Ninety percent of the world lives with either degraded land, unhealthy air or water stress. In low-income countries, 80 percent live without all three.

• The degradation of natural wealth is not just an environmental problem, it is also an economic liability. And this is not a future problem, it is already happening here and now.

• The world has also crossed 6 of the 9 "Planetary Boundaries", the scientifically defined limits for Earth systems that keep the planet habitable. Just 150 years ago, wild mammals accounted for about half of all biomass. Today, they account for a vanishing 5 percent, while humans and their livestock account for an astonishing 95 percent of biomass.

The good news is that across all three systems, change is possible and worth it. Restoring natural systems is possible and it can generate jobs and unlock surprisingly high returns.

• Improving farm-level practices of nitrogen fertilizer use can deliver 25 times greater benefits than their cost, while boosting crop yields.

• Chlorinating water at point of use could save a quarter of the children that prematurely die from water-related issues.

• "Pollution markets" not only reduce air pollution, they are also extremely cost effective: each $1 spent yields about $26-$215 in benefits.

Jobs and productivity rely on clean air, healthy soils, and resilient ecosystems. Sectors with low pollution footprints - such as forestry, renewable energy and sustainable agriculture - generate more jobs per dollar invested than polluting ones.

Achieving economic growth without harming the environment is not only possible but has already been demonstrated in practice by some highincome countries, mainly by increasing resource-use efficiency.

Closing the development gap requires more than dollars: it requires integrated solutions that address both poverty and environmental degradation together.

Many of the world's poorest societies face severe environmental decline before they have raised living standards. This demonstrates that the old paradigm-that pollution is a necessary evil of industrialization-is no longer valid, as many societies face environmental decline before industrializing.

• In low-income countries, 80 percent of people face three hazards at once: land degradation, unsafe air, and water stress.

• Land degradation erodes food security and livelihoods.

• Poor air quality reduces labor productivity and increases health costs.

• Water stress undermines health, agriculture, and energy generation.

Affluence provides only limited immunity. While low- and middle-income countries face disproportionate burdens, environmental degradation doesn't respect borders or income levels. A challenge in one region rapidly becomes a challenge for entire continents. Moreover, challenges like nitrogen pollution and declining water quality impact both rich and poor countries alike.

However, traditional finance wasn't designed for this challenge:

Financial incentives, including concessional finance, primarily target low-income countries, leaving out the middle-income nations that hold many biodiversity hotspots, major tropical forests, and critical river system, where the economic stakes of ecosystem degradation are also macro-relevant. With scarce development finance, they rationally focus on projects with the highest domestic returns. Standard lending operates at commercial-adjacent rates that don't account for the massive positive externalities (i.e. cross-border benefits) these countries generate when they produce or protect global public goods.

In short, the international financial architecture does not consistently reward countries for acting in humanity's collective interest, nor does it incentivize this kind of action.

The Framework for Financial Incentives (FFI) for Projects that Address Global Challenges with Cross-Border Externalities is a new financing instrument that operationalizes Reboot Development's economic logic: It takes us from understanding the problem (misaligned incentives for global public goods) to solving it (making protection of those goods financially rational for individual countries).

• How the FFI works in practice: Operating on a "least financial incentive principle," the FFI rewards countries for projects with global benefits, underpinned by dedicated shareholder contributions.

• The FFI offers countries additional loan volumes, longer repayment maturities, or reduced borrowing costs specifically for initiatives that address global challenges while generating positive cross-border externalities-such as forest protection, pandemic preparedness, or clean energy transitions.

It is a mechanism that reduces the shortterm tradeoffs associated with global public goods and shifts the economic calculus: What was previously a financial burden or an investing question mark becomes a financially attractive opportunity. Countries can pursue development that's good for both their people and the planet without sacrificing fiscal sustainability.

• FFI specifically targets middle-income countries, recognizing that these countries' choices will largely determine whether we stay within planetary boundaries.

