Does financing biodiversity reduce biodiversity loss? Evidence from EU funding of science and innovation

Recent calls for greater private capital in biodiversity finance often overlook the question of effectiveness. This article interrogates the assumption that the increased financing being called for directly reduces species-level loss. Using data on European Union-funded projects across twenty-six countries over two decades, I discover that conservation funding has been most effective in supporting forest preservation, but largely ineffective for other ecological-based measures of biodiversity. Applying a dynamic difference-in-differences framework, I show that conservation funding generally yields minimal ecological gains. In contrast, funding for biodiversity research expands biodiversity data coverage, though additional investment produces little marginal improvement. A geospatial analysis of bird sightings reveals delayed and spatially dependent impacts on avian biodiversity near funded projects. Additionally, I explore biotechnology-related biodiversity projects as a channel for private investment. These projects generate patents and genetic resources that can be commercialized, suggesting pathways for aligning biodiversity outcomes with investor incentives.