Our partners Global Canopy are launching The Little Book of Investing in Nature today. It provides an accessible overview of biodiversity finance at a time when governments and international negotiators are urgently seeking pragmatic solutions for the twin crises of climate change and the loss of nature.
It brings together information on a range of innovative financial products and services developed by both the public and the private sectors seeking to shift investment away from activities that damage nature (nature-negative) towards more nature-positive activities.
It references F4B's work on Nature-Climate Bonds, and calls for a systemic move towards a sustainable financial ecosystem. They highlight eight needed transformations:
Risk assessments and disclosures: The public and private sector will understand and quantify their exposures to risks associated with biodiversity loss and the negative impacts associated with their activities and operations, using frameworks such as that being developed by the Taskforce for Nature-related Financial Disclosures (TNFD).
Metrics of investment impact: In addition to understanding the financial returns, of a transaction or project, biodiversity impacts must be clear and uses broadly applicable metrics.
Finalisation of NBSAPs and NBFP: governments develop National Biodiversity Strategies and Plans (NBSAPs) and National Biodiversity Finance Plans (NBFPs), in line with funding needs.
Harmful subsidies reform: Governments transition existing policies that negatively impact biodiversity by addressing and reforming agricultural, fisheries, forestry and fossil fuel subsidies that are harmful to biodiversity.
Sustainable supply chain transitions and investment risk management: Private institutions put policies in place to support sustainable commodity production and reform their supply chains and investment practices in accordance with science-based targets. Investors will understand the impacts of their investments and lending decisions and will incorporate that information into the choices they make.
Capacity building and financial support: international and national organisations support countries through technical assistance as they transition to more sustainable economies. Development institutions offer concessional finance or blended finance funds to help increase local capacity.
Reform of laws and regulations discouraging ESG investments: National and international organisations that regulate investment practices reassess, and where relevant, reform laws and regulations that discourage investors from making triple-bottom-line investments. This will involve moving towards a broader definition of fiduciary duty that incorporates an understanding of the long-term collateral environmental and social benefits or harm associated with certain investments.
Alignment of investment portfolios with individual and institutional values: Investment managers conform portfolios to changing values that reflect clients‘ demand for preventing the loss of nature. In alignment with reforms of laws and regulations that better enable ESG investments, investors develop assets that allow clients to realise returns for their portfolios, while minimising harm to biodiversity or generating revenues from conservation. Private lending and equity investments in new technologies for biodiversity conservation project design, monitoring, evaluation, and investment management (for example, satellite imaging, machine learning, and investment assurance for nature-based solutions) will play a catalytic role in delivering better biodiversity finance.
The rules governing the investment activity of asset managers and financial advisors need resetting. Today, these rules encourage short-term economic returns, to the exclusion of any consideration of the collateral environmental or social damage of their investments. But this represents a disservice to the clients to whom they purportedly owe fiduciary duties. What use is a pension that pays out into a world devoid of life?
John Tobin-de la Puente, Professor of Practice, Cornell University Andrew W. Mitchell, Founder and Senior Adviser, Global Canopy