Could banks charge less to finance projects that protect nature if governments reduced the taxes on profits earned from those loans?

President Dr Irfaan Ali put that question to bankers and policymakers on the second day of the Global Biodiversity Alliance Summit, pressing for practical incentives to attract more investment in conservation.

“I didn’t hear the question of incentivizing investment in the sector coming out as clear as I would like,” he told the panel.

Ali proposed exploring whether tax relief on profits from biodiversity-related lending could translate into lower interest rates for borrowers, and how much those rates might fall.

He urged participants to look beyond debt swaps, suggesting “a tax incentive that can be given for components of loans that enhance biodiversity and nature.”

The intervention shifted the discussion from recognising nature’s economic value to a more immediate question: what would make banks lend, and on what terms?

No tax change was announced. But the suggestion prompted an exchange about who would bear the cost of making that financing more attractive.

Barbados’ Minister of Economic Affairs and Planning, Marsha Caddle, said her country already uses fiscal incentives to support national priorities, including nature-based approaches.

Those concessions, however, come at a price to the public purse.

“That is tax expenditure on our balance sheet,” she cautioned, highlighting the revenue governments forgo through tax incentives. She argued that international financing arrangements should also help reduce investment risks.

The Head of Nature Finance at Standard Chartered, Oliver Withers offered another possibility: incentives through banking regulations.

Withers pointed to an existing mechanism for qualifying infrastructure projects that can reduce a bank’s capital requirements, suggesting that regulatory approaches should also form part of the conversation.

“This doesn’t have to always be a tax play,” he said.

GBTI’s CEO Shawn Gurcharran urged policymakers to look beyond banks and large projects when designing incentives, arguing that households, entrepreneurs and individual taxpayers should also benefit.

“Let’s not concentrate only on macro, but let’s drill it all the way down to the micro: to the households, the individual taxpayers as well.”

Behind the exchange was a challenge raised repeatedly during the panel: a forest, wetland or healthy coastline can be valuable to an economy without generating the steady income needed to repay a loan.

As Withers put it: “Just because there’s macroeconomic value doesn’t mean it’s a bankable solution yet.”

Some projects can support commercial borrowing, while others need grants, concessional funding or guarantees to attract investment.

Ali warned that the consequences extend beyond conservation projects. Investments in power plants and other infrastructure could be undermined by environmental

threats if financiers fail to account for long-term risks.

“You can finance the best power plant, you can finance the best infrastructure, but it is all at risk in the long term if we don’t restructure the investment pathway,” he said.

His challenge to the panel was to develop policies that make protecting nature part of protecting the investments on which economies depend.