An appeal to investors to help us achieve vital biodiversity goals
Antonio Guterres (UN Secretary-General) opened the UN Convention on Biological Diversity in Montreal with a stark statement: “Without Nature, We Are Nothing.” NatureNature is the life support system for humanity, yet they are hell-bent on destruction.
The summit brought together over 190 delegates to negotiate the Global Biodiversity Framework for the period after 2020. Its implementation will require a change in how we produce, trade, and consume goods and services that rely on biodiversity and have an impact.
Investors and companies have, therefore, been paying attention. Businesses and investors play a crucial role in biodiversity and conservation efforts. They need to invest in sustainable production methods.
Speakers from the financial sector spoke on the Finance and Biodiversity Day, which took place on Dec. 14. They discussed ways to align financial investments with the biodiversity framework. In anticipation of the finance talks, Nature Action 100, a global engagement initiative was launched in order to motivate investors’ actions on nature-related risk and opportunity.
As a scholar of sustainable finance, these initiatives and discussions, while important, need to be accompanied by more urgent and targeted investments in nature-friendly options in order to reverse the loss of biodiversity.
“Without Nature, We Are Nothing”
Many scientific studies have shown alarming statistics about the rate of biodiversity loss. The Living Planet Report for 2022 shows a decline in wildlife populations of an average of 69 percent since 1970. This highlights the double crisis of biodiversity loss caused by human activities and climate change.
The value of ecosystem services, including flood protection and carbon dioxide sequestration, is estimated at US$125-140 trillion annually. (AP Photo/Al-emrun Garjon)
The loss of biodiversity has been given little attention, unlike the climate crisis, which led to the signing of the Paris Agreement. The risks of biodiversity loss are huge.
According to an OECD Report, ecosystem services from biodiversity, such as crop pollination and water purification, are valued at US$125-140 billion per year. About US$44 billion per year is dependent on the natural world.
The curve of biodiversity loss can be bent.
In 2020, the fifth Global Biodiversity Outlook Summary Report for Policymakers published by the Convention on Biological Diversity suggests a range of actions that can be taken to restore biodiversity.
These actions include the restoration of landscapes and marine and coastal ecosystems, redesigning agricultural systems through innovative productivity-enhancing approaches, deploying green infrastructure, enabling sustainable and healthy diets, rapidly phasing out fossil fuel use, and many more.
The Global Biodiversity Outlook offers climate action that could stop and reverse the rate at which biodiversity is declining (bend curve), possibly leading to net gains in biodiversity after 2030. (CBD/Global Biodiversity Overview 5, Summary for policymakers)
Investors and businesses have an important role to play across these domains. This is especially true when it comes time to shift to more sustainable manufacturing and production processes, invest in energy efficiency, reduce waste, conserve natural resources, and invest in climate solutions that also support biodiversity.
Biodiversity and finance
Finance professionals are still not aware of the risks associated with biodiversity. The non-profit CDP, which manages the world’s environmental reporting system, has added questions this year to assess companies’ approaches to biodiversity.
Three-quarters (7700) of the respondents did not evaluate their impact on biodiversity. The majority of companies in sectors that harm the environment, like apparel and manufacturing, do not take any meaningful actions to prevent biodiversity loss.
An OECD report for 2021 states that nature-related risks, impacts, and dependencies are not well understood in the financial sector and are almost completely uncompensated. This results in capital misallocation, which ultimately harms society.
Positive signs are present. Thirty-one percent (of the companies in the survey) have publicly committed to biodiversity initiatives and endorsed them, and 25 percent of respondents plan to do so over the next two-year period.
The 2022 Global Risks Report confirms the growing awareness, stating that biodiversity loss is the third most serious global risk in the next ten years.
Integrating biodiversity into financial decisions
Investors and lenders face a number of challenges when it comes to making informed decisions about the allocation of funds. This is in accordance with the increasing demand for ESG (environmental, social, and government) data disclosure.
The newly launched international initiative task force on nature-related financial disclosures develops a framework for risk management and exposure that will allow organizations to manage and disclose evolving nature-related risks.
The issue of biodiversity is gaining attention from financial policymakers. In March 2022, the network for greening the financial system, a coalition of over 120 central banks and supervisors, released a new statement acknowledging that biodiversity losses could have significant macroeconomic and stability risks.