Banking on Nature's Assets: How Multilateral Development Banks Can Strengthen Development by Using Ecosystem Services

Humanity depends on nature for physical and spiritual sustenance, livelihoods, and survival. Ecosystems provide numerous benefits or “ecosystem services” that underpin economic development and support human well-being. They include provisioning services such as food, freshwater, and fuel as well as an array of regulating services such as water purification, pollination, and climate regulation. Healthy ecosystems are a prerequisite to sustaining economic development and mitigating and adapting to climate change.

The UN-led Millennium Ecosystem Assessment audited the health of 24 ecosystem services globally and reported that two-thirds had been degraded over the past half century. This degradation is undermining development progress. However, by accounting for and managing ecosystem service trade-offs, multilateral development banks (MDBs) and partner countries can improve development outcomes, help address climate change, and reduce costs to people and economies. Toward this end, a growing number of tools are emerging to help factor ecosystem services into economic development decisions.

Traditionally, development planners have focused narrowly on provisioning services with a value in the market place while overlooking regulating services. Expansion of aquacultures has increased shrimp production, for example, but at the same time degraded the fish spawning ground and storm protection services provided by mangroves. Construction of dams has increased power and freshwater for irrigation while leading to downstream loss of wetlands and their purification and flood protection services.

MDBs have already begun to experiment with ecosystem service concepts in development planning and practice. This report makes the case for expanding beyond the current focus on single services and “add-on” projects. The authors recommend a more systematic approach, one that would take into account multiple ecosystem services in all development operations from the earliest stages of the planning process. Such an approach will enable MDBs to make the links among climate, environment, and development and identify risks and opportunities associated with development plans. Banking on Nature’s Assets identifies entry points for mainstreaming ecosystem services in MDBs’ core operations of strategic direction setting, advisory services, and investments and describes a portfolio of tools to help. It also presents a range of policy options that MDBs can help country partners implement to sustain critical ecosystem services.

The report concludes with five interrelated recommendations to scale up MDB and partner-country application of ecosystem services:

• Incorporate into environment strategies;
• Integrate into core operations;
• Build capacity to implement an ecosystem services approach;
• Empower local authorities, organizations, and communities; and
• Strengthen policies and incentives.

Entry Points for Integrating Ecosystems Services into MDB Operations