The Cali Fund in operation: the potential of sustainable finance instruments and next steps

A recent call for submissions to the Secretariat of the Convention on Biological Diversity (CBD) on the implementation of the newly agreed Cali Fund provided an important opportunity for stakeholders to shape its operationalisation. Lea Reitmeier, Agata Makowska-Curran and Jasmine Kindness reflect on the importance of getting the Cali Fund right for scaling-up private sector contributions, including the possible use of green bonds to incentivise contributions.

The Cali Fund, agreed at the 16th meeting of the Conference of the Parties (COP16) to the UN Convention on Biological Diversity (CBD), is the first multilateral biodiversity fund designed to rely primarily on contributions from the private sector for its use of Digital Sequence Information (DSI). DSI refers to digitised genetic code such as DNA or RNA and as such represents the biological diversity of our planet in digital form, from plants to animals and microbes. Stored in global databases, and often available free of charge, DSI enables researchers and companies to study, modify and use genetic material without accessing the physical organisms themselves. This data can be harnessed to develop valuable products such as pharmaceuticals and cosmetics (helpfully summarised in this Carbon Brief infographic).

A critical opportunity to advance financing for biodiversity

The establishment of the Cali Fund represents a recognition of the immense global value of DSI data by providing a pathway for companies that benefit commercially from free access to biological data to contribute to the protection of global biodiversity. Although low- and middle-income countries host the majority of the world’s biodiversity, the benefits from DSI use have mainly flowed to companies in high-income countries. At a conceptual level, the Fund seeks to correct this imbalance by channelling private benefit into collective investment.

The Cali Fund is not only a mechanism for equitable benefit-sharing: it is also vital for the private sector’s continued access to the biodiversity and healthy ecosystems it depends on to innovate. For example, AlphaFold3, a Nobel prize-winning tool transforming drug discovery, depends on access to biological data. With over 200 million proteins mapped and a projected valuation at over US$100 billion, AlphaFold3 illustrates how essential biodiversity data is to the digital economy. Ensuring long-term access to this information requires sustained investment in biodiversity conservation – exactly the role the Cali Fund is designed to play.

However, despite the clear benefits for business, due to the voluntary nature of the Fund, it may be challenging to create sufficient incentives for companies to contribute when clear regulatory enforcement mechanisms are lacking. Without expectations that contributions may eventually become mandatory, voluntary models often struggle to attract sustained private investment beyond reputational motivations. Voluntary biodiversity credits, for example, are estimated to have generated as little as US$1 million in sales, despite a growing supply. Sustained momentum will depend on stronger demand-side drivers, such as investor pressure, disclosure requirements and clearer policy signals that contributions may become a requirement.

Exploring the use of sustainable finance instruments

Recognising the Cali Fund’s potential, we submitted formal input to the CBD Secretariat’s call for submissions in March 2025. Building on our engagement at CBD COP16, the LSE Roundtable in September 2024, and our team’s interdisciplinary expertise, we provided concrete recommendations on how to incentivise industry contributions and strengthen accountability. Our submission emphasised the critical role of disclosure and information transparency, and financial market solutions, including investor stewardship and sustainable finance instruments.

Some of our recommendations have already gained traction – most notably in the UK Government’s submission, which echoed our proposal to conduct an exploration into how green bonds could be used in this context (see p.6 of our consultation response). Developing a broader ecosystem of incentives and public accountability remains essential. Sustainable debt financial instruments such as green or nature bonds could play an important complementary role in facilitating the flow of contributions to the Fund.

Green/nature bonds are fixed-income instruments where the proceeds are earmarked for specific environmental projects, such as biodiversity conservation or ecosystem restoration. If structured correctly, firms could issue green bonds where proceeds were directly used to support payments into the Fund, framing these contributions as part of a broader biodiversity or ecosystem services strategy. It is best market-practice that issuers disclose an annual allocation report and an impact report at bond maturity, highlighting the projects funded with the proceeds of the bond. Such bonds may offer a pathway to increase transparency around corporate contributions to the Fund and may help overcome some of the longstanding challenges associated with financing biodiversity protection.

