Making finance work for nature

Image © Shutterstock

By |2022-05-23T06:39:32+00:00October 27th, 2020|Biodiversity, Conservation, Economy, Environment, Finance, In-Depth, More than Carbon|Comments Off on Making finance work for nature

Our global economic system relies on a wide range of financial services to operate. From bank loans to public offerings of shares and from insurance to trade finance. Most of these financial transactions will have an impact on the natural world: directly, for example, through a loan to a timber extraction company, or indirectly, perhaps through a bond deal for a retail clothing company that sells products manufactured from viscose (derived from wood pulp). If we are to halt biodiversity loss, one thing is certain – the finance sector needs to be part of the solution.

Nature in decline

The 2020 Living Planet Report from WWF and ZSL, tells us that wildlife populations have fallen by an average of 68% since 1970. Sir David Attenborough has just released his very personal film, ‘A Life on our Planet’, a deeply felt plea for change in which he shows how life on Earth has declined over his lifetime. Whilst we wait for governments to show leadership by committing to ambitious targets under the Convention on Biological Diversity (CBD), next year, we already know where some of the most important changes need to happen. Scientists are agreed that we need to achieve, ‘No Net loss of Biodiversity by 2030’, to ‘Bend the Curve’ and halt nature’s decline. What does this mean for businesses and how can the finance sector play a key role in getting financial flows to work for – not against – nature?


Source: Leclère, D., Obersteiner, M., Barrett, M. et al.Bending the curve of terrestrial biodiversity needs an integrated strategyNature 585, 551–556 (2020) 

We have already seen how campaigns to address climate change have shifted the policy dialogue and there are signs that this is beginning to happen on biodiversity issues. Consumer awareness is increasing, as more people are looking to take action to protect nature through their everyday choices: the products they buy; how they invest their savings and pensions; and through increased shareholder action to put pressure on companies to align their businesses with global targets for climate and biodiversity.

The direction of travel is clear, but we need to move faster.

Finance and Biodiversity today

By financing activities across a wide range of sectors, many banks and investors continue to be leading contributors to biodiversity loss. Two reports published this year identified key sectors that have the greatest impact on biodiversity. The World Economic Forum’s, ‘The Future of Nature and Business’, July 2020, highlighted key sectors where action is needed:

  • Food
  • Land and Ocean Use
  • Infrastructure and the Built Environment
  • Energy and Extractives

Meanwhile, a report from UNEP-WCMC, ‘Beyond Business as Usual: Biodiversity Targets and Finance, June 2020, identified the same sectors, whilst also giving additional sub-industry sectors, including:

  • Apparel
  • Accessories and Luxury goods
  • Brewers and Distribution.

We know where action needs to be focused and there is broad agreement that, from the sectors above, agriculture has the greatest impact on biodiversity.

Industrial agriculture. Image © Shutterstock

‘No net loss’ requires a paradigm shift in how businesses and the finance sector operate. So where is the finance sector starting from? Earlier this year, Share Action, a UK-based NGO that works to promote an investment system that works for savers and communities and that protects the environment, published their Asset Manager rankings. This assesses the world’s 75 most influential asset managers on their responsible investment governance for human rights, climate change and, for the first time, biodiversity.

This report clearly shows that governance of biodiversity risks, impacts and dependencies is well behind governance on climate change.

The majority of asset managers’ policies on biodiversity remain critically undeveloped. None of the managers had a stand-alone, dedicated policy covering all portfolios under management. Just 32% had some mention of biodiversity related to responsible investment, while 68% had no mention of biodiversity in any public investment policy.

Looking specifically at deforestation risk, in September 2019 Global Witness produced a report, ‘Money to Burn’, which showed the funding links between banks and companies that were directly or indirectly associated with deforestation.

Gold mining in Guyana, South America. Image © Shutterstock

The future for Finance and Biodiversity

We know the key sectors to focus on and there is plenty of data available for the finance sector to engage companies on biodiversity risks and impacts. A number of NGOs provide detailed, company-level information on many of these sectors; ZSL SPOTT, CDP Forests, Canopy Planet Hot Button Ranking, Carbon Tracker, Global Canopy Forest 500 and TRASE are just some of the initiatives that provide the information needed to understand the risks and impacts of companies on the ground.

However, producing standardised biodiversity footprint metrics for companies remains extremely challenging.

A wide range of metrics have been developed – and continue to be developed – however, the missing piece of the puzzle for these to be useful is usually the lack of transparent supply chain information for companies.

In addition, there is limited information on the locations of company operations and activities. Biodiversity im