By Katie Leach, Senior Programme Development Manager - Biodiversity, ShareAction
Climate change and the loss of nature are two sides of the same coin.
We can’t achieve our climate goals without also acting to halt the loss of nature.
It is little wonder then that nature featured prominently this year at the UN climate talks (COP26). For the first time, the COP ‘decisions’ (the outcome of the talks agreed by all governments) extensively reference nature – some seven paragraphs were dedicated to the topic.
And with political interest in the topic, we also saw a flurry of actors rush to show their commitment too. This included pledges from 30 financial institutions - with $8.7 trillion in assets under management - to eliminate agricultural commodity-driven deforestation by 2025.
But as we’ve seen with climate change before it, pledges on biodiversity loss will only get us so far.
2022 will be a critical year. The next round of global talks on biodiversity will take place, where governments will look to make a final decision on the post-2020 biodiversity framework.
Now is the moment to learn from past mistakes, turn good intentions into action, and set a clear path to deliver on biodiversity commitments.
Both our natural world, and our climate, will depend on it.
There is no climate action without action on nature loss
Climate change and biodiversity loss represent severe environmental threats to the planet.
But there are many common solutions for both. This includes the protection of forests, wetlands and coastal ecosystems.
Climate change is the third largest direct driver of biodiversity loss, after land and sea use change and the direct exploitation of our natural world.
It has shifted species distribution, undermined ecosystem function, and is already impacting agriculture, aquaculture, and fisheries.
Climate change is also expected to increase the risk of spill over events such as pandemics, as changing climate conditions impact habitats and species migrate into new areas.
In turn, the loss of biodiversity and the vital services it provides also reduces our natural world’s ability to help limit climate change and mitigate its negative impact.
Degraded ecosystems are less able to maintain the regulatory services needed to manage climate change, such as carbon sequestration or the ability to act as a buffer to extreme weather events.
To drive real action on nature loss, we must look beyond forests
While commitments to tackle deforestation are welcome, policy makers, businesses and financial institutions also need to look at the role of other ecosystems in strengthening climate change mitigation and adaptation, for example the ocean, mangroves and peatlands, as mentioned in the COP26 decision text.
The ocean produces 50 per cent of the oxygen in the atmosphere, absorbs around 90 per cent of excess heat and about 25 per cent of human-produced carbon dioxide emissions. It regulates the global climate.
The ocean has greatly slowed the rate of climate change but has also been one of its first victims. Marine species are disappearing at twice the rate of those on land. Coral reefs are projected to decline to 10 to 30 per cent of former cover at 1.5C warming and to less than 1 per cent of former cover at 2C warming.
The protection and restoration of these other ecosystems, as well as efforts to eliminate commodity-driven deforestation, should be an essential component of net-zero transition plans.
Credible pathways to deliver on our nature commitments are vital
The UN climate conference saw a range of commitments to tackle biodiversity loss. On top of pledges from financial institutions, we saw 137 countries – covering 91 per cent of global forests – sign the Glasgow Leaders’ Declaration on Forests and Land Use. Meanwhile $1.7bn was pledged to support indigenous peoples and local communities in their role as guardians of forests and nature.
These commitments are a positive signal. Not only do they show these actors are ready to step up on nature loss, but made at the climate change conference, they signal a growing understanding of the interconnectedness of these two challenges.
But commitments alone will not build the future we need for our planet and its people.
We now need credible pathways for delivery.
These pathways must recognise what has and hasn’t worked previously. For example, the New York Declaration on Forests was signed by many governments, companies and financial institutions in 2014 with the aim to “cut natural forest loss in half by 2020, and strive to end it by 2030” .
Not one company achieved this high-profile 2020 goal.
In addition, our recent research found that not a single one of the 25 largest European banks has made a commitment to zero deforestation by a specific date. Ten banks’ sector policies outline an expectation that clients have a No Deforestation, No Peat and No Exploitation (NDPE) policy, but none include this as a strict requirement for clients .
While participation in such commitments and initiatives is encouraged, an emphasis on subsequent monitoring of compliance and outcomes is vital to ensure these pledges are not meaningless.
We need to hold all actors accountable and make sure that everything that was promised at COP26 is fully delivered.
The announcements made in Glasgow need to be reflected in countries’ national policies and action plans, integrated in business’ policies and practices and in financial risk analysis and decisions.
The financial sector has a major role to play
The twin crises of climate change and biodiversity loss call for financial institutions - whether asset managers, asset owners or banks - to adopt and implement ambitious and integrated strategies at speed.
The influence financial institutions wield through the ownership and financing of companies means their potential for driving change cannot be underestimated.
Although financial institutions are becoming more sophisticated in their responses to climate change, our recent asset manager and insurer rankings show that approaches to biodiversity lag far behind.
At present, many financial institutions treat biodiversity loss and climate change as isolated issues. In doing so they risk underestimating the true scale of their impacts and failing to develop effective mitigation strategies.
Efforts are underway to develop a risk management and disclosure framework for organisations to report and act on nature-related risks (the Taskforce on Nature-related Financial Disclosures, or TNFD ).
The aspiration is that the TNFD will complement the existing Taskforce on Climate-related Financial Disclosures (TCFD) in terms of usability and adoption by market participants. The aim is that together they will be comprehensive in their coverage of climate and nature-related financial risks
But we need action now.
As part of interviews for our biodiversity scoping study many investors emphasised the practical imperative to integrate biodiversity into existing work streams, for example on climate change.
Asset managers can already start to address these twin crises in an interconnected manner by:
- Embedding climate considerations in biodiversity policies;
- Elevating biodiversity loss considerations as part of climate engagement; and
- Prioritising engagement with sectors and companies who have a disproportionate impact on biodiversity and climate change.
In doing so, they will not only ensure they are keeping pace with the growing political and regulatory focus on these two systemic issues, but they will be ensuring they play their role in driving the change needed to protect our planet and its people.
There is no time to lose.