developing countries. It is unfair to impose mitigation goals and objectives on poor countries without recognizing their particular situations and providing support.
McKinsey: Is there a role for biodiversity or nature credits to help countries implement the GBF?
Carlos Manuel Rodríguez: Yes, indeed. The international community and national governments would need to agree on the conditions for a market that trades in biodiversity certificates, using what we learned during the last 15 years with forest carbon credits. But first we would need to add biodiversity-positive credits into the forest carbon bank because there’s a lot of good biodiversity resulting from forest and land-use activities for which owners are not compensated appropriately. We can go even further by also using banked carbon credits to incentivize improvements in human development. Simultaneously, we may need to continue to exert pressure to fully implement Article 6 of the Paris Agreement, which governs global carbon markets.
All countries—without any exemptions—would need to invest more to revert climate change and protect nature.Carlos Manuel Rodríguez
McKinsey: What responsibilities fall to the private sector to help implement the GBF and restore nature?
Carlos Manuel Rodríguez: The private sector is only now starting to take a more active interest in nature and has a significant role to play in restoring balance. For example, the Taskforce on Naturerelated Financial Disclosures [TNFD] is developing a framework that will enable companies to integrate nature into decision making.
Companies can borrow lessons learned from their experiences with carbon emissions—for example, how to invest to offset emissions while keeping prices in check—and apply them to biodiversity. Unfortunately, carbon dioxide is easier to view at the corporate level than biodiversity, so the TNFD work is extremely important.
Companies can map incentives and subsidies to their strategies and goals, analyze economic data to understand the cost of taking action versus not, and—more broadly—create the right environment to generate solutions. I strongly believe that a healthy market with good regulations can create the conditions to bring in the private sector.
This is also the moment to reevaluate national accounting systems so that negative—and positive— externalities are reflected in calculations of GDP. Likewise, we could discuss a new tax paradigm. Our current tax systems frequently may encourage exactly the wrong behavior by taxing everything positive and productive that humans do on the planet but not taxing activities that result in negative externalities. We could, for example, lower some income and sales taxes and impose taxes on harmful activities.
Finally, banking regulations, standards, and norms could evolve. Already, some sectors feel that cheap finance sources are disappearing because banks are conscious of carbon emissions in their portfolios. But educated consumers, combined with educated banks, can be an efficient source of nature and climate progress. If the two sides are working together, then excessive regulation by government becomes unnecessary