COP16: Come Together in Cali
Policymakers must deliver credible NBSAPs, create an enabling environment for the private sector, and develop holistic climate-nature strategies.
As the sixteenth meeting of the Conference of the Parties (COP16) got underway in Cali, Colombia, the UN Convention on Biological Diversity (CBD) set out its priorities for the high-stakes fortnight-long summit involving more than 23,000 delegates.
These included providing a first progress report on the Kunming-Montreal Global Biodiversity Framework (GBF), unlocking biodiversity finance from “all sources”, addressing nature-harmful subsidies and joining up climate change and biodiversity loss considerations.
Making meaningful progress in these areas, and others, requires greater financial backing from business and investors. In contrast, the financing gap for biodiversity has widened to US$942 billion according to a Bloomberg NEF report, with US$1.15 trillion needed by 2030 to restore and maintain biodiversity – five times the US$208 billion per year currently flowing to biodiversity.
The World Bank previously estimated that nature loss could result in a decline in global GDP of US$2.7 trillion annually by 2030.
However, the private sector requires greater action and certainty from regulators and policymakers to encourage investment to help close the financing gap.
“The market wants further clarity on coordinated international action amongst governments at a policy and regulatory level and – from this COP – a sense of coherence across different targets related to private sector mobilisation,” says Tony Goldner, Executive Director the Taskforce for Nature-related Financial Disclosures (TNFD).
“Uncertainty in the policy and regulatory landscape is probably the thing that will hold back progress the most.”
Apprehension over NBSAPs
The GBF was the central outcome of COP15 in Montreal, Canada, in 2022. The framework has the ultimate goal of halting and reversing nature loss by 2030 and was adopted by 196 countries at COP15.
It comprises 23 action-oriented global targets under four overarching goals. Targets 14, 15, 18 and 19 relate directly to the channelling of finance to preserve and protect nature.
Target 14 requires biodiversity decision-making to be integrated at every level, including progressively aligning all relevant public and private activities that have with significant impacts on biodiversity. Target 15 requires financial institutions and large companies to disclose nature-related risks, dependencies and impacts.
Target 18 looks to reduce harmful incentives by at least US$500 billion per year, and scale up positive incentives for biodiversity, while Target 19 calls for the mobilisation of US$200 billion per year.
To implement the GBF, each country is updating or creating a National Biodiversity Strategy and Action Plan (NBSAP) detailing how it will contribute to the global biodiversity targets. All signatories were due to submit their plans before COP16. However, to date just 35 NBSAPs have been submitted, with an additional 111 parties having provided national targets.
Effectively implementing NBSAPs and the GBF while incorporating of private sector finance is essential in avoiding further environmental damage and redirecting capital away from nature-depleting activities.
“We are keen to see progress being made on the GBF to unlock private finance and give greater guidance to the private sector that they should align with it,” says Karen Ellis, Chief Economist at the World Wide Fund for Nature (WWF) UK.
“We would like NBSAPs to have a greater level of detail and guidance on how the private sector will be involved in delivering on them,” she adds. “In the past, NBSAPs as well as other government plans and strategies haven’t succeeded because they haven’t tackled the underlying economic drivers of nature degradation or sought to regulate or manage that activity. Having a way to operationalise those NBSAPs through the private sector is critical.”
The missed NBSAP deadline by many countries sends a discouraging message, according to Emine Isciel, Head of Climate and Environment at Storebrand Asset Management and co-chair of the policy advocacy working group of the Finance for Biodiversity (FfB) Foundation, which represents 177 financial institutions managing more than €22 trillion (US$23.8 trillion) in assets.
“It’s concerning if developed countries can’t submit NBSAPs, because how can you expect countries with less resources to?” says Isciel. “It also sends a strong signal to the private market, but the wrong signal.”
Nicolette Bartlett, Chief Impact Officer at disclosure platform CDP, says the plans need to reflect the ability of governments to create an “enabling environment” to entice private sector investment.
“Governments need to work together, not just to bring forward their targets and what they’re going to put into the space, but to ensure they are focused on tangible policies and strategies for implementing what they’ve agreed to. That is the way you’re going to see private capital move at scale,” says Bartlett.