The new Livable Planet Fund (LPF) provides the grant financing needed for the price incentives under the FFI. This umbrella trust fund is the first fund exclusively providing incentives for Middle Income Countries to address global challenges that have a cross-border impact.

• The Global Solutions Accelerator Platform (GSAP) provides volume incentives that are truly additional to clients' resources. They are underpinned by voluntary Shareholder contributions to IBRD's capital in the form of new financial instruments (hybrid capital, portfolio guarantees, enhanced callable capital), benefitting from the impressive leverage of the World Bank's balance sheet (at and above 1:5 over 7 years).

• Beyond financing, it's about countries and their choice: FFI doesn't dictate priorities or impose conditions. Countries choose their own development pathways. FFI simply changes the financial equation so that choices benefiting the global commons become locally advantageous. It respects country ownership while acknowledging global interdependence.

• A well-resourced FFI has the power to match the urgency of the moment: In just its first 9 months of operation, there has been strong demand: the FFI approved incentives for 25 projects, with a total of $200 million in price support and $3.6 billion in volume incentives granted, impacting a total volume of $12 billion in lending. This is a recognition that business-as-usual timelines are inadequate. By being fully integrated into internal decision-making processes and taking advantage of the powerful WB leverage, the mechanism is designed for speed and scale because the problem demands both.

Reboot Development identifies three essential elements to unlock jobs and economic opportunities while preserving nature. FFI supports and strengthens all three elements in practice.

• Inform: Information is power. From air pollution monitors to satellite imagery, realtime data helps governments target problems, empowers citizens, and drives accountability. Without visibility, progress stalls. FFI requests clients and teams to specify and quantify crossborder benefits and rewards projects that embed this principle through verifiable outcome measurement.

• Enable: Policies work best when they work together. A systems approach aligns actions across sectors and time, helping avoid unintended consequences like pollution shifting or trade-offs between efficiency and equity. Achieving multiple goals requires multiple, well-coordinated tools. Given the understandable focus on domestic priorities by MICs, the FFI provides a dedicated incentive for win-win transformations that is specifically adapted to the various sectors - from water to food security, biodiversity and pandemics to climate change.

• Evaluate: Learning beats guessing. Regular evaluation keeps policies on track, helps scale what works, and ensures reforms can adapt to shifting realities. In a fast-changing world, smart feedback is as essential as smart design. For example, in the recently approved Brazil Amazonas project, Brazil's performance-based payments depend on meeting measurable deforestation targets.

The FFI value proposition for…

• For academics and researchers: FFI provides real-world evidence on whether the payment-for-externalities method can address underinvestment in projects with spillover benefits. It tests whether this new financing tool can overcome collective action problems.

• For donors and development partners: FFI offers a mechanism to invest in solutions that work at global scale (benefitting countries of all income levels) while respecting country ownership. Every dollar invested doesn't just finance one country's project; it generates benefits that cascade across regions and ultimately benefit donor countries themselves through reduced climate risk, better pandemic preparedness, and increased global stability and security.

• For finance ministries and policymakers in partner countries: FFI makes smart development financially feasible. As Reboot Development concludes, "Investing in nature is not only good for the planet, it is smart development." FFI provides the financial firepower to pursue such smart development pathways that protect natural capital while meeting development and employment objectives.

• For civil society and environmental advocates: FFI provides concrete financial backing for environmental commitments. It transforms abstract pledges into funded projects with measurable outcomes. While no single mechanism solves everything, FFI represents a significant step toward a financial system that values the protection of precious natural capital.

• For the planet and future generations: As Kevin Watkins of the London School of Economics points out, the FFI gives us a tool to be good ancestors: "Our ultimate responsibility is to hand on to our children and to their grandchildren a planet that is sustainable, a planet that is livable. We need to behave like good ancestors who think about the well-being of people in the future, and I think what the World Bank has put in place with this initiative is a financial structure that creates the incentives that could enable us to do that."