INSIGHT by Finance for Biodiversity
The Finance for Biodiversity (FfB) Foundation published a guide for financial institutions on Tuesday, 10 October, on how to manage the biodiversity and climate nexus in their investments and lending.
The nexus guide will be presented during the European Business and Nature Summit (EBNS) in a high-level policy & business dialogue called “Biodiversity and climate: Shifting the way we do finance with nature at its heart” on Thursday 12 October, from 9:30 am to 11:00 am CEST.
The guide, titled Unlocking the biodiversity-climate nexus, was written by members of a subgroup of the FfB Foundation’s Impact Assessment working group for banks, insurers, asset managers and asset owners.
“As we approach the 1-year anniversary of COP15 and gear up for COP28, it is important to handle nature and climate not isolated but approach them as two sides of the same coin. We cannot solve for one while ignoring another. Our paper unravels the understanding of climate-nature nexus by discussing the trade-offs and synergies that are associated with climate and/or nature action. We hope the guide provides the necessary foundation for all kinds of financial institutions to start their work on the nexus.”
-Deepshikha Singh, Head of Stewardship and Deputy Head of Sustainable Investment Research at La Francaise Asset Management
The guide outlines the synergies and trade-offs between climate and nature of a sample of investment/lending solutions that are, as of today, key to solving the nature and climate crises we face: agricultural solutions, alternative energy sources, circular economy and Nature-based Solutions (NbS).
Its five key recommendations to financial institutions are to:
- Finance synergy-generating solutions for the biodiversity and climate nexus and those minimising trade-offs (e.g. R&D, start-ups, innovation);
- Identify and prioritise sectors with a high impact on biodiversity and climate;
- Engage with companies on important nexus topics by leveraging relevant and existing frameworks;
- Set up sector policies, taking into account synergies and trade-offs between biodiversity and climate; and
- Integrate biodiversity into climate targets, policy and reporting.
Addressing nature and climate solutions in an integrated way can be seen as a fundamental risk management approach.
The guide says that “the most common trade-offs of nexus themes such as Nature-based Solutions, alternative energy, regenerative agriculture and circular economy solutions can already be avoided by changing the way these projects are undertaken”.
“By using renewable energy to power solutions, taking a results-based approach and considering the impact of activities on both climate and nature at every step, financial institutions can help mitigate trade-offs and exploit synergies,” the authors write.
Explore the guide
Unlocking the biodiversity climate nexus
A practitioner’s guide for financial institutions
“Addressing the challenges of climate change and biodiversity loss can no longer be postponed. The economy must profoundly rethink certain paradigms to be truly sustainable, and financial institutions have their part to play in this. This paper lays out the key pillars, linking the issues of climate change with those of the impacts on nature. It is the first time that financial institutions have collaborated to formulate a comprehensive analysis that not only identifies best practices and approaches, but also highlights the trade-offs and difficulties to be faced on the path to Natural Capital preservation.”
-Fiona Melrose, Head of Group Strategy and ESG at UniCredit
“Biodiversity is a complex topic. This guide helps financial institutions in their decision-making on the nexus, the intersection of climate and biodiversity, by building on knowledge and experience gathered from already existing climate mitigation approaches and climate targets. By working with corporates’ value chains when investing, financial institutions can support both, restore carbon sinks as well as natural habitats.”
-Hadrien Gaudin-Hamama, impact and ESG specialist at Mirova
“We believe using alternative energy sources is one of the best ways to curb greenhouse gas emissions. We must, however, be mindful of the holistic perspective and any negative side-effects must be scrutinized. For instance, the use of biofuel crops like sugarcane or palm oil can potentially damage natural habitats, contribute to soil erosion or the pollution of aquifers. This is why at HSBC AM, we strive to carry out in-depth due diligence of holistic environmental impacts related to our investment decisions.”
-Shehani Thanthrilage, Senior ESG Analyst at HSBC
“When assessing investment opportunities, the four pillar framework presented in the report will help financial institutions avoid creating undesirable trade-offs. To combat biodiversity loss effectively, we must go beyond climate change to protect our natural ecosystems and the services they provide.”
-Courtney Jermyn, ESG and climate change strategist at NN Group
Following COP15, attention to the threat of biodiversity loss has grown significantly. One observable result is the emergence of distinct action plans to reach biodiversity targets in isolation of climate targets. However, it is important to consider biodiversity and climate change’s interlinkage when deciding to take action on either, as the two can rarely be segregated. This guide aims to help financial players understand the synergies and trade-offs between these two challenges – and how to account for them in their investment process.”
-Marie Neveu, Climate Analyst at Pictet Group
“In today’s investment landscape, where profitability is intertwined with stewardship, understanding the intricate relationship between biodiversity and climate is becoming an imperative to amplify climate action. This guide emerges as a timely compass for financial institutions, offering a comprehensive roadmap to effectively navigate this intricate dynamic and providing actionable insights. As stewards of both economic growth and environmental preservation, financial institutions’ ability to integrate biodiversity in their climate endeavours is a requisite step towards a sustainable and prosperous future for all.”
-Genevieve Grenon, Private Markets, Responsible Investment Advisor at Desjardins Global Asset Management
“We are very pleased to see how our members have identified trade-offs and synergies between biodiversity and climate solutions that should be addressed when investing in climate or nature. The guide will help financial institutions integrate biodiversity into their climate targets and strategies as a first step in discovering this emerging topic of urgency.”
-Anne-Marie Bor, Co-Founding Development Director at the Finance for Biodiversity Foundation
| about
The EBNS is a yearly conference facilitating dialogue between policy makers, leaders in the financial sector and companies, NGOs and academics. This year the Summit will be held in Milan at Palazzo Lombardia on 11 and 12 October 2023. The event is initiated by the EU Business and Biodiversity Platform of the European Commission and is organised in cooperation with partner organisations.
About the Finance for Biodiversity pledge: In total 140 financial institutions representing 23 countries and over 19.7 trillion euro in assets signed the Finance for Biodiversity Pledge in 2023. The Pledge was initiated by a group of 26 financial institutions calling on global leaders and committing to protect and restore biodiversity through their finance activities and investments and launched during the Nature for Life Hub at 25 September 2020 and the Biodiversity Summit of the United Nations General Assembly at 30 September 2020.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