Halting harmful subsidies
Negotiations on 29 and 30 October 2024 aim to secure high-level political support for an international agreement on key issues, specifically including mobilising resources to close the significant biodiversity finance gap.
Private sector investment in nature had reached US$102 billion by May 2024, an eleven-fold increase on May 2022, but far short of what’s needed. Investors are becoming increasingly concerned over their nature risk exposure, facilitating the need to shift investments into nature positive ones.
“We keep hearing from institutional investors that there is a growing realisation they there is nowhere to hide from nature risk given every sector depends on nature,” says TNFD’s Goldner. “A lot of investors, particularly universal asset owners, need to scale up their internal capabilities on this issue quickly and manage these risks within their portfolio as best they can.”
A recent study by UK-based pensions provider and insurer Scottish Widows found water risks across its investments, and outlined its plans to manage exposures through capital allocation and stewardship.
COP16 will see the second dedicated Finance and Biodiversity Day on 28 October, designed to simulate collaboration between biodiversity and finance sector leaders. WWF’s Ellis said the greatest obstacle facing nature investments is the lack of policy initiatives focused on making nature itself – or nature-positive business models and technologies – strongly investable or profitable.
Ahead of COP16, the FfB called on global leaders to implement concrete actions to align public and private financial flows with the GBF, regarding it as essential to achieving the framework’s ambitious goals.
The CBD is also looking to make “defining” progress on reducing subsidies having a harmful impact on nature at COP16 – as demanded by the GBF’s Target 18 – partly in recognition of their influence on private sector investment.
Research from Earth Track, which tracks environmentally harmful government subsidies, found that at least US$2.6 trillion in subsidies globally are being spent on activities damaging to nature. It also found that the annual total of environmentally harmful subsidies had increased by more than US$800 billion compared to 2022.
According to a WWF report released in May, EU member states alone are channelling between €34 billion and €48 billion of subsidies annually into activities that harm nature.
“Most financial flows are harming biodiversity, and we need and enabling environment and action, alongside with resource mobilisation,” says Isciel. “Put simply, we must make it a better investment proposition for the financial sector to invest and support business practices that do not harm nature. There are many great initiatives from financial institutions, but they’re voluntary and to scale up these initiatives at the speed required we need that supporting environment from policymakers.”
Integrating interdependency
The interdependence of climate and nature has become increasingly recognised, but many believe it needs to be strengthened to effectively tackle both issues.
Building on the growing market recognition that there is no credible path to net zero without nature, the TNFD has been working on nature transition planning guidance with the UK Transition Plan Taskforce and the WWF. A draft will be released on 27 October for consultation, ahead of its finalisation next year.
The Glasgow Financial Alliance for Net Zero (GFANZ) will be launching a separate consultation paper on 27 October on voluntary, supplemental guidance for how financial institutions can integrate nature considerations in support of net zero transition planning.
The paper looks to “mainstream” the message that net zero cannot be achieved without nature, also reinforcing what the link between climate and nature means on a practical level.
Joy Williams, Executive Director of Financial Institution Transition Planning at GFANZ, warns that joined-up thinking on climate and nature is still lacking. “One of the surprising things that came out of our work is that mainstream finance was looking at nature and climate separately,” says Williams.
“Nature is much broader than climate, so policymakers setting priorities would be very helpful for the private sector to understand what those priorities are and how much support they will get from the policymakers,” she adds.
TNFD’s Goldner says the ultimate goal should be to bring currently parallel workstreams together in an integrated climate-nature transition plan. “That’s what the market wants, and that’s what will be most decision-useful for investors and helpful for governments,” he says.
While CDP’s Bartlett says there has been a continued and increased” focus on transition plans in the context of climate, counterpart plans for nature are somewhat lagging behind. CDP has collaborated with stakeholders, including the TNFD and WWF, to expand the concept of transition plans to include nature to create a “holistic view” of transition incorporating both climate and nature to better manage related risks.
Barlett flags that with movement expected on the climate-focused nationally determined contributions at COP29 in Azerbaijan, that “clear and tangible” NBSAPs are important to assist with alignment between the two issues.
“Finance and the rest of the private sector need to see these two things coming together and government policy being holistic, because right now we fear that development could be happening in silos,” she adds.
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