event 13 янв. 2021

Nexus Blog // Nature and finance: looking forward to 2021

In 2020, we’ve seen nature rise rapidly up the finance sector agenda. In 2021, action will accelerate. For financial institutions looking to tackle nature-related risks, here are five major developments to keep an eye on in 2021. By Beate Triantafilidis, Content Lead, Finance, Global Canopy.

category Nexus Blog tag Governance tag Finance
Jeffrey blum 7 ga Pkh Igqs unsplash

Photo by Jeffrey Blum on Unsplash

“The finance sector is now on biodiversity where climate was five years ago in the lead up to COP21 in Paris. The movement is there with lots of new initiatives. We’re not there yet, but it’s coming”. - Robert-Alexandre Poujade, ESG analyst, BNP Paribas Asset Management

1: Launch of the Taskforce on Nature-related Financial Disclosures (TNFD)

Building on the successful Task Force on Climate-related Financial Disclosures (TCFD), the initiative to bring together a TNFD rapidly gained interest in the second half of 2020. An Informal Working Group, now counting 73 members, has worked to establish a detailed framework and work plan for the nature-focused Taskforce itself, which is planned to launch in the first half of 2021.

In its first year, the TNFD aims to develop a draft framework for nature-related reporting, which is then planned to be tested and refined in year two, leading to launch and dissemination from mid-2023 onwards.

“TNFD is my best pick for mainstreaming biodiversity in the financial sector,” said Robert-Alexandre Poujade, ESG analyst at BNP Paribas Asset Management, speaking at the European Business & Nature Summit last week.

To join the first big nature event of the year, save the date for the One Planet Summit on biodiversity on 11 January, where the initiative to bring together a TNFD will be represented.

2: Global policy targets for nature

In 2021, the world’s governments are expected to negotiate internationally-agreed targets for nature protection under the Convention on Biological Diversity (CBD). Originally planned for 2020, the negotiations have for now been postponed to May next year. The upshot of the postponement is that new commitments from governments in the latter half of 2020 have strengthened the foundations for a global biodiversity agreement.

In September, 64 governments signed the Leaders’ Pledge for Nature, which included committing to “an ambitious and transformational post-2020 global biodiversity framework” at the CBD next year. The US was one of the key economies who did not sign the Leaders’ Pledge – alongside Australia, Brazil, China, India and Russia – but as President-elect Biden is now stepping into the US presidency before the CBD, the likelihood of an ambitious global agreement has increased. If successful, it could be the biodiversity equivalent of the 2015 Paris Agreement on climate change.

A global policy target for nature protection would play a crucial role in clarifying expectations for financial institutions.

“A Paris-like target for biodiversity is really important, so that the financial institutes can connect their targets to global targets,” said Peter van der Werf, Senior Engagement Specialist at Robeco, speaking at the European Business & Nature Summit last week.

Alongside the CBD, a key policy event to note for 2021 is the global UN climate change conference (COP26), which will be hosted by the UK in November. Nature-based solutions to the climate crisis will be high on the agenda.

3: Financial supervisors and regulators look at nature-related risks

Government action on nature in 2021 will not be limited to the two key policy summits.

“So far we’ve focused on climate, but biodiversity is next,” said Mairead McGuinness, European Commissioner for Financial Stability, Financial Services and the Capital Markets, speaking at the European Business & Nature Summit. The Commissioner highlighted the leadership of De Nederlandsche Bank (DNB), the Dutch Central Bank and financial supervisor, which was the first globally to highlight biodiversity as a material financial risk. Their landmark study found that 36 percent of the assets held by Dutch financial institutions are exposed to biodiversity risks.

In 2021, other financial supervisors and regulators are expected to follow suit. Via the Central Banks and Supervisors Network of Greening the Financial System (NGFS), the Dutch Central Bank is engaging with other central banks and supervisors on nature-related risks. Earlier this month, the Sustainable Insurance Forum (SIF), a global group of insurance supervisors and regulators, announced that they are undertaking a scoping study on the financial risks of biodiversity loss. The study will include looking at how insurance supervisors and companies are responding to the risks.

4: Financial institutions make their own nature-related commitments

While calling for more government action on nature, financial institutions are also stepping up.

“The time we have is too short to wait for the best framework or methodology. We need to be collaborating and experimenting,” said Matthias Seewald, Chief Investment Officer at Allianz France, at the European Business & Nature Summit last week. “The Finance for Biodiversity pledge is one arena for that.”

Under the Finance for Biodiversity Pledge, 37 financial institutions with EUR4.8 trillion of assets under management have now committed to collaborate, engage on biodiversity with companies they finance, assess their own biodiversity impact, set targets and report publicly on their biodiversity performance by 2024 at the latest.

More signatories to the Pledge will be announced in the spring. The group is aiming to reach 100 signatories while governments gather to negotiate global targets.

5: Corporates improve reporting on nature, as new technologies boost data availability

Despite the explosion of new initiatives in the nature and finance space in 2020, less than one-quarter of at-risk companies globally reported on biodiversity. Moreover, when companies did include biodiversity in reporting, it was often limited to qualitative descriptions: While 46 percent of companies in the EU referenced biodiversity in their reporting, only 10 percent included metrics.

While reporting and disclosure recommendations from the TNFD will not be ready until 2023, corporate reporting on nature and biodiversity will likely begin improving already in 2021, as companies make note of the increasing interest from investors, banks and regulators. Leading corporates and financial institutions may also explore new nature-related data made accessible by a combination of remote sensor and satellite technologies and artificial intelligence.

“As a banker, I like numbers, and I’m excited that we’re now seeing more data – not enough, but more data – on nature,” says Markus Mueller, Global Head of Chief Investment Office at Deutsche Bank’s International Private Bank, speaking at the European Business & Nature Summit

This article was originally posted by Global Canopy and was re-published with their kind permission.

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