New report published with the UN Environment Programme sets out how banks, investors and insurers can understand their impact and dependency on nature
A new report published today by the United Nations Environment Programme (UNEP) and the Natural Capital Finance Alliance (NCFA), of which Global Canopy is a founding member, shines a spotlight on the urgent need for financial sector action on biodiversity. The report highlights the need for banks, investors and insurers to set firm targets to reduce biodiversity loss, for example ‘net positive impact’ across their activities, starting with nine critical sectors where financial players are exposed through their loans, investments or underwriting activities.
Biodiversity – the variation of species and genetics among animals, plants, fungi or microorganisms – is fundamental to economic health, yet in less than three generations, human-caused global change has accelerated sharply, altering almost 75% of our planet’s surface, from land to ocean, and posing a considerable risk of changing the Earth’s systems. The continued degradation of these vital ecosystem services represents an estimated annual loss of at least US$479 billion per year.
Policy frameworks, such as the Post-2020 Global Biodiversity Framework, due to be agreed under the Convention on Biological Diversity in 2021, and the European Union’s 2030 Biodiversity Strategy, are placing biodiversity at the heart of a post-pandemic economic recovery.
This may be set to change. The European Commission, for example, is currently reviewing the reporting obligations of businesses under the Non-Financial Reporting Directive, with a view to potentially mandating new disclosures on biodiversity.
Today’s report – developed by the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) – explores how financial institutions can contribute to halting biodiversity loss. It sets out the nine priority sectors with large financial flows and major potential dependencies or impacts on biodiversity. This enables financial institutions to gain an understanding of where the highest risks lie within their current activities to inform their target setting.
A step-by-step guide outlines approaches to target-setting on biodiversity based on an initial analysis of the nine priority sectors, with example targets including “no net loss” or “net gain” of biodiversity. These can be implemented through measures such as investing in ecosystem restoration, biodiversity conservation, and the sustainable use of natural resources. This approach enables financial institutions to reduce risk exposure and create a more resilient global economy.
Commenting on the launch of the report, Niki Mardas, Executive Director of Global Canopy, said:
“The nature crisis is accelerating. This is an existential threat to us all – and is already creating profound systemic risks for the global finance sector. Establishing evidence-based biodiversity targets is a basic and essential step for any financial institution that does not want to get left behind. This report – and the innovative ENCORE data platform that sits behind it – is an important step towards that.”
The report draws on the science and analyses of the online ENCORE tool – Exploring Natural Capital Opportunities, Risks and Exposure – developed jointly by the NCFA and UNEP-WCMC. It will be followed later this year by a ground-breaking biodiversity module in ENCORE, currently under development in consultation with 27 financial institutions. The module will enable banks, insurers and investors to assess whether their portfolios are in alignment with global biodiversity goals.
The nine sectors financial institutions should focus on target setting for are (in alphabetical order):
- Agricultural Products (priority from both impacts and dependencies perspective)
- Apparel, Accessories & Luxury Goods (priority from dependencies perspective)
- Brewers (priority from dependencies perspective)
- Distribution (priority from impacts perspective)
- Electric Utilities (priority from dependencies perspective)
- Independent Power Producers & Energy Traders (priority from dependencies perspective)
- Mining (priority from impacts perspective)
- Oil & Gas Exploration & Production (priority from impacts perspective)
- Oil & Gas Storage & Transportation (priority from impacts perspective)
You can find the report here.