Key questions for stakeholders interested in linking Cali Fund contributions to green bonds

1. Who will be the issuer? Primarily large companies, especially those in the seven sectors referenced in the recent COP Decision on the Fund (e.g. pharmaceuticals, biotechnology and agriculture). Sovereign states could also serve as issuers if they wish to support the Cali Fund, even though not explicitly required under the Decision.
2. What are the precedents? Green bonds have increasingly been used as tools to finance international cooperation on biodiversity and climate change, offering a clear precedent for how companies could contribute to mechanisms like the Cali Fund. For example, Germany’s sovereign green bonds channel a portion of proceeds to Sustainable Development Goal 17 focused on strengthening international collaboration on sustainable development, such as its contributions to the PROBLUE Fund. In the private sector, BBVA and the International Finance Corporation (IFC) launched the world’s first corporate biodiversity bond in 2024, using private capital to finance reforestation, ecosystem restoration and sustainable agriculture in Colombia, aligned with national biodiversity strategies. Similarly, the Nature Conservancy’s US$350 million green bond has helped fund conservation projects in over a dozen countries, with co-financing from public and philanthropic countries.
3. How will the principal be repaid? Issuers generate revenue from the use of DSI, though timelines and risks vary significantly across sectors. For instance, pharmaceutical returns can take years to materialise. This could be addressed by structuring bonds with longer maturities to better align with cash flow realities.
4. How can biodiversity outcomes be reported? Companies will pay into the Fund and a disbursement formula designed by all parties will then determine the share of money states receive. It will likely not be possible to track an individual dollar from source to recipient project. Therefore, it will be key that the UN attains and publishes information from the recipient countries about projects annually. This should include qualitative and quantitative information. For reporting purposes associated with a green bond (e.g. Impact and Allocation Reporting) the information and metrics published by the UN could be informed by reporting requirements similar to those used in the ICMA Green Bond Principles to ensure ease of use.
5. How can corporate and national priorities be linked? Private sector contributions could be linked to national biodiversity priorities where relevant. If the Cali Fund directed resources to projects that support a country’s National Biodiversity Strategies and Action Plans (NBSAPs), companies could structure their green bond use-of-proceeds to reflect that alignment. This would enable firms to show that their contributions support recognised policy goals on biodiversity, making the case for both environmental and strategic relevance. Importantly, this alignment could help demonstrate that private sector contributions are delivering on nationally agreed priorities as well as advancing global goals.
6. Who are the key stakeholders that need to be engaged? There are aspects to implementation that still need to be clarified. For example, it remains to be seen how independent Second Party Opinion (SPO) providers such as Sustainalytics, S&P Global and ISS-Corporate would assess Fund contributions within a bond framework; but their evaluations are critical to ensuring alignment with market standards and investor expectations. Furthermore, green bonds require ongoing reporting on the use of proceeds, which may prove challenging while the disbursement formula for Cali Fund remains undefined, particularly from a single company’s perspective.
7. Are there alternative fixed income instruments that can be used? Green bonds may still be preferable to other sustainable debt instruments. Sustainability-Linked Bonds (SLBs) have gained momentum as an innovative sustainable finance instrument. However, we believe they are less suitable in this context. Unlike green bonds, which are tied to specific environmental projects, SLBs are general-purpose bonds with coupon rates linked to the issuer’s achievement of predefined key performance indicators (KPIs), assessed against sustainability performance targets (SPTs). They are designed to track outcomes of structural shifts in company behaviour. Paying into the Cali Fund does not necessarily reflect these operational changes but instead captures essentially a financial transfer. Further exploration and engagement with stakeholders into the potential for green bonds are needed to incentivise contributions into the Cali Fund.

Potential for scalability

The Cali Fund will be administered by the United Nations through the Multi-Partner Trust Fund Office (MPTFO), the UN entity dedicated to multi-stakeholder pooled financing instruments. By hosting and supporting the operationalisation of the Fund, the MPTFO has a unique opportunity to demonstrate how private sector contributions can be effectively channelled to multilateral pooled funds, setting a precedent for future financing models. If the Fund succeeds in mobilising private capital, it could be scaled up and replicated for other global challenges that require more industry participation, but a lack of incentives and missing or unclear regulatory enforcement mechanisms may impede progress.

The authors welcome feedback and engagement on the proposals outlined above and in their submission to the CBD Secretariat. The Grantham Research Institute is currently undertaking a project with the LSE Global School of Sustainability (GSoS) called ‘Paying nature: mobilising financial resources from the private sector for biodiversity’, which will continue research related to the Cali Fund and its broader challenges. GSoS is the interdisciplinary centre for sustainability impact at LSE. To find out more about the ‘Paying nature’ project, please contact Camila Cristancho Duarte (m.c.cristancho-duarte@lse.ac.uk).

The LSE team contributing to the discussions held during CBD COP16 included representatives of the LSE-funded Ocean Biodiversity Collective. The views in this commentary are those of the authors and do not necessarily represent those of the host institutions or the Ocean Biodiversity Collective. Lea Reitmeier authored this commentary when employed as a Policy Fellow at the Grantham Research Institute.