Pakistan is accustomed to debating the cost of climate change. Floods destroy infrastructure, droughts reduce agricultural output and heatwaves threaten lives and productivity. Yet there is another economic crisis unfolding more quietly: the erosion of the natural systems that make economic activity possible in the first place. Fertile soils, rivers, forests, wetlands, pollinators and mangroves are often treated as free gifts of nature, until they disappear and their economic value suddenly becomes visible. This is where biodiversity financing matters. It is the mobilisation and allocation of public, private, and blended capital towards the conservation, restoration, and sustainable use of ecosystems. More importantly, it represents a shift in thinking: from treating nature as an environmental expense to recognising it as productive infrastructure and a financial asset. Globally, this transition is increasingly guided by the Kunming–Montreal Global Biodiversity Framework, the Taskforce on Nature-related Financial Disclosures (TNFD) and science-based approaches to measuring nature-related impacts and setting targets. Together, these frameworks are creating a common language through which governments, companies, and financial institutions can identify nature-related risks, measure outcomes, and align investment with a nature-positive economy. The direction of travel is clear. Just as climate risk has moved from the margins of environmental policy into boardrooms and financial markets, biodiversity and nature-related risks are beginning to follow the same path. For Pakistan, this could not be more relevant. The country’s economic future is inseparable from the health of its ecosystems. Agriculture depends on fertile soils, pollinators, and water. Cities depend on functioning watersheds and wetlands. Rural communities depend on forests, rangelands, and rivers, while coastal populations rely on mangroves as natural protection against storms and erosion. Yet biodiversity is still largely discussed as a conservation issue rather than as an economic and financial concern. This distinction is increasingly costly. The global economic case is compelling. More than half of global gross domestic product (GDP) is estimated to be moderately or highly dependent on nature, while the global biodiversity-finance gap is estimated at roughly $700 billion annually through 2030. The challenge, therefore, is not simply to find more money for environmental projects. It is to redesign the way capital is allocated so that financial decisions account for the value of ecosystems and the risks created when they deteriorate. Biodiversity finance can take many forms, including public expenditure, concessional and blended finance, loans, bonds, equity, payments for ecosystem services, and other nature-linked instruments. Its real promise lies in connecting ecological outcomes with economic incentives. Pakistan’s environmental challenges demonstrate why this connection is necessary. Water scarcity, land degradation, deforestation, declining soil quality, biodiversity loss, and climate-related disasters are not separate problems competing for attention. They are interconnected symptoms of an economy placing increasing pressure on its natural foundations. A degraded watershed can worsen flooding while reducing water security. Declining soil health can undermine agricultural productivity and increase farmers’ vulnerability to climate shocks. The loss of mangroves can expose coastal communities, infrastructure and businesses to greater physical risks. Financing nature, therefore, should not sit in a separate environmental silo. It should be integrated into climate adaptation, disaster risk reduction, food security, water management, and rural development. The Kunming–Montreal Global Biodiversity Framework, adopted in 2022, provides an important international architecture for this transition, setting four long-term goals and 23 targets for halting and reversing biodiversity loss by 2030. For Pakistan, its value lies not merely in international commitments but in offering a framework for connecting biodiversity priorities with national planning, financial policy and investment decisions. The more difficult question is how to turn those priorities into investable opportunities. Here, developing countries offer useful lessons. Costa Rica’s long-standing Payments for Ecosystem Services model demonstrates a simple but powerful principle: people who maintain valuable natural assets should have an economic incentive to protect them. Landowners have been compensated for services such as forest conservation, carbon sequestration and watershed protection. Pakistan could adapt this logic to support forest restoration, watershed management, mangrove conservation, and sustainable agricultural practices. Water utilities, businesses, insurers and financial institutions could potentially participate where healthy ecosystems can demonstrably reduce economic and operational risks. Colombia offers another direction of travel by demonstrating how biodiversity objectives can increasingly be linked with restoration, sustainable land use and financial innovation. For Pakistan, this opens the door to instruments such as nature-linked loans, biodiversity bonds and blended-finance vehicles. But innovation without credibility will not attract serious capital. Investors need confidence about what qualifies as a genuinely biodiversity-positive investment and how outcomes will be measured. Developing a national biodiversity-finance taxonomy or investment classification system could therefore help direct capital towards credible activities while reducing the risk of greenwashing. Public finance, however, cannot step aside. Many ecosystems generate benefits that are shared across society but do not produce immediate cash flows for private investors. The objective should not be to replace public spending with private capital. Rather, public and concessional finance should be used strategically to absorb early-stage risks, develop data and monitoring systems, establish standards and create pipelines of investable projects. In other words, public finance can build the bridge that enables private capital to follow. Financial reporting will also become increasingly important. IFRS S1 requires companies to disclose sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance or cost of capital. While it is not a biodiversity-specific standard, its materiality-based approach provides an important entry point for companies to consider how nature-related dependencies and risks may become financially significant. IFRS S2, focused on climate-related disclosures, reinforces the reality that climate and nature risks are deeply interconnected. The TNFD can further help organisations identify and assess nature-related dependencies, impacts, risks and opportunities, while the Science Based Targets Network provides approaches for setting measurable targets for nature. Together, these frameworks can help Pakistani businesses and financial institutions move beyond broad sustainability commitments towards measurable risk management and better capital allocation. Pakistan now needs a coherent biodiversity-finance architecture linking national biodiversity priorities with financial regulation, investment policy, corporate reporting and climate-risk management. Success should not be measured by the number of projects announced or trees planted, but by whether natural assets are genuinely restored, financial risks are reduced and livelihoods become more resilient. Pakistan does not face a choice between economic growth and nature. The real choice is between a model of growth that gradually erodes the natural foundations on which the economy depends and one that invests in those foundations before their loss becomes an irreversible financial liability. As global markets increasingly price climate and nature-related risks, the cost of ignoring biodiversity will only rise. Pakistan should stop treating nature merely as something to protect. It is infrastructure, risk management and economic capital and it is time the country’s financial system began investing in it accordingly. The article does not necessarily reflect the opinion of Business Recorder or its owners.
Biodiversity financing: why investing in nature matters for Pakistan’s economy
RELATED ARTICLES
