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Innovative financing models are emerging globally to advance nature-based solutions (NBS) that can cost-effectively enhance infrastructure performance, meet Sustainable Development Goals, and mitigate the negative impacts of climate change. Despite the potential for NBS to generate attractive returns and provide significant cost-savings, these financing models remain underutilized. Consequently, NBS are not achieving their full potential and a tranche of pent up green capital is sidelined. This report highlights five proven NBS financing strategies that leverage private finance: green bonds, blended market-rate and concessional loans, land-based financing strategies, insurance policies, and endowments. This report also outlines current barriers to the successful scaling of these financing strategies in Latin America and the Caribbean and identifies the approaches and enabling conditions needed to overcome them.

Governments across Latin America and the Caribbean (LAC) face challenges in extending and maintaining infrastructure to serve their populations, especially as climate change and ecosystem degradation endanger communities and infrastructure assets across the region. To help address these challenges, the Inter-American Development Bank (IDB) aims to increase its support of Nature-based Solutions (NBS) in accordance with the banks 2020 Environmental and Social Sustainability Mainstreaming Action Plan. This Issue Brief serves two main functions. First, it describes IDB's growing focus on NBS and provides a tour of IDBs main offerings regarding NBS project support and investment. Second, it serves as a baseline of IDBs activities related to NBS from which the bank and partners can build upon moving forward. Going forward, IDB will ramp up support for clients to incorporate NBS considerations and opportunity analysis in country agreements and throughout all stages of project preparation, from investment identification to execution.

Nature-based solutions (NBS) can contribute to equitable and sustainable development across Latin America and the Caribbean and represent an important investment opportunity for national and subnational governments, infrastructure service providers, development banks, and corporations. Examining the status of NBS efforts and results within the region can shed light on what is required to drive more investment towards NBS projects. To chart a pathway forward, this brief provides a regional review of NBS projects, their status, and implications for investment. These NBS projects aim to address a variety of objectives, including securing water supply, improving water quality, reducing landslide risk, and helping to manage urban flooding, river flooding, or coastal flooding and erosion. The projects utilize a broad range of types of NBS, from forest management to coral reef restoration. This brief outlines the difficulties to scaling NBS adoption in the region and identifies strategies to address the challenges moving forward.