Green capital: Where biodiversity and finance meet
As worldwide momentum gathers around biodiversity, how can financial investors generate biodiversity-positive economic activities?
Coming out of 2020 in the wake of a global pandemic, the need to create a global diversity framework is more critical than ever.
The total global value of ecosystem services amounts to between $125 trillion and $140 trillion per year, equivalent to 1.5 times the volume of global GDP. It is, therefore, crucial to better understand and measure our impact on biodiversity so we can reduce negative impacts and generate biodiversity-positive economic activities.
As worldwide momentum gathers around biodiversity, and as financial investors place increased attention and interest on this new topic, we see four trends emerging.
Trend 1: Setting targets and commitments
Don’t wait for global rules for biodiversity to translate to the local level.
There is no such thing as a “biodiversity budget,” and there are plenty of existing tools and frameworks to help you plan your transition today. These include tools to identify your material biodiversity issues (value chain mapping), your local biodiversity ambition levels and boundaries, and the main drivers of biodiversity loss.
Trend 2: Measuring impacts
Recognizing that a biodiversity indicator doesn’t exist won’t work. You need a smart combination of tools that lean toward a dashboard approach that allows you to see the bigger picture—one adapted specifically (in this case) for the financial sector. Measurement is one thing, but data collection and stakeholder engagement are essential, too. As interest in natural capital accounting increases, so too are efforts to standardize impact measurement.
Trend 3: Measuring dependencies, reporting risks
Natural risks lead to financial risks. Biodiversity loss negatively affects institutions through the (in)direct dependency of the activities they finance. Physical risks, such as climate change or the introduction of an invasive species, can disrupt the value chain or result in raw material price volatility.
Financing green is a way to ensure the acceleration of finance that supports a nation or a government’s delivery of carbon targets or green promises, as well as broader international objectives.
Trend 4: Making pro-biodiversity investments
Pro-biodiversity investments are also a critical step towards a climate solution. There is a huge market potential here, with only 5% of climate financing currently directed toward nature-based solutions. Being a climate action leader provides a good base to act on biodiversity risks and opportunities, and vice versa.
Investing in biodiversity should be thought of as the new frontier for responsible investors.
A rapid, radical transformation
Biodiversity loss, along with the risk of business inaction, jeopardizes a business’s bottom line. Unfortunately, some of the risks associated with biodiversity loss have already materialized today, such as water shortages, ecosystem collapse, and pollination shortages.
To avoid a collapse of our fragile ecosystems, the science is clear. We need a rapid and radical transformation of our economic models that have put our natural world in jeopardy.
Both public and private actors, with support from science, can help each other become nature positive by 2030. But these four trends will need to be adopted at scale for the sector to become resilient and for biodiversity loss to be reversed.