A summary on what effects might the latest COP 15 have in financial institutions, target by target. The purpose of the latest UN Biodiversity Conference was manifested through the adoption of the Global Biodiversity Framework (GBF), which provides a framework for bold action and alignment of economic sectors. One of six key decisions as part of the ‘Kunming-Montreal biodiversity package’, 196 countries adopted it, and it has come to be considered the analogy of the Paris Agreement on climate. The framework calls for a whole society approach, whereby the objectives established are to be translated into national plans through National Biodiversity Strategy and Action Plan (NBSAP) that countries must update no later than the next COP, which will be held in late 2024. The upcoming regulatory shifts that should be expected from signatory countries will affect all members of society, including the private sector. Nonetheless, the private sector, including financial institutions, should anticipate to these changes as there is a particular investment case to do so. Doing it now would entail a mitigation of risks related to nature and creating opportunities to profit on the positive outcomes of nature. To seize the opportunity, they ought to align their portfolio with those targets established under the GBF. The financial sector should from now onwards include biodiversity in all its decisions: financing, underwriting and investment decisions. Along the recognition of nature-based solutions during COP 27, the GBF is an important step forward in the preservation and restoration of nature.
In a nutshell, the horizons that the GBF foresees, is the halt and reverse of nature loss by 2030;
backed by 23 action-oriented targets which concern the activities conducted by financial institutions. Furthermore, for the longer term, the GBF also includes four overarching goals to be achieved by 2050. The UNEP FI along PRI recommend three broad actions to be taken by investors to be ahead of national governments’ implementation of the GBF, to forecasts potential risks and capitalize on opportunities associated with the biodiversity crisis.
- Integrate biodiversity into investment decision-making.
- Invest in innovative solutions to mobilise the needed $200bn/year to meet GBF’s objective. These solutions include blended finance, impact funds, payment for ecosystem services, green bonds, and biodiversity credits.
- Disclose nature-related dependencies, impacts, risks, and opportunities.
The GBF’s long-term goals (2050 horizon)
Out of the four goals laid out for the 2050 horizon there is only one that explicitly refers to private finance yet all of them are relevant to the private sector to a certain extent. The 2050 scenario envisions a situation in which biodiversity is thoroughly valued, conserved, restored, and widely used.
Moving to the goals, goal A states that the resilience of all ecosystems has to be maintained, restored or enhanced. Also, extinction rates and risks must be reduced tenfold, and the current genetic diversity maintained. Abiding to this, financial institutions should then refrain from any financial flow that contributes to the opposite and instead, enhance those that contribute to the objectives previously stated.
Goal B establishes that nature’s output, mainly in the form of ecosystem services, should be sustainably used and managed. A sustainable use entails that this the flow of services is not compromised for future generations. Therefore, financial institutions should integrate sustainability within their decision-making processes in the form of internalizing environmental externalities and investing in the maintenance of the environment.
Regarding goal C, it seeks to ensure equitability in the use of biodiversity resources. Moreover, indigenous peoples and local communities (IPLCs)’ efforts to preserve nature should be acknowledged as well as their rightful access to these services often neglected. In this sense, financial institutions should ensure sound stakeholder engagement of financed activities and across supply chains, as well as a consent of indigenous people in case they are affected. A more proactive stance should be promoted towards IPLCs in nature-related enterprises and as project proponents.
Lastly, goal D is the analogous of Article 2.1 in the Paris Agreement which calls for the alignment of private and public flows to support the implementation of the GBF. Similar to goal A, this means for private institutions to reduce and halt as much as possible negative biodiversity-related financial flows and to scale up beneficiary flows to close the current finance gap