China dialogue is publishing a series of articles exploring the systemic financial risk posed by biodiversity loss and what financial institutions are doing about it.
F4B authors and partners contributed to several of the articles.
By F4B's Charlie Dixon and Basic Root's Arindam Basu
On the risks on DFI balance sheets from biodiversity "Asian DFIs must commit to conducting biodiversity-related stress tests of their balance sheets. Right now, these risks go largely unchecked. They endanger nature, undermine sustainable development, and have the potential to develop into material financial risks. We need a systematic change in the way DFIs operationally measure, manage and report this risk."
By Guido Schmidt-Traub, Justin Adams, Zhu Chunquan
Towards a shared EU–China strategy: " China and the EU can promote ambitious outcomes at the biodiversity and climate summits by combining the “Western approach” of greening supply chains with the “Eastern approach” of integrated land-use planning under ecological civilization. Put differently, “vertical” supply chain initiatives, as championed by European countries, can and need to integrate with “horizontal” policy frameworks for land use, as advanced by China. This combination can achieve lasting change and add to a geostrategic China–EU relationship rooted in mutual respect, collaboration and learning from one another."
By Fan Shenggen
"Repurposing crop subsidies can benefit human health, as they shape consumption as well as production. If China subsidised its vegetables production at a rate relative to its population, we would see an increase in the consumption of greens of close to 4%. This could have long-lasting effects on poverty, food security and nutrition."
By F4B Chair Simon Zadek
On how counting biodiversity can build on climate experience, but needs a different approach: "there are key differences in how financial institutions must deal with climate change and nature need. For example, climate risks to investors can be more easily measured, via such things as physical risk, tonnes of carbon emitted and the carbon intensity of investment portfolios. Similar metrics are difficult to establish for nature, as it covers everything from oceans to forests and wetlands, minerals and wildlife. Nature data sources are often public not private, unlike much climate data. This creates new opportunities for ensuring public and policy oversight, and challenges in translating public scientific data into information relevant to the corporate and financial communities."
By Hilde Jervan
On how the Norwegian Government Pension Fund is starting to consider biodiversity: " A major problem we must overcome is biodiversity data, which is location-specific. When we assess the risk of biodiversity loss, for example from conversion of forest to plantations, we look at the scale of deforestation. Are large areas slated for clearing? We try to clarify if companies’ concession areas overlap with those known to be rich in biodiversity, and the consequences. Will habitats of threatened species be lost? What actions are the company taking to prevent and mitigate impacts? But many companies are not willing to share information, which makes the assessment even more difficult and time consuming. Investors should require companies to be more transparent and ask them to provide tangible information about how their operations affect biodiversity."
By F4B Ambassador Marianne Hahr
On the potential for blockchain to improve the efficiency of financial flows and curb deforestion: "At the time of logging, a tree would be recorded in the BSN database using its GPS coordinates. A smart beacon would then attach to its path on a blockchain ledger. Transaction documents such as customs records would follow its subsequent route.Once at customs, the QR code revealed where the tree was saved, for example on the screen of a smartphone. The geolocation would then be automatically compared to a database of prohibited areas. If the journal originated from such an area, the smart contract would automatically block the order and disbursement of payment using the digital yuan."
By F4B Ambassador Rupesh Madlani
On the potential for linking new sovereign debt and refinancings to nature performance: "this would help meet climate and nature challenges, as well as deliver value for citizens, and break the cycle of debt and debt service characteristic of conventional debt issuance. How would this work? An emerging market country could issue debt, for general purpose, that allows it to meet its goals for citizens and development. Linked to the new issuance is an adjustment scenario, where a coupon and principal adjustment are hard-wired and verifiable to internationally accepted standards."
By Toby Gardner
On how the Trase initiative is using data to provide information on agriculture's link to deforestation, to food markets. "Trase is an independent, science-based supply-chain transparency and intelligence platform that seeks to empower a transition towards more sustainable commodity production, trade and consumption.We use a wide range of supply chain data from public sources and self-disclosed by companies to link regions of production, via trading companies, to countries of import. Importantly, we do this for entire sectors, such as Brazilian soy or Indonesian palm oil exports."