Financial institutions will soon be able to demonstrate how they are contributing towards global targets on biodiversity. UNEP-WCMC will work with the Natural Capital Finance Alliance (NCFA), a collaboration between the UNEP Finance Initiative (UNEP FI) and Global Canopy to enhance a web-based tool so that financial institutions can align portfolios with global biodiversity targets.
With funding from the Swiss Federal Office for the Environment FOEN, the tool ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) will be developed to help financial institutions answer the following questions:
· Am I influencing biodiversity through my investment or lending portfolio?
· Am I harming or building the resilience of biodiversity with my investments?
· Is my portfolio in alignment with global/regional biodiversity targets and how much so?
Financial institutions can already use ENCORE, developed by the NCFA and UNEP-WCMC, to visualise how businesses impact and depend on natural capital. The tool underpins the World Economic Forum (WEF) report released this week, Nature Risk Rising, which shows that $44 trillion of economic value generation – over half the world’s total GDP – is moderately or highly dependent on nature and its services. For the first time, the WEF’s Global Risks Report 2020 highlights biodiversity loss and environmental damage and disasters among the top five risks in terms of likelihood and impact.
The new functionality planned in ENCORE will build capacity for the finance sector to respond to the decline in nature, with mounting evidence from new scientific assessments such as the IPBES Global Assessment in 2019 increasing awareness of risks related to biodiversity loss. The Financial Times recently noted biodiversity as one of “20 things to watch in 2020” and a further article explained that financial institutions are paying more attention to preserving natural habitats in their investment decisions. Investors are also beginning to assess how they may be impacted by the practices of investee companies that contribute to the loss of biodiversity.
The enhanced tool will enable financial institutions to demonstrate how they are contributing towards global targets on biodiversity. For example, the UN Sustainable Development Goals, Science-Based Targets and the developing Post-2020 Global Biodiversity Framework which will be adopted at the UN Biodiversity Conference in October.
The Zero draft of the Post-2020 Global Biodiversity Framework by the Convention on Biological Diversity recognises that urgent policy action is required to transform economic and financial models. Tools like ENCORE and the planned enhancement are needed urgently to support the reform of economic sectors and the financial system and stabilise the loss of biodiversity.
The tool was launched at the UNEP FI Global Roundtable in Paris in 2018, and the new module on biodiversity will be launched at the 2020 Conference of the Parties to the Convention on Biological Diversity. The ENCORE tool has been made possible with funding from the Swiss State Secretariat for Economic Affairs (SECO) and the MAVA Foundation.
Jonny Hughes, CEO, WCMC, said: “The finance sector will be key to achieving the goals set out in the Post-2020 Global Biodiversity Framework, but it can be unclear how financial portfolios are influencing biodiversity. This new phase of the ENCORE project will increase the ability of the finance sector to track progress against global biodiversity targets.”
Karine Siegwart, Vice Director of the Swiss Federal Office for the Environment, said: “There is a great need for methodological development in the field of biodiversity and sustainable finance. The publicly available and science-based ENCORE will be oriented towards ambitious international biodiversity goals and thereby provide help for financial institutions to assess their biodiversity impact. That is why the Swiss Federal Office for the Environment is supporting the further development of ENCORE under the umbrella of the Swiss Biodiversity Action Plan.”
Liesel van Ast, Membership and Regional Co-ordination Manager, UNEP FI, said: “Evidence-based approaches to setting meaningful, measurable targets are important for the financial sector to deliver positive impacts that contribute to stemming biodiversity loss and securing resilience.”