Sustainable finance and global efforts to combat desertification: an overview

Introduction

Desertification, the degradation of land in arid, semi-arid, and dry sub-humid areas, poses an increasing threat to ecosystems, communities, and economies worldwide. Over the past two decades, climate change has exacerbated desertification, intensifying its impacts on biodiversity, food security, and water availability. However, a significant global effort has also unfolded to address desertification, often led by the UN Convention to Combat Desertification (UNCCD) and underpinned by sustainable finance mechanisms. As policymakers and scientists gather for the 16th Conference of the Parties (COP 16), it’s an opportune moment to assess how sustainable finance instruments have evolved and been applied in efforts to reverse desertification and its impacts.

Emergent financing mechanisms for combatting desertification and land degradation

Sustainable finance includes a range of financial instruments, such as green bonds and sustainability-linked loans (SLLs), which are designed to achieve environmental objectives while generating returns for investors. These financial instruments have become important ways to mobilise the capital needed for land restoration, sustainable agriculture, and climate resilience projects—all of which contribute to mitigating desertification.

For example, Rizoma-Agro, a Brazilian company, issued a BRL25mn (USD4.5mn) green bond to finance regenerative agriculture. At the time of issuance, it was the only bond in Brazil dedicated to regenerative practices. The bond financed row crops and agroforestry, irrigation systems, post-harvest infrastructure, R&D, and agriculture management, thereby helping mitigate desertification risks in Brazil.

Additionally, the Land Degradation Neutrality (LDN) Fund, established in partnership with the UNCCD, was launched in 2017. The LDN Fund is an impact investment fund that blends resources from public, private, and philanthropic financiers to fund sustainable land management and restoration projects. Its objective is to achieve land degradation neutrality—a state in which the amount of degraded land is balanced by land restoration efforts. The LDN Fund reached its final closing at $208 million in March 2021. By April 2021, LDN projects had protected 120,000 hectares and avoided 20 million tonnes of CO2 emissions, with projects across Peru, Bhutan, Kenya, Ghana, and the Philippines.

In addition to green bonds and the LDN Fund, various climate-focused funds have emerged to drive resources into desertification-prone areas. Climate funds, such as the Green Climate Fund (GCF) and the Adaptation Fund, have directed millions of dollars toward climate adaptation and mitigation projects in arid and semi-arid regions. For example, since its inception in 2010, the GCF has approved projects across countries like Namibia, Senegal, and Burkina Faso, focusing on land restoration, sustainable water management, and climate-resilient agriculture.

Notable projects include the GCF’s support of the Great Green Wall in the Sahel—an 8,000km stretch of vegetation aimed at restoring 100 million hectares of degraded land. Likewise, the Adaptation Fund is financing projects such as a 2.5 million USD smart agriculture and anti-degradation initiative for Armenian communities near the “Khosrov Forest” and “Dilijan” National Park.

Impact investing projects that support the UNCCD’s objectives

In addition to these large global funds, there are other smaller yet significant impact funds focused on restoring nature and combatting desertification. Examples include the L'Oréal Fund for the Regeneration of Nature (€50 million in 2020), the Orange Nature Fund (€50 million in 2021), and the Nature+ Accelerator Fund (USD10 million in 2022).

The L'Oréal Fund for the Regeneration of Nature aims to restore one million hectares of degraded ecosystems and capture 15-20 million tonnes of CO2 by 2030. It has successfully funded projects like ReforesTerra, which seeks to restore 2,000 hectares of degraded land in the Amazon by involving smallholder farmers in the lower Rio Jamari basin of Rondonia to promote reforestation and natural regeneration.

Furthermore, the Orange Nature Fund is unique in that it does not seek direct financial returns but rather financial returns through voluntary carbon units (VCUs) generated by each tonne of carbon sequestered in their projects.

How combatting desertification supports the UN sustainable development goals

Combatting desertification closely aligns with several UN Sustainable Development Goals (SDGs), demonstrating the interconnectedness of environmental sustainability, social welfare, and economic growth.

This particularly includes SDG 15 (Life on Land), which directly influences efforts to halt desertification, as it focuses on sustainably managing forests, combatting desertification, and reversing land degradation. As previously highlighted, sustainable finance instruments provide essential funding for land restoration and biodiversity conservation initiatives that are key to achieving SDG 15.

This work also impacts SDG 13 (Climate Action) and SDG 2 (Zero Hunger), along with SDG 6 (Clean Water and Sanitation), as desertification directly threatens food security by reducing arable land and decreasing agricultural productivity. Sustainable finance instruments support innovations in sustainable agriculture, such as regenerative farming and climate-smart crop practices, which contribute to food security in affected regions.

The road ahead: scaling up sustainable finance to meet future challenges

While progress has been made in mobilising sustainable finance for desertification projects, significant challenges remain. Reaching land degradation neutrality (LDN) goals will require investments estimated at USD 1.6 trillion over the next decade, a figure significantly higher than current funding levels. Additionally, each dollar invested in restoring degraded land yields approximately $7-$30 in economic benefits.

Looking ahead, public-private-philanthropic partnerships will be essential for scaling up sustainable finance for desertification initiatives. This includes blended finance models that combine public grants with private capital to attract more investment in land restoration and climate adaptation projects.

Furthermore, local capacity-building and stakeholder engagement are critical for the success of these projects. Sustainable finance initiatives should involve local communities in project planning, implementation, and monitoring, as their knowledge and participation are crucial for long-term sustainability. Community-based approaches can also strengthen social cohesion and foster a sense of ownership, making restoration efforts more resilient and impactful.

Conclusion

Sustainable finance instruments have become powerful tools in the fight against desertification, channelling resources toward projects that restore degraded land, build climate resilience, and improve livelihoods. As we look to the future, the ongoing commitment of governments, financial institutions, and local communities will be essential to scale these efforts and achieve the UN Sustainable Development Goals. COP16 offers a unique opportunity to renew international resolve, drive innovation, and mobilise the financial resources needed to reverse desertification and secure a sustainable future for all.