Nature based solutions

Explanation

In November 2024, the ADB published its Environment Action Plan (EAP) 2024–2030. The EAP is intended to guide the Bank’s strategic approach along the three axes of (i) biodiversity and ecosystem management; (ii) pollution control and circular economy; and (iii) nature based solutions. To do so, the EAP recognises the dual need to increase nature-positive investments and to mainstream environment into traditional sector operations and investments.

The EAP is a comprehensive strategic framework for guiding an integrated approach to the three inter-related and cross-cutting areas identified. It includes a tangible “list of environment actions” which the Bank commits to undertaking, and which will be reviewed and updated annually. An accompanying monitoring and results framework is due to be established to track progress.[1]

Nature based solutions

Nature based solutions (NBS) are explicitly recognised by the ADB as a valuable area for action in its core strategy documents (beyond the EAP) and across several of the Bank’s “Operational Priorities”. Illustratively, the Bank’s Strategy 2030 enshrines the achievement of environmental sustainability “through a variety of approaches, including the use of payments for ecosystem services, nature-based solutions…”. Similarly, the Climate Change Action Plan (CCAP) 2023–2030, suggests that the ADB will “study and develop nature-based climate solutions”, recognising the high potential for NBS for low-carbon and climate-resilient development in the Asia–Pacific region.

There is ample evidence of practical actions taken by the Bank in line with this strategic level recognition.[2] For example, in June 2022 the ADB published an internal guide on integrating nature based solutions for climate change adaptation and disaster risk management. The guide explicitly integrates NBS within key ADB priorities and programs, such as the Country Partnership Strategy. The Bank’s Disaster Risk Management Action Plan 2024–2030 similarly makes reference to integrating NBS as part of a holistic approach to disaster risk management.

Moreover, during COP28 the ADB launched the Nature Solutions Finance Hub for Asia and the Pacific to deploy financing measures aimed at de-risking NBS investment programs. Relatedly, the ADB also approved the “Natural Capital Fund” in 2023. This fund aims to leverage concessional lending from the Global Environment Facility (GEF) to finance projects that improve food security while safeguarding and restoring natural capital in client countries. Furthermore, the ADB is championing natural capital accounting, which aims to mainstream natural capital considerations into project design, economic analysis, and assessment. The Bank’s efforts in this regard notably include co-convening the Nature Capital Forum (with Stanford University’s Natural Capital Project) to build awareness of approaches to the topic among regional decision makers. This builds on the work of the ADB’s Natural Capital Lab to support natural capital accounting and assessments.[3]

A flagship ADB initiative in this area is the Regional Flyway Initiative. This aims to protect, restore, and sustainably manage a network of threatened natural wetlands – including mangrove forests, peatland, marshes, tidal mudflats, and coral atolls – along the East Asian–Australasian Flyway. In doing so, the initiative aims to conserve vital ecosystems that provide services to nearly 200 million people. Simultaneously, the initiative will generate biodiversity benefits (including for over 50 million migratory waterbirds) and contribute to climate change goals by sequestering significant greenhouse gas emissions and enhancing climate resilience.

These initiatives reflect the Bank’s active efforts to promote the development of tailor-made NBS projects. However, it is not clear whether the Bank is proactively screening the remainder of its project pipeline for opportunities to integrate NBS into operations that were not originally designed with this in mind.

Biodiversity

The ADB recognises biodiversity loss as a key driver of climate change, and accordingly intends to mainstream biodiversity in its operations to ensure biodiversity co-benefits are recognised and better reflected in its portfolio. The Bank’s new Environmental and Social Framework (which will apply from 1 January 2026) includes an Environmental and Social Standard (ESS 6) which recognises the conservation of biodiversity and sustainable management of living natural resources as fundamental to sustainable development. Accordingly, the ESS forbids the implementation of project activities that involve critical habitats, unless they fulfil the ADB’s specified preconditions.

Specifically, the ADB states that no project activities may be implemented which may cause adverse impacts to critical habitat or its priority biodiversity features, unless each of the following conditions are met:

1. No other viable alternatives exist for development.
2. The project is permitted under the host country’s applicable laws.
3. Relevant stakeholders are consulted.
4. Mitigation measures are put into place to ensure a delivery of net gain.
5. A project is not anticipated to have a measurable adverse residual net impact on any other priority biodiversity features.

Moreover, certain critical habitats are deemed of such importance that no project activities are permitted in these areas. These comprise:

1. Alliance for Zero Extinction sites
2. UNESCO Natural and Mixed World Heritage sites
3. free-flowing rivers of at least 500 kilometres in length.

The ADB states that these standards, along with the ADB’s promotion for nature-positive DMC initiatives, are aligned with the Convention on Biological Diversity and the Kunming–Montreal Global Biodiversity Framework (GBF). In practice, this means that the ADB’s efforts have integrated the GBF’s “30×30” goal of protecting 30% of land and sea area by 2030 into national planning, and will continue to do so. This entails a commitment to contributing to developing nature-positive economic sectors and ensuring that development projects safeguard protected species and habitats. The Bank’s efforts are also actively intended to support its contribution to covering the identified USD 200 billion annual finance gap (from both public and private sources) for nature and biodiversity identified by the GBF.  

