25 September 2020
Nature is finally making its way up the sustainable investment agenda.
In fact, 2020 could be remembered as the year when biodiversity and other nature-related issues finally got the recognition they deserve.
The progress they have made is epitomised by today's launch of a group that will build a Task Force on Nature-related Financial Disclosures (TNFD).
Pleasingly, it seems interest in this topic is starting to become widespread among the financial community.
Today also marked the launch of the Partnership on Biodiversity Accounting Financials’ maiden report laying out a common approach to measuring positive impact on biodiversity. Its publication is seen as an important step towards developing a harmonised biodiversity accounting metric for the financial sector.
Meanwhile, a Finance for Biodiversity Pledge was also launched today, with 26 firms as signatories.
Earlier this week, four French asset managers issued a mandate to develop a tool to help investors integrate nature and biodiversity considerations into their decision making, while Robeco wrote that loss of biodiversity could be a bigger issue than climate change.
Here is an extract from a piece I read yesterday: “The world is highly dependent on our ecosystems, extracting $125 trillion in benefits each year. With biodiversity in decline and current land economics changing, we believe it is time to invest in nature.”
Who wrote this? An NGO? No – it was those tree huggers at Barclays, in a note called Biodiversity: Investing in Nature!
So, what has driven this sudden rise in awareness of nature-related risks and opportunities, and their materiality for the financial sector?
I put this question to Nicky Chambers of NGO Global Canopy. She is tipped to become a co-chair of a technical expert group, which will help to form the TNFD. She said she has been pleasantly surprised by the traction that nature-related issues have gained in recent months.
“When we first started work on the TNFD, we envisaged it being an uphill struggle,” she said. “But we're getting representation across the finance sector, civil society and a really good range of input – the appetite is much greater than we'd anticipated a while ago.”
She believes this is partly due to the impact of Covid-19 as well as the increased incidence of natural catastrophes including devastating forest fires. One theory is that Covid-19 was due to the destruction of natural habitat , causing greater migration of species , which can help the spread of diseases.
“What's happening in the world has made people stop and think a bit, and Covid was a classic example of a nature-related risk that has not been taken into account. A number of things have come to a head and people realise it's no longer just about climate.” (Read a comment from Nicky here.)
You could also argue that the increased awareness of nature is a natural progression, given the increased investor awareness of climate change. After all, climate change and nature are interconnected, and mutually reinforcing. Deforestation and other habitat loss is a driver of climate change as well as destruction of biodiversity . One of the major impacts of climate change is the destruction of the natural environment, with impacts on biodiversity and water as well as on humans. Similarly solutions to climate change, such as reforestation, will sometimes benefit biodiversity.
Ultimately, there is a growing realisation that human beings depend on nature for their survival, and with nature already in a parlous state, halting its destruction is becoming an increasingly urgent priority.
The TNFD is welcome. Its work will be mindbogglingly complex but anything that can be done to manage and protect nature has to be welcomed as an economic and humanitarian need.
For too long the job of preserving nature has been the preserve of NGOs. Businesses and finance must now join forces to protect our natural capital – our future wealth and health depends on it.
So, cheers to the TNFD and all the other initiatives mentioned in this piece.
Peter Cripps is the editor of Environmental Finance
Read some of our nature-related content here:
An additional $20 billion to $45 billion would be required each year - on top of the current $24 billion already being spent - to double the conservation of land and national waters, according to analysts at consultants McKinsey.
Financial flows into global biodiversity conservation in 2019 have been estimated at between $124 and $143 billion but the estimated amount needed to protect the earth's biodiversity is $722- $967 billion per year, leaving a current biodiversity financing gap of between $598 billion and $824 billion annually.
A number of leading Dutch financial institutions have joined forces to boost knowledge about biodiversity within the financial sector. Merel Hendriks and Simon Zwagemakers outline some of the key developments
Ten financial firms have joined a working group to develop a reporting framework for the impact of the financial sector on biodiversity and ecosystems to complement the Task Force on Climate-related Financial Disclosures (TCFD).