The Finance for Biodiversity Foundation (FBF) has issued a series of recommended amendments to the Global Biodiversity Framework (GBF), following feedback from over 84 financial institutions.
A draft framework was issued last year, but the FBF said further clarity is needed for it to be successful.
Sonya Likhtman, a manager within the EOS team at the international business of Federated Hermes and co-chair of the Public Policy Advocacy working group for FBF, said: “COP15 presents an opportunity for transformative change to address the biodiversity crisis. Establishing an ambitious GBF is key. To be successful, it must highlight the necessary actions to be taken by all stakeholders, including the financial sector, to urgently halt and reverse biodiversity loss”.
The position paper Aligning financial flows with biodiversity goals and targets, published ahead of the upcoming second instalment of COP15 in May, called for clarity on the definition of ‘financial flows’ and how GBF becomes part of policy for financial institutions.
It said:
- The GBF should ensure that the alignment of financial flows is not only an implementing mechanism, but also a policy aim both for government action and for financial market actors, which is crucial to reduce negative impacts on biodiversity and incentivise positive impacts
- When the GBF references “financial flows”, it should clearly define these as both public and private financial flows and ensure this definition is also reflected in relevant goals and targets
The FBF has suggested a number of amendments saying it supports the inclusion of public and private financial investments within the “financial flows” definition, but it needs to be clearer on what governments and financial firms need to do.
It suggests language such as “identifying, measuring and managing the risks, dependencies and impacts of their investments and financial activities on biodiversity” as a clearer action to follow, for example.
In terms of policy, the paper also reiterated the FBF’s stance on urging governments to “establish a regulatory environment that enables financial institutions to address biodiversity-related risks and opportunities, including by introducing consistent and decision-useful corporate disclosure regulations” – something the Taskforce for Nature-related Financial Disclosures (TNFD) is working on.
“We strongly believe that the GBF should include an explicit expectation for financial institutions and businesses to align financial flows to global biodiversity goals, supported by appropriate regulatory measures and financial incentives,” the paper said.
It also called on the public and private sectors to come together and bridge the finance gap on nature together.
“Current financial flows have proved insufficient for countries to meet their national biodiversity targets, and the funding available for biodiversity has yet to make a significant positive impact in low-to-middle-income countries, which are particularly susceptible to biodiversity loss. A significant increase of public and private financial resources is fundamental.
“Today, most of the funding for nature conservation comes from public sources, but in the future the private sector has a critical role to play in closing the financing gap. The appetite among private financial investors for channelling finance towards restoration and conservation projects, although still relatively small, has grown in recent years.”
FBF also issued some recommendations around reducing harmful flows, increasing resources, and creating targets. The full paper can be found here.
Emine Isciel, head of climate and environment at Storebrand Asset Management and co-chair of the Public Policy Advocacy working group, added: “Financial institutions are increasingly aware that, alongside climate change, the loss of biodiversity and the related decline in ecosystem services are creating risks to businesses and increasing systemic risk for the financial system. An enabling policy environment that supports financial institutions in better managing the risks and capitalising on the opportunities is key.”
Reaction
Vian Sharif (pictured left), head of sustainability at FNZ and member of the TNFD Technical Experts Group, said moving forward financial institutions need to consider climate and nature risks in parallel.
“Climate and nature – either we solve both or we solve neither,” she explained. “Today, nature degradation and exceeding planetary boundaries in relation to natural capital is a systemic risk to economic stability & resilience. The move to nature focus is happening now driven by regulation (TNFD, Article 29, SFDR) and investor demand, given global ESG assets are expected to track $53trn, or more than a third of the world’s asset base.
“There is growing awareness that if institutions ignore nature, it is less likely that they will be able to solve and adhere to their climate change commitments.”
Meanwhile, Ingrid Kukuljan, head of impact investing at the international business of Federated Hermes, highlighted it is estimated that damage to our ecosystems and the associated loss of biodiversity could represent a risk to global economy of $10tn by 2050.
“We consider biodiversity loss as an urgent crisis as we are already living on borrowed time.
“We need corporates to understand their impacts and dependencies on biodiversity and ecosystems the same way investors need to start allocating capital to companies that help to preserve and replenish our natural capital.”
