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F4B PROJECTS

A FRAMEWORK FOR
SYSTEMIC CHANGE

The growing recognition of the importance of the nexus and the interconnectedness of finance and biodiversity, has precipitated a large number of analyses and initiatives.

 

Some are focused on individual public financing mechanisms, some on the cost of inaction, and some on particular aspects of biodiversity, such as oceans, forests and large-scale food value chains such as soya and beef.

 

Such breadth of scope, innovation and diversity of approach is to be welcomed. However, there is a danger that it seeds confusion, unhelpful disputes and, ultimately, unproductive competition between approaches and initiatives.

F4B has sought to provide an overarching narrative and a framework for systemic change, first with our initial framework white paper Towards a Common Framework at the Nexus of Financing and Biodiversity released in April 2020, and then following on from this a second paper Aligning Global Finance with Nature’s Needs: A Framework for Systemic Change.

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The second white paper sets out six areas where systematic policy change is needed:

Advance Citizens’ Biodiversity Choices: financial institutions should take account of citizens’ individual and collective biodiversity-related rights and preferences in their financing decisions.

  • Financial institutions inform and empower citizens to make biodiversity-related choices, as savers, lenders, insurers, consumers, voters and taxpayers.

  • Regulators require financial institutions to adopt compliance processes to respect the heritage rights of indigenous communities to biodiversity stewardship and use, and to respect their traditional livelihoods.

Disclose Impacts on Biodiversity: financial institutions should publicly disclose actual and expected biodiversity impacts and associated risks.

  • Financial institutions make the data and assumptions underlying reported impacts and risks publicly available, to enable effective citizen and shareholder action, and to facilitate the setting of effective standards, policies and regulation.

  • Regulators require financial institutions regularly and publicly to report the biodiversity impact of their entire balance sheets, and to stress-test expected biodiversity risk. 

Create Liability for Biodiversity: legal systems should make financial institutions liable for biodiversity impacts.

  • Legislators extend liability for biodiversity damage caused by companies to their banks and other financing institutions.

  • Regulators require financial institutions and corporates to establish biodiversity protection as a public fiduciary responsibility of company directors in their corporate governance. 

 

Align Public Finance with Biodiversity: governments and public agencies should transparently align all public finance to biodiversity-related policies, goals and commitments.

  • Governments eliminate or reform all biodiversity-negative subsidies and taxes and develop and scale up incentives for biodiversity restoration.

  • Integrate biodiversity impact criteria into procurement, investments and financial instrument design, sovereign debt arrangements and monetary practices.

Align Private Finance with Public Policy: financial institutions should ensure that their activities are consistent with biodiversity-related public policies, goals and commitments.

 

  • Financial institutions align their financing with biodiversity-related public policies and international commitments – for example, through assurance of net gain of biodiversity and ecosystem services.

  • Regulators require financial institutions to align their financial practices, including the design of financial instruments, offers and services, with the biodiversity-related public policies and biodiversity-related international public policy commitments in jurisdictions where they operate.

Integrate Biodiversity into Financial Governance: institutions governing global finance should ensure that financial institutions effectively steward biodiversity. 

  • Governance arrangements, including mandates, instruments, and the basis on which governing bodies are held to account, should be demonstrably responsible, capable and effective in stewarding the impact of finance on biodiversity.

  • Financial governance institutions, including financial regulators and monetary authorities, standards setters, and those with fiduciary responsibilities for financial assets, should publicly explain the past and likely impacts of their decisions and actions on biodiversity.

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