News | May 2021
In a critical decade for climate and nature, banks and investors can now explore their portfolio’s impact on species extinction risk and ecological integrity, and take immediate action to reverse biodiversity loss.
The new ENCORE biodiversity module launched today by the Natural Capital Finance Alliance a collaboration between the UN Environment Programme World Conservation Monitoring Centre, the UN Environment Programme Finance Initiative and Global Canopy, enables financial institutions to explore to what extent their financial portfolio indirectly drives species extinction risk and impacts ecological integrity.
Focused on the agriculture and mining sectors which are particularly exposed to biodiversity risks, the tool includes guidance for engagement, enabling financial institutions to take immediate action to transition these sectors towards a nature-positive future.
Analysis using the new module suggests that:
The module allows financial institutions to identify pathways to increase positive impacts within agricultural and mining portfolios, as well as transition mining portfolios to a low energy future.
Over 30 financial institutions have taken a pioneering role in the development and testing of the module.
Financial institutions face escalating risks from nature loss. US$44 trillion of economic value generation, over 50% of global GDP, is moderately or highly dependent on nature and its services, but the world’s ecosystems have declined by 47% globally on average compared to their earliest estimated states, with 1 million species at risk of extinction. This creates material risks and opportunities for banks, asset owners and asset managers, as they invest in and lend to companies facing increasing physical, market, regulatory and reputational threats associated with biodiversity loss.
Corli Pretorius, Deputy Director, UN Environment Programme World Conservation Monitoring Centre said: “Financial institutions are increasingly aware that biodiversity loss is an urgent issue they must tackle. The challenge has been to gain a more granular understanding of how biodiversity risks and opportunities show up in specific portfolios. Now, financial institutions can use the new module to understand the biodiversity risks and opportunities in their portfolios; they can prevent or account for the negative impacts on nature, while directing investments to better outcomes for people and planet.”
Biodiversity loss is fast rising up the global policy agenda with an ambitious post-2020 global biodiversity framework expected to be agreed by governments in Kunming in October 2021. Momentum is building and leading financial institutions are increasingly taking biodiversity into account, seeking ways to align financial flows to global biodiversity goals.
Eric Usher, Head of the United Nations Environment Programme Finance Initiative said: “The ENCORE biodiversity module lies at the cutting edge of sustainable finance, allowing financial institutions to take material action to pivot the real economy towards a nature-positive future. Replenishing and rebuilding biodiversity is an urgent global priority and those financial institutions which show market leadership by being early movers may have a considerable competitive advantage.”
The new module lies at the cutting-edge of sustainable finance, allowing financial institutions to take immediate action, activate stakeholder engagement, and transition their portfolios towards a nature-positive future. Banks and investors can use the module to map their current exposure, and explore future scenarios, identifying potential pathways to increase positive impacts within agricultural and mining portfolios, as well as transition mining portfolios to a low energy future. The module provides guidance on company engagement, enabling financial institutions to work with stakeholders in high-priority areas to adapt production practices with the aim of making them nature-positive.
Niki Mardas, Executive Director of Global Canopy, said: “Data is key to unlocking finance sector action on biodiversity loss, and the missing link that financial institutions tell us they urgently need to shift their financing and investment away from nature-negative activities and towards nature-positive ones. The ENCORE tool has already been used by key finance sector players, like the Dutch Central Bank, to explore nature-related risks across entire markets. Now the new ENCORE biodiversity module enables individual financial institutions to take further targeted action in sectors like agriculture and mining which have high impacts and dependencies on nature.”
Karine Siegwart, Vice-Director of the Swiss Federal Office for the Environment, said: “Switzerland is committed to becoming a leading sustainable financial marketplace. With the ENCORE tool the financial sector globally is provided a unique tool with a powerful lever for halting biodiversity loss. We are proud to be supporting such critical efforts towards aligning financial flows with biodiversity targets”.
The ENCORE biodiversity module is an extension of the free-to-use, online ENCORE tool (‘Exploring Natural Capital Opportunities, Risks and Exposure’) which assists the finance sector in visualising the links between the economy and nature. ENCORE allows banks, investors and insurers to identify nature-related risks, opportunities and exposure in their activities by setting out how each industry and sub-industry depends and impacts on nature. The ENCORE tool and biodiversity module are available by signing up here.