Biodiversity trust funds are ideal vehicles for leveraging additional finance to innovative projects that fall outside of the bounds of traditional development projects. They provide a promising long-term mechanism for financing biodiversity conservation, which, if linked with the Clean Development Mechanism of the Kyoto Protocol, and other such mechanisms could play a central role in the implementation of the Convention on Biological Diversity.
Environmental trust funds vary widely in structure depending on the ways funds are sourced, managed and distributed. Most funds are governed by a mix of government and NGO representatives. Small private initiatives at the community level – as indicated by examples from Nepal, Pakistan, the Philippines, and Uganda – are more likely to be cost-effective and innovative than government-run larger funds.
In most countries, domestic investment in environmental issues is increasing. Environment funds have also been established in many countries and have contributed to the prominent role that NGOs now play in environmental action.
In some cases, fund revenues may be captured by a government agency or by a NGO with little of the money reaching the intended objectives. Funds also often have very high overhead and administrative costs and they are generally far too conservative or unsophisticated with regard to investment strategies. Further the objectives of the donors sometimes differ markedly from those of the intended recipients. In a case study from the Mgahinga and Bwindi in Uganda, for example, the donors are concerned with biodiversity, while the local community recipients are concerned with improving their quality of life.