COP15: financial institutions call for ‘ambitious’ biodiversity framework

Firms including Fidelity International and UBS Bank are among 150 financial institutions with a collective AUM of $24trn that have called for an “ambitious” global framework to come from the COP15 biodiversity conference taking place in Montreal.

The joint statement said that nations must adopt a post-2020 Global Biodiversity Framework for economic actors, including financial institutions, that takes decisive action to halt and reverse nature loss. Once in place, the framework is expected to be followed on a decade-long timescale.

A key demand from the statement was that the final framework contain a clear mandate for the alignment of financial flows with the preservation of global biodiversity, such as Article 2.1(C) did within the Paris Agreement for climate change.

Pipeline of nature-positive projects

The joint statement also called for an agreement that would support the assessment and disclosure of nature-related impacts and dependencies, and provide clear targets and definitions to take action and help develop a pipeline of nature-positive projects and investments.

Jan Erik Saugestad, CEO of Storebrand Asset Management and a signatory to the letter, said: “The private financial sector is critical if we are to deliver the urgent action required to halt and reverse biodiversity loss in this decade. Some financial institutions are already taking important steps to address biodiversity loss, but voluntary actions alone will be insufficient to change practices across the financial sector in a way that protects and restores biodiversity.

“It is therefore critical that the updated framework creates the impetus for governments to create the enabling environment that will support and scale up actions from the financial sector to reverse biodiversity loss in this decade.”

The statement was coordinated by the UN Principles for Responsible Investment, and acknowledged that human drivers are causing “unprecedented damage” to the natural environment, resulting in over one million animal and plant species being threatened with extinction.

Huang Runqiu, president of the convention that is presided over by China though hosted in Montreal due to Covid shutdown concerns, expressed confidence in a press conference that agreement on such a framework would be reached at COP15.

“All parties need to show greater courage, wisdom and determination, fully demonstrate the sincerity, flexibility and inclusiveness, to close gaps, minimise differences, and meet one another halfway, so as to work towards the final achievement of the conference’s goals”, said Runqiu, China’s minister of ecology and environment.

Further notable signatories to the statement were Amundi, First Sentier and HSBC Asset Management. Missing were asset managers including Vanguard, State Street and BlackRock.

The letter was also coordinated by the Finance for Biodiversity Foundation, a convening body of 111 financial institutions representing 20 countries and over $17trn in assets.

Further COP15 developments

In spite of optimism from the COP president and pressures such as that from the joint statement, there is still the possibility the final document from the conference will be weakened following national and lobbyist pressure, mirroring the reference to “low-emission” fuels rather than “net-zero” in the final text from the recent COP27 climate summit.

There have, however, also been company reports released to coincide with COP15 that show increasing awareness of biodiversity in the financial world.

Climate and nature-based sustainable finance provider Earth Security shared a report on “cloud forests”, which are mountain tropical forests constantly shrouded in clouds that sit at the headwater of river basins.

Among its findings, Earth Security reported that an estimated $246bn of hydroelectricity depends on water from such cloud forests, and that a “cloud forest bond” could help relevant governments achieve better finance terms in return for protecting valuable natural assets threatened by biodiversity loss and climate change.

ESG and portfolio analyst MSCI has also launched tools that claim to help investors identify companies at risk of contributing to biodiversity loss and deforestation.

According to MSCI, the screening tools combine thousands of ESG and climate data points, overlayed with the firm’s geolocation data that helps pinpoint a company’s operations. The tools include biodiversity-sensitive screening metrics, and metrics that can identify firms exposed to deforestation, itself an area that is currently being targeted by EU legislation.

On the opening day of COP15, UN Secretary General António Guterres spoke of the need for national biodiversity finance plans to “help close the finance gap”.