The loss of biodiversity requires rapid action, including from the financial sector. The financial sector could step up investments in the conservation and restoration of biodiversity. Eight financial institutions, united in the Biodiversity Working Group , share their plans and give examples.
The loss of biodiversity
Biodiversity is declining rapidly worldwide. Three-quarters of the earth’s land surface has been significantly altered by human actions. The current rate of extinction of plants, animals and insects is 1,000 times higher than the average over the last ten million years. If we do not take action now, up to one million species could disappear. This unprecedented loss of biodiversity leads to high costs to our society and economy.
Economic damage caused by biodiversity loss
Many raw materials and economic sectors are directly or indirectly dependent on the diversity of plants, animals and insects in the world. In the long term, the economic damage resulting from biodiversity loss could amount to EUR 1.7 trillion to EUR 3.9 trillion each year. For the sake of comparison: the long-term economic damage caused by greenhouse gases (based on figures from 2008) is estimated at around EUR 1.5 trillion per year. In order to ensure the stability of our society and economy for future generations, it is crucial that we do our utmost to conserve and restore biodiversity.
Biodiversity Working Group
In the Dutch financial sector, too, there is a growing awareness that the conservation and restoration of biodiversity is essential and that action must be taken soon. To that end, a Biodiversity Working Group has been set up within the Sustainable Financing Platform. This is a cooperative effort of eight financial institutions, which have published their expertise and experiences in a report entitled Biodiversity: Opportunities & Risks for the Financial Sector, detailing their plans as well as examples. The report makes it clear why biodiversity is important to financial institutions, and how institutions can integrate biodiversity into their financial decision-making.
Biodiversity loss risks
Financial institutions have an impact on biodiversity, especially through their investments, insurance products and loans to businesses and households. Financial institutions run risks through their investments in companies whose supply chains are exposed to high biodiversity risks. For example, failing ecosystems can lead to credit risks for banks. This is the case when natural resources are rendered inaccessible and the production processes that depend on them are disrupted.
Investing in the conservation and restoration of biodiversity
It is evident that more investment is needed to conserve and restore biodiversity. According to the Biodiversity Working Group, it is up to financial institutions to take the lead here. They should invest in biodiversity and strive to minimise the risks associated with the loss of natural capital. It is important that they make their impact on biodiversity measurable and develop new investment models. Business models that take biodiversity into account offer businesses opportunities, as in the longer term they are more sustainable and lead to increased market share, new business models, and better relations with stakeholders (OECD, 2019).
The EU’s Business @ Biodiversity Platform has developed an action plan to enable financial institutions to increase their investments in biodiversity-enhancing innovations:
Building capacities among financial institutions and businesses
- Gaining a better understanding of biodiversity in projects and innovations.
- Building capacities for the co-development of bankable biodiversity projects that deliver benefits to multiple stakeholders.
- Stimulating the emergence of environmental brokers and ‘orchestrators’.
- Building knowledge and expertise within the financial sector regarding sectors with significant negative biodiversity externalities.
- Building expertise in businesses and NGOs for the design of bankable pro-biodiversity projects.
Setting targets and establishing standards
- Developing impact targets, strategies and road maps for biodiversity for the restoration of natural capital and aligning business strategies with these.
- Developing consistent and uniform financial accounting and reporting requirements relating to biodiversity. Cooperation between financial institutions aimed at establishing biodiversity risk criteria and applying these in their risk assessment systems and pricing.
- Establishing standards, metrics and open data sources to provide a clear overview of pro-biodiversity projects and innovations.
- Developing financial products enabling consumers to invest in pro-biodiversity projects.
- Applying innovative frameworks to assess the potential of products and supply chains for natural solutions (such as green infrastructure).
Members of the Biodiversity Working Group
The Biodiversity Working Group consists of eight financial institutions and two other organisations. The members of the working group are: Actiam, APG, ASN Bank, a.s.r., FMO, Rabobank, Robeco and NWB Bank, the Dutch Ministry of Agriculture, Nature and Food Quality, and the Erasmus Platform for Sustainable Value Creation. The working group is headed by Lidwin van Velden, chair of the Management Board of NWB Bank.