Aside from its own institutional commitments, the ADB is also a signatory of the MDB Joint Statement on Nature, People and Planet announced at COP26, reinforcing the Bank’s ambition to grow its portfolio of nature initiatives. The pledge commits MDBs to tackle biodiversity loss, and channel resources to nature-positive investments, among others. Accordingly, the Joint MDB Group has since published the MDB Common Principles for Tracking Nature-Positive Finance, a key deliverable from the aforementioned COP26 joint statement.

The ADB has also launched a USD 5 billion Healthy Oceans Action Plan, running from 2019 to 2024. The plan intends to guide the Bank’s support for sustainable tourism, fisheries, protection and restoration of coastal and marine ecosystems, reducing marine pollution and improving sustainability in port and coastal infrastructure development. As part of implementing this plan, the ADB has launched the Oceans Financing Initiative. This blended finance initiative provides finance and technical assistance to reduce risks and support private sector investment in bankable ocean health projects. The initiative is being piloted in Southeast Asia in collaboration with the WWF, ASEAN Infrastructure Fund, and the Republic of Korea.

As of Q3 2024, progress towards fulfilling the USD 5 billion financing target of the Healthy Oceans Action Plan had reached 76%, with the largest financial commitment (USD 1 billion) going towards the removal of marine debris.

Agriculture and livestock

The ADB’s previous Climate Change Operational Framework 2017–2030 (CCOF) recognised that the agriculture and natural resources (ANR) sector is highly exposed to climate impacts. Moreover, it recognised that almost 80% of ADB’s Developing Member Countries’ (DMCs) NDCs outline ANR sector measures. This is indicative of the scope (and potential DMC demand) for ADB to offer climate-friendly support in this sector. However, the ADB’s current portfolio and support for this sector is limited (as noted by the Bank in the CCOF), and has declined in recent years relative to other sectors, dropping from 27% of the ADB’s portfolio in the 1980s to just 7% in the 2000s.

The CCOF has since been superseded by the Climate Action Plan 2023–2030 which recognises the opportunity to enhance the agriculture investments currently in the Bank’s project pipeline by integrating climate-smart and climate-resilient measures, with a focus on high-emissions areas such as livestock and rice, fertiliser production and application, agri-processing and logistics, and the just transition. Concretely, the Bank has pledged to make 90% of its incremental investments in agriculture, food, and natural resources (AFNR) climate-smart by the end of 2025. Furthermore, the Bank is collaborating with the International Rice Research Institute to scale up the dissemination of low-carbon rice production practices regionally and within individual countries. It is also developing knowledge partnerships with academic institutes and the private sector to pool knowledge and expertise in climate-smart agriculture and nature based solutions.

However, despite the Bank’s efforts to promote more sustainable agriculture practices, there is no explicit commitment to eliminate agricultural commodity-driven deforestation from its portfolio.

On fisheries, the ADB’s update to its safeguard policies forbids investments in “marine, inland and coastal fishing practices, such as large-scale pelagic drift net fishing and fine mesh net fishing harmful to vulnerable and protected species in large numbers and damaging to marine or freshwater biodiversity habitats”. This is a significant and commendable inclusion, particularly given that several Asian countries are home to a large proportion of the world’s coral reefs. These ecosystems are already highly vulnerable to the impacts of climate change, such as ocean warming and acidification. By prohibiting harmful fishing practices, this safeguard helps reduce additional stressors on coral reefs, enhancing their resilience to climate change impacts.

Forests

The ADB is one of the few MDBs to have a forestry policy. Since the policy dates from 1995, its continued relevance or whether more recent institutional documents supersede it is uncertain. Nonetheless, the early adoption of a forestry policy underscores the ADB’s commitment to prohibiting financing for projects that could significantly contribute to deforestation, forest degradation, or commercial logging in old-growth and primary forests.[4] The policy also mandates compensatory reforestation or rehabilitation, in consultation with affected communities, if such impacts are unavoidable.[5]

The ADB’s latest Environmental and Social Framework (ESF) reinforces the forestry policy by prohibiting support for commercial logging operations, or the purchase of logging equipment for use in primary tropical humid forests or old-growth forests. The ESF also confirms the ADB’s commitment to avoid financing road construction in old growth forests and any rural infrastructure or other public investment that “significantly”, directly or indirectly, contributes to deforestation or to the degradation and depletion of forests.[6] In many ADB client countries, forests are recognised in Nationally Determined Contributions (NDCs) as important for both adaptation and mitigation efforts. Accordingly, the ADB’s strategy emphasises forest conservation, sustainable use, development of new forest areas, the rehabilitation of degraded forestlands in its region, and keeping agricultural development to non-forest lands.

