Most financial flows contribute to nature degradation. To fulfil the Kunming-Montreal Global Biodiversity Framework, the financial sector must transform the way it operates. A recently published high-level roadmap sets out a path to do so.
Human activities drive biodiversity loss and climate change. This creates interrelated risks that are a threat to the world’s economy and society. There is clear consensus that the functioning of healthy natural ecosystems is fundamental to thriving local and global communities, and to the global economy. A 2018 WWF report outlined how nature is the basis for all economic activity and – in financial terms – is worth an estimated US$125 trillion.
The vast majority of financial flows, however, are still dedicated to activities that put nature at risk. In just one example, Greenpeace recently revealed that between 2000-2023, the Dutch Rabobank financed large-scale sectors that contribute to deforestation in Brazil to a total of $10 billion, earning 717 million euro in profit. The social and environmental damage costs linked to these cash flows are at least 66 billion euro, meaning that for every euro earned in profit, this caused €94 in negative impact.
Researchers estimate that rewiring financial flows will lead to far-reaching benefits: every dollar invested in restoration activities provides an estimated $7-30 return in economic benefits. With the historic agreement of the Kunming-Montreal Global Biodiversity Framework (GBF), signed by 188 countries in November 2022, the financial sector has a key role to play in nature restoration.
The Kunming-Montreal Global Biodiversity Framework
The Kunming-Montreal Global Biodiversity is a framework designed to safeguard and sustainably use biodiversity while protecting millions of species and billions of people. The framework is structured around a shared vision, consisting of four goals for the year 2050, and a 2030 mission supported by 23 global targets for immediate action during this decade. Key commitments relevant to the financial sector include but are not limited to:
- Bridging the biodiversity finance gap of USD 700 billion annually and aligning public and private financial flows with the GBF and its 2050 Vision (Goal D).
- Identifying and reforming harmful incentives amounting to USD 500 billion per year by 2030, with a focus on the most damaging incentives, while scaling up positive incentives to promote biodiversity conservation and sustainable use (Target 18).
- Mobilising at least USD 200 billion per year by 2030 to support the implementation of national biodiversity strategies and action plans.
A report recently published by the UN Finance Initiative and partners – “Aligning financial flows with the Kunming-Montreal Global Biodiversity Framework”- provides a high-level roadmap for actors within the financial sector, including private and public financial institutions, supervisory entities, and policymakers, to align public and private financial flows with the GBF’s 2030 targets and 2050 vision.
Here we outline some of the key advice the report offers actors within the financial sector:
1. Prepare: set a clear and consistent environment to catalyse action
- Recognise and address nature-related systemic risks: Take action to reduce nature-related risks and adhere to the shared vision, 2050 goals and 2030 targets proposed in the Global Biodiversity Framework (GBF).
- Integrate biodiversity across policy and finance ministries: Promote the need to reverse nature loss by 2030 across government entities and integrate considerations into policies and regulations across sectors.
- Align financial flows and climate-nature action: Adhere to policy frameworks for financing biodiversity, including the 10 Point Plan for Financing Biodiversity.
- Redesign financial institutions’ role in biodiversity conservation: Build an organisational culture that emphasises the importance of acting for nature and prepare for future compliance requirements.
2. Implement: Take action to align financial flows with the GBF
- Integration of biodiversity into policy and regulatory frameworks: Actively and effectively implement the Global Biodiversity Framework (GBF), National Biodiversity Strategies and Action Plans (NBSAPs), and National Biodiversity Finance Plans (NBFPs) within domestic policy and regulatory frameworks.
- Mobilisation of financial resources for biodiversity: Build competitiveness attractiveness, and use public-private blended financial approaches and other innovative financing approaches, while mobilising more resources for developing countries.
- Sustainable development assistance and positive outcomes: Use sustainable development programmes to generate positive outcomes for nature, climate, and socio-economic development.
- Implementing Specific Targets and Measures for Biodiversity: Assess, monitor, report, and disclose nature-related risks and impacts using science-based approaches.
3. Support: Mainstream biodiversity through effective engagement
- Cross-sector and cultural engagement to support biodiversity: Strengthen public-private and wider stakeholder dialogue on nature and engage with indigenous people, local communities, and other groups in a fair way, to make sure everyone benefits from nature.
Critical opportunity for the financial sector
Embracing the mission set forth in the Kunming-Montreal Global Biodiversity Framework (GBF) is crucial for safeguarding the world’s biodiversity for generations to come. With this new UN FI report in hand, the financial sector has the opportunity to play a key role in addressing the interrelated risks of biodiversity loss and climate change after centuries of contributing to nature degradation.
Through cross-sector engagement and recognition of nature-related systemic risks, finance can be part of creating a more thriving global economy, more resilient societies, and a healthier planet. Could this be the moment for a transformative shift in the way the financial sector operates?