Comment: Eric Usher of the UN Environment Programme Finance Initiative and Corli Pretorius of the UN Environment Programme World Conservation Monitoring Centre say banks should urgently set targets for financing the protection of nature in the critical next decade in the same way that many have set climate targets
The UN General Assembly last month saw a groundswell of political commitment around one of the most decisive issues of our time: biodiversity loss. Biodiversity – the variety of all life on Earth – is the living fabric of our planet. It is at the core of human life and prosperity, and all businesses depend on and impact nature through their activities and supply chains. US$44 trillion of economic value generation, more than half the world’s GDP, is moderately or highly dependent on nature, according to the World Economic Forum.
Yet biodiversity is in unprecedented decline, with up to 1 million species threatened by extinction. A recent Swiss Re report found that a fifth of countries worldwide are at risk from ecosystem collapse. Biodiversity loss is projected to continue under a business-as-usual scenario, causing disastrous impacts for communities and economies worldwide.
Halting and reversing biodiversity loss will require transformative change and action from across all sectors of society. Next year, countries are expected to adopt an ambitious and transformative Post-2020 Global Biodiversity Framework at the UN Biodiversity Conference (CBD COP15) in China, but governments alone cannot stop the global nature crisis. The loss of nature creates societal risk and exposure, and it demands a whole-of-society response, including from the finance sector.
The WEF found that nature-positive solutions can create 395 million jobs by 2030
Financial institutions have a crucial role to play in accelerating the transformation of the global economy towards a greener and more resilient future. “Economic systems and financial markets must account for and invest in nature,” stressed UN Secretary-General Antonio Guterres in New York last month. “The current system is weighted towards destruction, not preservation.”
If the challenge is great, so are the rewards. With conservation and sustainable use of biodiversity supporting the achievement of 12 of the 17 Sustainable Development Goals, there are tremendous investment opportunities as the world begins the UN Decade of Action and Delivery of SDGs and of ecosystem restoration (2021-30). Indeed, the World Economic Forum found that nature-positive solutions can create 395 million jobs by 2030, alongside $10.1tn in business opportunities.
What can financial institutions do?
One key step is to support and incentivise new, nature-positive business models among their clients. The newly introduced Global Fund for Coral Reefs aims to do just this, serving as a blended finance vehicle leveraging grants, debt, and other financial instruments to facilitate private return-based investments for coral reef conservation and resilience. The fund seeks to invest $500m over the next 10 years, supporting businesses and finance mechanisms that improve the health of coral reefs and associated ecosystems, while empowering local communities and enterprises.
Indeed, the “blue economy” and ocean-related sectors have an estimated economic value of $2.5tn per year, equivalent to the world’s seventh-largest economy. Cross-industry forums such as the Sustainable Blue Economy Finance Initiative encourage financial institutions to address unexplored biodiversity risks and opportunities in their exposure to ocean sectors including shipping, aquaculture and offshore renewables.
Financial institutions should also urgently set biodiversity targets and implement changes to achieve them. This year, for the first time ever, the top five global risks from the World Economic Forum’s Global Risk Report all came from a single category: the environment. While many in the financial sector have set climate targets in recent years, few have begun to address the critical issue of biodiversity loss. This means the nature agenda can build from what climate finance has learned – namely, the importance of setting targets, managing risk, disclosing, and reporting.
There is an increasing number of tools available for financial institutions to help them set and achieve their targets, including ENCORE. ENCORE is developed by the Natural Capital Finance Alliance, a collaboration between the UN Environment Programme Finance Initiative (UNEP FI) and Global Canopy, in partnership with UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) to help financial institutions better understand their impacts and dependencies on nature and integrate natural capital risks into their activities.
Climate change and biodiversity loss are twin crises and need to be tackled together. We can’t make nature wait for climate
Setting targets alone is not enough. To achieve them, nature must be at the heart of decision-making. A new ENCORE module is currently in development to strengthen biodiversity target-setting by enabling financial institutions to assess the current exposure of their portfolios to biodiversity risk and alignment of their portfolios with global biodiversity goals. Dozens of financial institutions are working together to test and refine the tool.
The next 10 years is a last-chance decade for both biodiversity and climate. Many businesses are making progress towards tackling climate change, but climate change and biodiversity loss are twin crises and need to be tackled together. We can’t make nature wait for climate – we need to do both and accelerate the socio-economic transitions they require.
As we look to build back better from the Covid-19 pandemic, the shifts in the global financial system are a chance to set the world on track for a nature-positive recovery and ensure financial flows move towards sustainable development. There are real environmental and societal consequences to what financial institutions choose to do. 2020 should usher in a decade of responsible and ambitious action by financial institutions, moving capital wisely to restore ecosystems and replenish nature, bringing long-term stability and resilience to market economies.
Eric Usher is head of the UN Environment Programme Finance Initiative (UNEP FI) and Corli Pretorius is deputy director of the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC).
World Economic Forum biodiversity loss CBD COP15 coral reefs marine ecosystems ENCORE Global Canopy