From Ambition to Action

Storebrand Head of Climate and Environment Emine Isciel stresses the need for governments to take effective measures to implement the Global Biodiversity Framework, specifically on the alignment of financial flows.

As countries begin the countdown to the 16th UN Biodiversity Conference of the Parties (COP16) in Colombia later this year, the pressure is mounting on governments to develop ambitious – and credible – plans to halt or reverse biodiversity loss by 2030.

Each country will need to submit National Biodiversity Strategy and Action Plans (NBSAPs) – akin to nationally determined contributions under the Paris Agreement – and National Biodiversity Finance Plans (NBFPs) before the meetings begin on 21 October.

For the Finance for Biodiversity (FfB) Foundation, representing 76 financial institution members, the policy deliberations ahead of COP16 are of great importance. To inform the discussions, the foundation has published a set of recommendations to ensure that both public and private financial flows and disclosure requirements, as agreed at COP15 under the Kunming-Montréal Global Biodiversity Framework (GBF), are embedded in national strategies.

“COP15 was the first time the Convention on Biological Diversity (CBD) and member states had an ambition on the alignment of financial flows to nature, similar to the Paris Agreement’s Article 2.1(c) on climate finance,” Emine Isciel, Head of Climate and Environment at Storebrand Asset Management and co-author of the report, told ESG Investor.

Isciel also co-chairs the FfB’s public policy advocacy working group. Ahead of COP16, the FfB has doubled up its efforts to influence nature transition plans, which is the reason it published its recommendations this month.

“We need to ensure that the finance goals and targets secured in the GBF are not overlooked when governments develop their NBSAPs, because an enabling environment is needed to support investor action,” Isciel said. “It’s not only about disclosure – that is not the end goal.”

Under the GBF, Targets 14, 15, 18 and 19 relate directly to financial institutions and financing. For example, Target 15 requires financial institutions and large companies to disclose around nature-related risks, dependencies and impacts, while Target 19 calls for the mobilisation of US$200 billion per year for biodiversity. While Target 15 is “extremely important”, the paper argues for broader policies, Isciel explained.

A new approach

The FfB’s set of recommendations that governments need to take to implement the GBF covers four areas. First, requiring companies and financial institutions to assess, monitor and disclose their nature-related risks, impacts, dependencies and opportunities (Target 15).

The foundation also proposes to mandate nature transition plans based on sectoral transformation pathways, and to foster collaborative commitments (Target 14). It also says central banks and supervisors should take action (Target 14), and supports the creation of economic incentives for businesses and financial institutions to maximise the mobilisation of private finance (Target 18 and 19).

Importantly, while the FfB’s recommendations were designed to be universally applicable across jurisdictions, the foundation recognises that not all countries are starting from the same place when developing strategic plans. As such, it advocates for flexibility according to national settings in terms of the pace of change. It also recognises the need for capacity-building initiatives to help countries develop sustainable capital markets.

“Constructing NBSAPs is not a one-size-fits-all solution,” said Isciel. “Member states are at different stages – for example, applying the same requirements to a developing country as to Norway won’t work. Therefore, we highlighted best practices across jurisdictions.”

The paper also recommends a holistic, economy-wide sectoral approach to constructing NBSAPs, whereby all institutions should take biodiversity into consideration when drafting plans.

“Often, the responsibility lies within the environment ministry, but it is not responsible for the sectors that are driving the biodiversity loss,” said Isciel. “We have previously advocated for finance ministers to increase their focus on biodiversity and nature. We recommend that they lead on this ‘whole-of-government’ approach in direct collaboration with environment ministers.”

Finance ministers should also use the tools already at their disposal, such as tax reform, subsidies and other incentives, to support the restoration, conservation and sustainable use of nature. “They need to put a price on nature if they want to shift capital flows,” Isciel added.

While there is much debate around assigning a value to the benefits that nature provides, pricing environmental externalities should be pragmatic. Isciel referred to the example of a protected area under the 30 by 30 (30×30) agreement reached at COP15 – which aims to safeguard 30% of the planet’s land and 30% of its oceans by 2030 – and the monetary value assigned to it.

“However, the other 70% of the world is more challenging to appraise, as there is still much deliberation on what constitutes sustainable use,” she added. “Opponents say that you can’t put a price on the intrinsic value of nature, which I understand on one level. But right now, if you don’t put a price on nature, then it’s worth nothing.”

Maintaining the dialogue

In the run-up to COP16, the FfB will continue to engage with member states in the Global North and South, as well as regional groupings such as the EU. The foundation is also in talks with various countries through the CBD, as FfB is part of the advisory group on resource mobilisation.

Importantly, the foundation fosters ongoing engagement with many finance ministers, particularly through the Coalition of Finance Ministers for Climate Action. The coalition, which counts 72 finance ministries among its members, published the ‘Bending the Curve of Nature Loss’ report in June 2022, illustrating how nature loss could pose significant risks for the financial system. It also recommended policy actions for risk mitigation.

As indicated in its recommendations, the FfB considers that central banks and supervisors are in a unique position to comprehend and monitor nature-related risks, and as such – should integrate nature in their macro- and micro-prudential supervision, monetary policies, and portfolio management.

According to the FfB, this should help foster financial stability through efficient frameworks based on risk assessment, while prudent monetary policies would ensure price stability.

“The actions of central banks and supervisors can vary from country to country, but importantly, they should integrate and communicate that nature-related risks are part of their mandates,” said Isciel.

She pointed to the De Nederlandsche Bank’s report on financial stability repercussions of nature degradation in the country, as well as the work that Banco Central do Brasil has done to integrate environmental risks into its prudential framework. The Brazilian central bank has required banks under its supervision to assess their climate risk as well as deforestation, which are relevant to both climate and nature since 2022.

In addition, the Network for Greening the Financial System – which includes 114 central banks and financial supervisors – has developed scenarios assessing nature-related economic and financial risks, and is exploring the links between climate and nature.

Road to COP16

Financing the nature transition will likely be a hot topic during this year’s COP16. As such, the FfB also made several recommendations around developing biodiversity credit markets, sustainable finance instruments, and the important role blended finance will play in supporting nature transition plans.

“It is akin to the discussion under the United Nations Framework Convention on Climate Change, which is exploring how much new and innovative resources developed countries can provide to developing countries,” said Isciel. “While there is a lot of focus on ‘financing green’, the most important first step is to progressively stop and reduce existing financial flows that are already harming nature, and prevent possible future financing activities that might continue in the same direction.”

NBSAPs, resource mobilisation and other indicators will be under the microscope at the fourth meeting of the Subsidiary Body on Implementation (SBI4) – a subsidiary of the United Nations Framework Convention on Climate Change (UNFCCC) – that will take place in Nairobi in May. COP16 will also be focused on these areas, as well as on concrete action on the ground.

“We are moving from ambition to national action,” said Isciel. “Of course, financing is a central part because it will be needed to implement such an ambitious agenda in both developed and developing countries.”

While this has been a sticky issue during COPs, addressing the estimated biodiversity finance gap of US$700 billion per year is the only way that the world will be able to achieve meaningful progress on the nature – and, de facto, the climate – transition.

“While a handful of governments have already submitted NBSAPs, we have a window of opportunity to ensure that others who are preparing and showcasing ambitious plans do not forget about private finance,” Isciel added.

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