The ADB acknowledges that it is “essential to support government and private sector policies that avoid deforestation” in the context of outlining financial support for adjacent solutions. However, the Bank’s climate framework also states that it has a very limited portfolio of investments and limited internal capacity to prevent deforestation and degradation. Thus the ADB states it is “doubtful” that it “will be able to carry out large scale interventions in Phase 1 (from 2017–2023)” of the Climate Framework.[7]

In practice, the ADB has nonetheless supported several dedicated initiatives to promote forest restoration, such as the aforementioned Regional Flyway Initiative which works with a coalition of sovereign partners to protect and restore a network of threatened natural wetlands. The first flagship project, a 150 million loan approved in 2024, will restore 12,000 hectares of wetlands in China. Additionally, in 2022, the Bank signed a USD 15 million equity investment in New Forest’s Tropical Asia Forest Fund (TAFF2) for sustainable forestry practices in Southeast Asia. Moreover, the ADB continues to provide support for interventions targeting the conservation of carbon sinks, biodiversity, and ecosystem services through the reduced emissions from deforestation and degradation (REDD+) and improved land management component of its Climate Change Fund (CCF).[8]

Discussions with the ADB have suggested that the Bank’s support for forestry activities is growing in response to heightened demand from both DMCs and private companies for support in contributing to climate and biodiversity targets. This includes increased provision of both technical (e.g. technical assistance for sustainable forest management, such as in Papua New Guinea) and financial support (e.g. blended finance and policy based loans that include forestry provisions such as in the Philippines), as well as complementary enabling activities to support forest investments (such as the Model Forest Act Initiative, market analysis, and earth observation tools). Specifically with regard to climate mitigation efforts, the Bank suggests it is exploring different financing options, including carbon credits, payment for ecosystem services, and debt for nature swaps.[9]

However, given most of the ADB’s DMCs are home to nearly 15% of the world’s tropical forests, the Bank has the opportunity to contribute more substantially to reducing deforestation, as part of fulfilling its overarching climate commitments (and those of its member countries). [10] Moreover, robust safeguards and explicit pledges against deforestation, regardless of the Bank’s current investment level in forest-related sectors, can send a valuable signal regarding the Bank’s commitment to this issue.  

Recommendations:

• It is commendable that the ADB has had a forestry policy in place since 1995. To build on this initial leading example, the ADB should update its policy to align with its updated international climate commitments, and a substantially changed (sub)sectoral landscape (with respect to forestry). The update should include an explicit commitment to net zero deforestation across its portfolio, with stronger exclusions on unsustainable logging in its prohibited investment activities list.
• To contribute to the Bank’s ongoing efforts to mainstream climate change considerations in the agricultural sector, the ADB should establish a time-bound pledge to eliminate agricultural and commodity-driven deforestation from its investment and credit portfolios.
• In line with its intention to better mainstream biodiversity considerations across its portfolio, the ADB is currently implementing a nature-positive finance screening and tracking system. Such a system could facilitate both ex-ante identification of opportunities to integrate nature-positive activities at the project preparation phase, and ex-post tracking of finance. For this system to be effective and fulfil the commitments under the Bank’s EAP 2024–2030:
  • The Bank should ensure that this follows the MDB Common Principles’ two-step process: first screening finance for eligible nature-positive activities, and subsequently applying three eligibility criteria: substantive contribution, measurable outcomes, and no significant adverse impacts.
  • To facilitate accurate monitoring, evaluation, and reporting, the system should explicitly distinguish between climate finance and nature-positive finance, while appropriately tracking co-benefits where projects qualify for both categories.
  • The system should actively facilitate identification of opportunities to mainstream nature and NBS in projects in more traditional sectors as a short- to medium-term priority, as the Bank builds out its portfolio for qualifying nature-positive operations.

[1] Once this is in place, E3G will update the assessment with an overview of relevant indicators.

[2] Development Asia, the ADB’s knowledge collaboration platform, has collated a summary of the Bank’s work in this space, available at ADB Data Room: Nature-Based Solutions.

[3] This initiative has had notable success, including supporting the adoption of the Philippine Ecosystem and Natural Capital Accounting System law in 2024.

[4] Notably, the Bank does not define how a “significant contribution” to deforestation is determined, neither in the ESF (see following paragraph) nor in the forestry policy.

[5] Compensatory reforestation or rehabilitation notably does not necessarily eliminate or negate climate impacts, given the short- to medium-term reduction in carbon capture potential.

[6] See above.

[7]  The CCOF 2030 will be implemented in two operational phases: phase 1 from 2017 to 2023, and phase 2 from 2024 to 2030 (now covered by the CCAP 2023–2030). Phase 1 focuses on accelerating investments, learnings, and supporting member countries in meeting their NDCs. Phase 2 focuses on lessons learned, Paris Agreement compliance, and increasing the country NDC updates. See the “Climate and overarching strategy” metric for further coverage.

[8] The CCF was launched in 2008 and has received a total of USD 98 million of financing since inception.

[9] Information received directly from the ADB. As further evidence of the Bank’s efforts in this space, the ADB confirms it has established a forestry working group to promote forest conservation and protection in DMCs, and is exploring a traceability system to track the origin of agriculture products to comply with EU Deforestation Regulations.

[10] For further evidence regarding the significant relevance of forestry efforts in the Asia and the Pacific region, see here.