Infrastructure investment and biodiversity diversity funding
enabled
Linking credit guarantees for grid expansion to biodiversity protection can help finance both infrastructure development and biodiversity protection
Introduction
Biodiversity worldwide is ever more endangered and equally underfunded. At the same time, the countries with the greatest biodiversity stocks need to expand their electricity grids to connect renewable energy projects, support industry and enable economic growth.
These two priorities are usually treated separately, but economic growth depends on the integrity of ecosystems. What if we could redesign energy financing so that it also funds biodiversity protection?
South Africa is a standout example with the highest plant diversity in the world and one of the highest levels of endemic animal species in the world. This biodiversity creates jobs, raises incomes, and drives scientific advancement, but only 0.3% of GDP is spent in real terms on protecting it. That level is insufficient if we consider that 30% of ecosystems are endangered and 14% of species are threatened with extinction.
Like many other countries, South Africa urgently needs additional capacity on the national grid. As of October 2026, the Independent Transmission Projects programme (ITP) is in the early stages of a USD 25 billion (ZAR 440 billion) grid infrastructure build programme, intended to link remote renewable energy sites with cities and industrial consumers. This is a critical enabler of national growth and industrial development, but lacks a comprehensive credit guarantee solution to give lenders confidence.
The normal solution would be for national government to extend guarantees against its own balance sheet. However, over the past decade, sovereign guarantees worth R450 billion have already been given to Eskom, Transnet, independent power producers and a host of others. National Treasury considers this a risk and there is little head room to increase the amount.
It is clear that an alternative financial solution is needed. Fortunately, there is one.
Blended finance can support both current and future needs
A credit guarantee vehicle (CGV) was created for South Africa with the support of the World Bank earlier this year, with a core fund of US$500 million and a potential first round of US$2.5 billion debt guarantee cover. This fund is intended to support the transmission build-out, among other development priorities, using both private capital and funds from development finance institutions. Because those providing the credit guarantees are from investment-grade institutions, it is envisaged that the funds would be available at a lower cost than debt raised against the South African government’s BB rating.
The difference between these two interest rates could be leveraged for biodiversity protection. Credit guarantors could require ITP project developers – the debt takers – to secure a portion of the implied saving to fund nature protection.
With a programme horizon of 20 to 30 years, the mechanism could provide a stable form of biodiversity finance, well matched to ecosystem management needs. Funds from this structure can be directed to ecosystems that are harder to finance. Grasslands and rangelands are sometimes hard to make a biodiversity investment case for, when compared to watersheds and wetlands that contribute to both water supply and flood protection.
This would help close the investment gap for biodiversity – protecting the foundation for our economic resilience while also supporting much-needed development infrastructure.
The advantages are twofold. Credit guarantee providers, DFIs and reinsurers would face a lower barrier for participation, maximising the social, economic and environmental benefits. Lenders can use this facility not only to support the just energy transition, but can also achieve their biodiversity protection and management goals under the Kunming Montreal Global Biodiversity Framework commitments.
Secondly, the South African state benefits across multiple levels. The grid is expanded, allowing overall economic growth to accelerate. Rural communities – often overlooked – secure a larger portion of the benefits, while biodiversity is preserved. There is also signalling value for investors who are able to see long-term thinking and reduced biodiversity and climate risk exposure.
Biodiversity-based finance enables balanced development
Here is the crux. An infrastructure finance guarantee based on biodiversity enables balanced development. It makes high-value economic investments possible and can accelerate delivery by leveraging biodiversity that is usually overlooked as a source of value generation. In so doing it drives wider social and economic growth, creating jobs and developing resources with and for rural communities. In the case of the ITP programme, it does so in the cause of promoting renewable energy and reducing reliance on fossil fuel generation. It is a holistic contribution to a just energy transition.
This finance model does not have to stop at energy or South Africa. Beyond grid connections and renewable energy, funding is also needed for water, port and rail expansions.
Larger developing nations face similar biodiversity threats, infrastructure needs, and fiscal constraints. Many are among the world's 17 megadiverse countries, shown below, which together account for a significant share of global biodiversity. This creates an opportunity to explore whether the same financing approach could be applied elsewhere.
Figure 1 - Megadiverse countries
Source - Conservation International
The potential becomes clearer when considering the scale of planned infrastructure investment in these countries. The figure below shows a selection of megadiverse middle-income countries, together with their planned kilometres of electricity grid expansion to around 2040 and the proportion of land currently protected. Most are located in biodiversity-rich tropical regions, yet many remain well below the global target of protecting 30% of land by 2030.
Figure 2 - Selected ‘megadiverse’ middle income countries with protected landmass and planned electricity grid expansion to 2040, %, kilometres
Source - World Bank, National electrical power strategy publications
The scale of planned infrastructure investment in these countries presents an opportunity to apply the same financing mechanism beyond South Africa. Linking credit guarantees to biodiversity protection could help mobilise long-term conservation funding while supporting infrastructure expansion and economic growth.
This mechanism could help deliver essential services to large populations while supporting an increase in protected areas from the average of 12% today (excluding Brazil) towards the 30% target.
Achieving this potential means changing the way we think about biodiversity finance. Biodiversity and infrastructure investments are compatible with each other, and shouldn’t have to compete for the same pool of limited funding.
Biodiversity resources can be mobilised to enable and de-risk infrastructure projects, while infrastructure projects can be used to secure those same biodiversity resources. It is a positive loop that can accelerate growth, unlock wide economic and social development, reaching both city and rural populations and securing the underlying environmental resources they rely upon. With balanced outcomes and inclusive growth, it is a mechanism to deliver a just transition.
