The world’s banks must start valuing nature and stop paying for its destruction | Environment


The scientific community has long been unequivocal about the destruction of biodiversity. Last month, the UN reported that the world had not fully met one of the 2020 Aichi Biodiversity Targets that countries endorsed with fanfare in 2010, even as they saw biodiversity was declining at an unprecedented rate and the pressures driving this decline are intensifying. .

This week’s Bankrolling Extinction report reveals that financial institutions provide the capital that finances the overexploitation of our lands and seas, causing biodiversity to plummet. Last year, the world’s 50 largest banks provided $ 2.6 billion (£ 1.9 billion) in loans and other credits to sectors with high impact on biodiversity, such as forestry and ‘Agriculture. Bank by bank, the report’s authors found cavalier ignorance or indifference to the implications, with the vast majority ignoring their impact on biodiversity.

In short, this report is a chilling statement of the status quo.

Fortunately, signs are emerging that some governments are – slowly – targeting donors for the destruction of the natural world. They must now push harder. In the wake of Covid-19, treasury cupboards may be empty, but with new policies and limited clawback funds, they can channel trillions of dollars of private capital toward nature’s positive response to coronavirus, to boost growth, prosperity and resilience without reverting to overconsumption of the status quo and to climate and biodiversity risk.

The voices of economics and finance are starting to give impetus and justification for such momentum. One of the world’s largest business groups, the World Economic Forum (WEF), has recognized the economic importance of nature. In its annual Global Risk Report, released earlier this year, the WEF found that, for the first time, environmental risks dominate perceived business threats. Biodiversity loss has been seen as one of the top five and most likely risks over the next decade, with concerns ranging from the potential collapse of food and health systems to disruption of food chains. entire supply.

And Cambridge University economics professor Partha Dasgupta will describe in an upcoming report how we are depleting our precious natural capital because we have failed to value nature. Dasgupta said the “asset management problem” resulting from this economic surveillance is forcing us to become much more efficient in the way we use our planet’s precious natural resources.

Smart financial institutions realize that regulation of biodiversity is coming. The first recommendation of the Bankrolling Extinction report is, and rightly so, that banks “disclose and drastically reduce their impact on nature and stop funding new fossil fuels, deforestation, overfishing and destruction of ecosystems.”

I see three essential steps that governments can take.

First, they should lead by example in financing favorable to biodiversity, by diverting harmful agricultural subsidies to promote a transition to less harmful activities.

Agriculture is the main cause of biodiversity loss today. The Paulson Institute recently estimated that, at $ 450 billion per year, the value of agricultural subsidies harmful to biodiversity exceeds the cost of paying farmers to use nature-friendly practices. In other words, diverting harmful subsidies to pay farmers to protect biodiversity can lead to a net economy.

In that case, Britain could be a leader, if it manages to complete its planned review of agricultural subsidies after Brexit, replacing crop-based payments with environmental payments. Last week the EU also recognized that we need to make agriculture more environmentally friendly.

Second, governments should ask their development banks to use their liquidity and convening power to become global models for reporting and reducing their impacts on biodiversity.

There are 450 development finance institutions (DFIs) around the world, which invest $ 2 billion annually. Many have only one shareholder, their national government, and as such they can be a powerful financial lever for policy goals, including the conservation and restoration of biodiversity. DFIs could become world leaders by showing commercial banks that the data and methods to measure and reduce their impact on biodiversity already exist. It would be wonderful if they could announce such an initiative at the very first global meeting of 450 DFIs, at the Finance in Common summit in November.

And third, financial regulators and central banks could make these reports on biodiversity risks a condition of authorization by financial institutions. The Dutch Central Bank has already taken a first step, in its recent report, Endetted to Nature. After identifying biodiversity risks exceeding € 800 billion (£ 725 billion) at Dutch financial institutions, the bank concluded that financial institutions should clarify the risks they face as a result of the loss of biodiversity.

Once they have reported on their impacts on biodiversity, financial institutions will need to reduce them, under pressure from stakeholders, including citizens and financial regulators, and they will pass that pressure on to the companies in which they invest. We saw a glimpse of this in action, when the world’s largest asset manager, BlackRock, joined a shareholder revolt this month, demanding that the world’s largest consumer group, Procter & Gamble, specifically measures and reports the company’s impact on forests.

In an era of regulatory change, doing the minimum is a dangerous strategy. In the case of biodiversity, the minimum bar is likely to move steadily upward for the foreseeable future. By going above and beyond, investors can seize the opportunity, rather than just focusing on avoiding risk. Funds specializing in environmental, social and governance priorities underscore this opportunity. These funds are now worth more than $ 1 billion and could exceed the value of conventional funds by 2025 in Europe, according to a new analysis from PricewaterhouseCoopers.

By paving the way for private capital in this way, governments can set new biodiversity targets for 2030 at the United Nations Biodiversity Conference in Kunming next May with confidence that they will no longer be shamefully missed.

• Sir Robert Watson is the former chair of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), and former chair of the Intergovernmental Panel on Climate Change (IPCC)


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