UNEP calls on finance sector to boost biodiversity ambition and engagement

The finance sector must urgently set evidence-based biodiversity targets in order to prevent its activity from fuelling the ongoing degradation of ecosystems and jeopardising the stability of the global economy, according to UN-backed research.

A report published today by the United Nations Environment Programme (UNEP) and the Natural Capital Finance Alliance (NCFA) warns that few banks, insurers, and investors have frameworks in place to measure and address ongoing biodiversity loss.

There are nine sectors where financial players are critically exposed to biodiversity loss through their loans, investments and underwriting activities, according to the report. The industries deemed most at risk include both economic sectors that have major impacts on biodiversity - oil and gas, mining and goods distribution - and, conversely, tranches of the economy heavily dependent on ecosystem health for survival, such as the apparel, accessories and luxury goods sector, brewers, electric utilities, and independent power producers. The agriculture sector, which is simultaneously heavily dependent on biodiversity while a major contributor to its decline, was also highlighted as a high-risk sector.

The report, dubbed Beyond Business as Usual: Biodiversity Targets and Finance, recommends that financial institutions craft biodiversity targets tailored to each sector's activity that could be met through ecosystem restoration, conservation, and the sustainable use of natural resources. The targets themselves, it suggested, could incorporate "no net loss" or "net gain" of biodiversity commitments.

"The Covid-19 pandemic is a stark reminder of our exposure to and the risks created by the loss of nature," Corli Pretorius, deputy director, UNEP World Conservation Monitoring Centre (UNEP-WCMC). "We urgently need all sectors of the economy to create better outcomes for people and nature. This report shows that banks, investors and insurers have a crucial part to play too. By making nature part of its decisions, and setting ambitious targets for biodiversity, the financial sector can reduce its risks and help to build a more resilient economy."

Today's report argues the EU's recently-adopted 2030 Biodiversity Strategy and the Post-2020 Global Diversity Framework, due to be agreed on at the UN's biodiversity summit in 2021, will only be effective if financial institutions are enlisted in the fight against biodiversity loss.

But, despite the World Economic Forum's estimates that more than half the world's GDP is either moderately or highly on dependent on nature, the report warns very few financial institutions have acted to address its decline. A recent investigation by ShareAction found that none of the world's 75 largest asset managers has a dedicated policy on biodiversity.

Eric Usher, UNEP Finance Initiative head, said the emergence of Covid-19 "has underscored the fact that, when we destroy biodiversity, we put our lives, livelihoods and economies at risk".

"This report provides a pathway for financial institutions to build back better and contribute to halting and reversing the biodiversity crisis, enabling them to bring their assets and decision-making in line with global policy developments," he added

The new study draws on insights provided by a tool dubbed Exploring Natural Capital, Opportunities, Risks and Exposure (ENCORE), which was jointly launched by NCFA and UNEP in late 2018. The online tool allows banks, investors, and insurance firms to assess how their portfolios could be affected by biodiversity loss.

Karin Siegwart, vice-director of the Swiss Federal Office for the Environment, which helped fund the report, said the tool would allow the finance sector to better align itself with international biodiversity goals. "Improving the understanding of industries' exposure to biodiversity risks as well as their impact on biodiversity loss allows for better-informed decision-making," she said. "This is why we support the development of the enhanced ENCORE tool as it helps align financing and investment decisions with international biodiversity goals."

In recent months, policymakers have faced an avalanche of calls demanding that investment in the restoration of nature is a centrepiece of economic recovery efforts from the coronavirus crisis.

Earlier this month, a coalition of NGOs and business groups, including WWF, the International Chamber of Commerce and United Nations Global Compact, urged the private sector to "speak up for nature" and encourage political leaders to embrace economic policies and packages that prioritise nature restoration. And more than 50 UK charities wrote to the Prime Minister to demand that his government implement a 'green recovery' plan that involves working with the international community to rapidly reverse the decline of biodiversity and nature.

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• Topics
• Biodiversity
• Risk
• Investment
• green finance
• United Nations Environment Programme
• Natural Capital Finance Alliance
• ESG