F4B LAUNCHES GROUND-BREAKING TRANSITION FRAMEWORK FOR FINANCIAL INSTITUTIONS
F4B LAUNCHES GROUND-BREAKING TRANSITION FRAMEWORK FOR FINANCIAL INSTITUTIONS TO ADVANCE INTEGRATED APPROACH TO CLIMATE & NATURE
New transition framework from the Finance for Biodiversity Initiative will help financial institutions to integrate their approaches to climate and nature when assessing, reporting and acting on risks and opportunities.
Transition framework – the first of its kind – will enable financial sector to develop consistent climate and nature scenarios and transition plans, and ultimately drive both better financial and environmental performance.
Important first step to address increasing demands for an integrated approach to climate and nature from framework developers, standard setters, and regulators.
London, Tuesday 1 March 2022 – Finance for Biodiversity (F4B) has today published a first-of-a-kind integrated transition framework that can be used by financial institutions (FIs) to manage risks and opportunities in their transition to a net zero, nature positive, world.
Financial sector action on climate change has accelerated in the past few years, underpinned by the work of the Task Force on Climate-related Financial Disclosures (TCFD). More recently, there have been developments in approaches to managing nature-related risks and opportunities, notably by the Taskforce on Nature-related Financial Disclosures (TNFD).
To date, few if any FIs have adopted an integrated approach to managing climate- and nature-related risks and opportunities. This shortfall is despite the clear scientific evidence of the critical importance of the climate-nature nexus, as evidenced in the most recent report released by the Intergovernmental Panel on Climate Change (IPCC), and the work of the Convention on Biological Diversity (CBD).
F4B’s integrated transition framework is the first framework seeking to provide FIs with practical guidance on how to integrate their understanding and management of climate and nature in the necessary transition to a net zero, nature positive world. Its release is a contribution to the field, and is intended to complement and strengthen ongoing efforts in both the climate and nature space. Notably it is consistent with the work of the TNFD, and can be used alongside its ‘beta’ framework to be released in mid-March 2022.
F4B’s integrated transition framework also seeks to encourage other organisations to move more rapidly towards an integrated approach in dealing with nature and climate, including the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), the International Sustainability Standards Board (ISSB), and the Science-based Targets Network (SBTN).
Today’s publication by F4B - Towards an Integrated Transition Framework: Managing Risks and Opportunities at the Nature-Climate Nexus, with support and analysis by Vivid Economics - argues that an integrated approach can avoid mispricing risks and opportunities, can correctly value assets, and ultimately drive better financial performance. F4B’s framework provides both the content FIs need to understand how climate and nature are interlinked, and the process needed to make this operational. The structure allows FIs to build out from existing climate frameworks to integrate nature. It can be expanded over time as best practice evolves, and can serve both public and private financial institutions of varying sizes, complexities, and maturity.
Simon Zadek, Chair, F4B said: “Put simply, financial institutions that successfully integrate climate- and nature-related risks and opportunities into their decision making now will be better able to manage their investments, and ensure they are ahead of the inevitable policy changes that will mandate such behaviour in the future. Our integrated transition framework offers an off-the-shelf solution that FIs can use – from today – to develop quantitative, nature-inclusive strategies that will potentially help to drive investment success.”
Jan Erik Saugestad, Chief Executive Officer, Storebrand Asset Management said: “Biodiversity is increasingly on the agendas of financial institutions, not only for its contribution to climate change mitigation and adaption, but because it underpins all economic activities and human well-being. There is an urgent need to approach the transition to both a net-zero and nature positive world in an integrated way. Failure to do this will mean the financial sector mispricing risks and opportunities, and incorrectly valuing assets. So the Framework which F4B is publishing today is a welcome first step to help financial institutions grasp this challenge.”
Professor Marcelo Mena, Pontificia Universidad Catolica de Valparaiso said: "For many years we acknowledged the existential threat climate change posed to our wellbeing and our economic development. We have made much progress in integrating climate risk into our financial system. Yet the recent pandemic has shown us how vulnerable we are becoming to biodiversity loss, and the role of natural capital in our resilience as a species. Integrating climate and natural systems in our investment decisions is the smartest way to address and manage the increasing risks we will face this century."
Mauricio Cárdenas, Senior Research Scholar, Columbia University said: “This is a very relevant report on a topic that needs greater attention. Nature loss and climate change have a compounding effect on the vulnerability countries and firms face. Investing in nature-based solutions is a priority that unfortunately lacks adequate financing. This report offers some useful suggestions as to how to move forward.”
Today’s framework follows on from F4B’s May 2021 report (The Climate-Nature Nexus: Implications for the Financial Sector) which laid out how climate-nature interactions will shape the attractiveness of investments in the future, and how FIs can already leverage their progress on climate to make a start on nature.
Notes to editor:
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About Finance for Biodiversity
Finance for Biodiversity (F4B) aims to increase the materiality of biodiversity in financial flows and decision-making, and so better align global finance with nature conservation and restoration. F4B is advancing five workstreams that create and amplify the feedback signals that increase the value of biodiversity in private and public financing decisions: market efficiency and innovation; biodiversity-related liability; citizen engagement and public campaigns; responses to the COVID-19 crisis; and nature markets. F4B has been established with support from the MAVA Foundation, which has a mission to conserve biodiversity for the benefit of people and nature. For more information, visit www.f4b-initiative.net