International Biodiversity Day State-of-Play

    Stockholm (NordSIP) – Today, May 22nd 2023, the United Nations invites us to mark the International Day for Biological Diversity.  It is just over a year since NordSIP’s 3-part series of articles aimed at institutional investors new to the topic of nature-based investing.  In these we examined the basic facts behind the biodiversity crisis and how this has an impact on investment portfolios.  The next stage was to deconstruct the broader crisis into its underlying operations, market, credit, insurance and regulatory/legal risks, finishing up with an overview of nature-related metrics and tools available to investors.  The articles were aimed at supporting investors’ preparations for potential outcomes of the landmark 15th conference of the parties (COP15) to the Convention on Biological Diversity (CBD), which after a series of delays was finally scheduled to take place in Montréal, Canada in December 2022.

    COP15 was intended to garner a level of international consensus and commitment on nature commensurate with that of the 2015 Paris climate agreement.  Hopes were not high as the conference began, given the numerous remaining areas of disagreement in the draft agreement.  The situation looked even worse when delegates from developing nations walked out of the discussions in protest at proposed funding mechanisms.  Nevertheless, despite these setbacks, delegates pushed on beyond the COP15 deadline to find sufficient consensus to produce a headline agreement.  This was presented under the tagline “30×30,” representing the overarching goal of restoring and protecting 30% of global land and sea areas by 2030.

    The 30×30 agreement signed in December 2022 is formally known as the Kunming-Montreal Global Biodiversity Framework, with reference to COP15’s originally planned venue location and Chinese presidency.  It was broadly welcomed by environmental NGOs, but the sheer complexity of the task ahead and the remaining lack of clarity over funding have been a cause for concern.  Moreover, the success 30×30 depends on the creation of the right economic incentives and regulatory environment for nature-based investment to grow to sufficient scale.  Unlike greenhouse gases, measurement of an accurate biodiversity footprint involves many more variables, for which reliable data are still lacking in many areas.  The Natural Capital Finance Alliance and UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) have set up the freely accessible Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) tool to help financial institutions natural capital risks into their investment activities.  The Taskforce on Nature-related Financial Disclosures (TNFD) also released the latest version of its proposed reporting framework on 28 March, 2023, with a public consultation to run until 1st June ahead of the publication of the final framework in September.

    There does not appear to be a smooth path towards nature positivity.  Biodiversity-related elements of the European Union’s (EU) proposed Green Deal have come under attack.  Certain agriculture sector lobbyists and politicians are objecting to the rewilding of farmland and moves to reduce the use of pesticides and fertilisers.  The nature and climate crises are inextricably linked, with soil, wetlands, forests and sea grass representing powerful carbon sinks.  Efforts to encourage and curate effective carbon markets via the financing of nature conservation have hit multiple setbacks over recent months.  These have included controversy over the calculation of carbon credits and the unilateral appropriation of a 50% share of the total revenue generated from carbon credit projects by the government of Zimbabwe.  Despite these obstacles, COP15 succeeded in placing biodiversity and natural capital higher up the political agenda.  Institutional investors are awaiting opportunities to invest in nature-based-solutions at scale.  Nevertheless, certain objectives within the 30×30 agenda may need to be addressed by public or philanthropic money, given the difficulty in assigning a monetary value to all elements of natural capital.

    Image courtesy of United Nations
    Richard Tyszkiewicz
    Richard Tyszkiewicz
    Richard has over 30 years’ experience in the international investment industry. He has worked closely with major Nordic investors on consultancy projects, focusing on the evaluation of external asset managers. While doing so, Richard built up a strong practical understanding of the challenges faced by institutional investors seeking to integrate ESG into their portfolios. Richard has an MA degree in Management and Spanish from St Andrews University, and sustainability qualifications from Cambridge University, PRI and the CFA Institute.

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