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Finance For Biodiversity Pledge Puts Sustainability Up Front

Photo Courtesy Lukasz Szmigiel

Two years ago, a report from the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) determined that about 1 million animal and plant species are threatened with extinction – many within decades – partly because of the earth’s rapid loss of biodiversity.

The report was compiled by 145 expert authors from 50 countries, according to the UN Sustainable Development Goals website, with inputs from another 310 contributing authors. It assessed biodiversity and environmental changes over the past five decades and found that the average abundance of native species in most major land-based habitats had fallen by at least 20 percent, mostly since 1900.

Efforts to restore the planet’s biodiversity will require commitments from every sector of society – including the financial world. That’s the idea behind the Finance for Biodiversity Pledge, a commitment signed by 55 financial institutions to incorporate biodiversity criteria into their company policies.

The Finance for Biodiversity Pledge was launched last September as a vehicle for banks, insurance companies, investment firms, and other financial institutions to embrace and advocate for biodiversity – as well as convince governments to establish programs that can help reverse the loss of nature.

Early supporters of the pledge included French insurance firm Axa SA and British banking giant HSBC Global Asset Management. U.S.-based companies that have signed on include Change Finance PBC, Domini Impact Investments LLC, Karner Blue Capital, Nia Impact Capital, and Vert Asset Management. The pledge was launched in anticipation of this year’s United Nations Convention on Biological Diversity, which is scheduled for October in Kunming, China.

Organizers of the Kunming event have said they want banks and fund managers to play a part in protecting the planet’s biodiversity by making nature impact a part of mainstream financial decision-making. Pledge signatories want much the same thing from the financial community.

According to the Finance for Biodiversity website the group’s mission is to “protect, restore and sustainably manage” the world’s natural resources.

“We will make every effort to take our share of responsibility and contribute to the protection and restoration of biodiversity and ecosystems through our financing activities and investments,” the site said.

Among other things, the Finance for Biodiversity Pledge aims to help reverse five major threats to the environment. These include the following:

  • Ecosystem Decline: According to the IPBES report, natural ecosystems have declined by an average of 47 percent since 1970, relative to their earlier estimated states.
  • Species Extinction Risk: About one-quarter of species are threatened with extinction in most animal and plant groups studied.
  • Ecological Community Risk: Biotic integrity, described as the abundance of naturally present species, has decreased by 23 percent on average in terrestrial communities.
  • Biomass and Species Threats: The world’s biomass of wild mammals has declined by 82 percent since 1970.
  • Deterioration of Indigenous Communities: Natural elements important to indigenous people has declined by 72 percent since 1970.

The finance pledge is committed to reversing the degradation of oceans, forests, freshwater bodies, and other ecosystems, which the Finance for Diversity says “is undermining nature’s ability to provide vital goods and services for all societies to thrive.” Efforts in this area will include battling pollution and land-use change, including deforestation and water scarcity in freshwater habitats.

The loss of biodiversity doesn’t only affect the environment. It also has an impact on the economy and, by extension, the financial sector. Businesses both depend on and impact biodiversity via ecosystem services and other natural capital assets, either directly through their operations, or indirectly through supply chains.

Banks and other financial institutions that fund economic activities that depend on these ecosystem services – such as agriculture and forestry – are exposed to the physical risks of biodiversity loss through their own portfolios. Another risk, at least for financial firms that have a major negative impact on biodiversity, is a loss of reputation and business, as well as exposure to litigation.

Those risks have no doubt served as an impetus for more financial institutions to sign on to the pledge. In May, Amundi SA, Legal & General Investment Management, and Aviva Plc joined the coalition. All financial institutions are welcome to sign up, including banks, insurers, asset managers, pension funds, impact funds, and investment firms. There will be another round of new signatories in September.

Active signatories will also join forces in the new Finance for Biodiversity Foundation, which will support the signatories’ call to action to reverse nature loss in this decade and also coordinate different working groups on topics such as engagement with companies, assessing impact, and public policy advocacy.

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