Financial institutions must address the urgent threat that biodiversity loss poses to our planet and its people. As owners and financers of companies, the financial sector’s role in driving change cannot be underestimated.
Over the next two weeks, thousands will gather in Montréal for the United Nations Fifteenth Conference of the Parties to the Convention on Biological Diversity (CBD COP15).
At this gathering, parties to the Convention will adopt a Global Biodiversity Framework that sets out goals and targets for the coming decade.
COP15 has the power to kickstart ambitious and urgent action globally, regionally and nationally both by governments and the whole of society. With more financial institutions and companies attending than ever before, the private sector must be prompted into action by these international policy developments.
We’ll be keeping a particular eye on Target 15. If agreed, this target will mean nations are expected to require all large businesses and financial institutions to assess and report the impact of their activities on biodiversity. National policies in line with Target 15 would also require businesses to reduce these impacts by half, and increase their positive contribution to reversing biodiversity loss.
We want to see an agreement that includes Target 15 in the framework, but investors don’t have to wait to get started.
In addition to adopting their own bold targets and commitments on biodiversity, financial institutions can take practical steps today to start tackling the biodiversity crisis in line with the proposed goals and targets in the Framework.
Use data and metrics that are already out there
There are several tools and measurement approaches financial institutions can use now to assess impacts and dependencies on biodiversity. They are imperfect, but a good start. Assessing impacts and dependencies on biodiversity is a crucial step in understanding how portfolios interact with the natural world and is likely to be part of the Global Biodiversity Framework through Target 15.
Data tools such as ENCORE, IBAT and Trase are key for understanding potential high-risk sectors, locations and supply chains, while measurement approaches like the Global Biodiversity Score can support biodiversity footprint assessments. There are even new and innovative ways to measure biodiversity, like eDNA, that financial institutions can try out. And information from publicly available company reports, third party data providers and sustainability benchmarks, can also build a more detailed understanding of a company’s interaction with nature.
But location-level data from companies on their assets and supply chains can make these assessments even more accurate. That’s why financial institutions should require detailed location-level disclosures from companies – that will also support implementation of the Taskforce on Nature-related Financial Disclosures (TNFD) LEAP Nature Risk Assessment approach.
COP15 is likely to further revive the use and development of biodiversity data and metrics by financial institutions as they set out action plans to reach the goals and targets of the Framework. Importantly, the financial sector can actively contribute to initiatives working to improve biodiversity measurement for both companies and financial institutions, for example initiatives led by the Finance for Biodiversity Pledge and the Science-Based Targets Network.
Make the links between biodiversity and climate
Climate change and biodiversity loss are inextricably linked. In fact, Target 8 in the Global Biodiversity Framework specifically focuses on how the impacts of climate change on biodiversity need to be minimised. Financial institutions can take advantage of the relationship between climate change and biodiversity loss to address biodiversity through their climate strategies.
For example, they can act now to ensure that companies in high-emitting sectors– many of which also negatively affect biodiversity– assess and disclose their impacts and dependencies on biodiversity. This will ensure that risk assessments consider the impacts of climate change on biodiversity and identify opportunities that both mitigate climate change and protect and restore biodiversity.
Data from climate reporting, such as that reported through the Taskforce on Climate-related Financial Disclosures, can also support assessment of biodiversity-related risks. This could be data on greenhouse gas emissions, pollution or water use – all of which will support the assessment of impacts and dependencies on biodiversity at a company level. The financial sector can use this existing data, and benefit from other resource efficiencies, when they make the links between these two crises.
Halting biodiversity loss and restoring ecosystems is essential for achieving net-zero. That's why financial institutions must also ensure that companies’ climate transition plans integrate biodiversity. Developing biodiversity-informed climate transition plans, while a crucial step in addressing biodiversity loss, is not sufficient. Financial institutions should encourage companies to formulate a standalone biodiversity strategy that addresses all drivers of biodiversity loss (not just climate change).
Get ahead of the regulation
The finance sector can prepare today for the impact of biodiversity-related financial regulation, while also driving forward the development of more ambitious policies.
Policies and regulations on biodiversity are evolving rapidly, with progressive policymakers calling for regulation to follow in the footsteps of climate policies.
Regulations such as France’s Article 29 which requires companies and financial institutions to report on their biodiversity impacts and dependencies, as well as the goals being agreed at an international level at COP15, indicate a growing interest in holding financial institutions accountable for their contributions to biodiversity loss.
Financial institutions must be ready to adapt at speed to these regulations. They can even jumpstart this process by trialling the Taskforce on Nature-related Financial Disclosures (TNFD) Framework to build their capacity to respond to future regulation.
They must also play a key role in raising sector-wide standards for biodiversity stewardship. The finance sector can also support ambitious policymaking by contributing more transparently to policy development and supporting specific policy responses to proposed regulation. They can also join policy-focused working groups, like those run by UKSIF and the Finance for Biodiversity Foundation, to push for more effective biodiversity-related financial regulation.
The time is now
Halting and reversing biodiversity loss requires urgent action by governments, companies and individuals. But financial institutions must also play their part in tackling this crisis.
The three practical steps to take action above are at the core of ShareAction’s new briefing - showing that the finance sector already has the resources, tools and strategies to start tackling biodiversity loss today.
At this year’s COP15, over a thousand companies and financial institutions will be represented. The finance sector must make the most out of this worldwide effort for change. They must galvanise action on biodiversity in their own community.
Change is essential. Our planet depends on it. And there’s no time like now