The current global rate of extinction is at its highest point in 10 million years. We are losing 100 species every day. The primary culprit? The global food system which threatens 86% of species today.

Earth is home to an estimated 8.7 million unique species. Each plays an important role in maintaining balance in our ecosystem.

In 2023, the World Economic Forum ranked biodiversity loss as the fourth biggest global risk over the next 10 years. This loss not only jeopardizes our planet’s health but also carries significant financial, reputational, and business risks. It exacerbates social and economic inequalities and increases pressure on governments and businesses to thwart environmental damage. 

How do investments support biodiversity?

We need financial investments from the private sector and from public organizations  that support actions that “protect, restore, enhance the sustainable use and management of nature, or enable these actions”. Nature-positive finance can support biodiversity in four different ways:

1. Protection  Activities that maintain the current status and condition of biodiversity and ecosystems.
2. Restoration Actions that assist the recovery or preservation of an ecosystem that has been degraded, damaged or destroyed.
3. Sustainable use and management of nature Supporting the use of nature in a way and at a rate that does not lead to long-term biodiversity loss.
4. Enabling conditions Policies, models and sectoral instruments, incentives, data and other tools enabling the aforementioned activities.

Clearly, organizations need to incorporate biodiversity into their investment portfolios. We are already seeing positive moves here. Intensa Sanpaolo was the first Italian bank to issue a green bond in 2017, for which it has developed specific frameworks that comply with the Green Bond Principles, the Social Bond Principles and the Sustainability Bond Guidelines of the International Capital Market Association.

Separately, international finance institutions, like the International Fund for Agricultural Development (IFAD), also embed biodiversity concerns into their investments. IFAD’s ‘Rural Sustainable Development Project in Bahia’ (2014-2022) in Brazil enhanced the local biodiversity of agricultural crops by investing in a Creole Seed Programme, which rescues creole seeds for family production, that restored more than 1,000 hectares of the precious Caatinga biome.

Further, the recently adopted Kunming-Montreal Global Biodiversity Framework (GBF) explicitly calls on actors to use innovative finance instruments to help meet the target of raising $200 billion for nature conservation from public and private sources annually by 2030.

Financial tools to support biodiversity

As organizations increasingly recognize the urgency of integrating biodiversity into investment strategies, various financial tools have emerged as effective means of addressing this critical issue. In this section we examine an array of financial mechanisms driving biodiversity conservation and explore how they’re reshaping the landscape of environmental finance.

Debt-for-nature swaps: These have seen exciting success in a number of countries, including Belize and Ecuador. Debt-for-nature swaps involve an international conservation organization and local organizations purchasing a country’s foreign debt at a discounted rate and converting it into local currency debt. The proceeds from this transaction are then used to fund conservation activities. This approach relies on the willingness of commercial banks or governments to buy debt at less than the full value of the original loan. Many developing countries, that are unable to repay their debts in full, find this approach attractive.

In Belize, a $553 million debt-for-nature swap to protect coral reefs cut the Caribbean country’s external debt by 10% of its GDP. Ecuador completed the highest debt-for-nature-swap, which involved repurchasing US$1.6 billion in bonds, saving US$1.1 billion in debt service repayments with US$450 million invested in conservation activities.

Many of the countries most vulnerable to climate change, with limited access to traditional loans, can enhance resilience and access fiscal resources through debt-for-nature swaps.

Source:  Picture adapted from Dialogo Chino Blog

Green bonds: These are standard bonds, but with a bonus “green” feature and are characterized by flat pricing – meaning that their price is the same as that of ordinary bonds. Green bonds for biodiversity ensure that proceeds from the sale of bonds are invested in projects that generate biodiversity conservation or benefits.

The Responsible Commodities Facility in Brazil is a financing program, managed by an established, dedicated fund management company, that is supported by green bonds. It offers financial incentives to Brazilian farmers to produce soy on already cleared and degraded lands, and aims to discourage further expansion of agricultural land. The program also offers low-interest credit lines to Brazilian farmers who commit to avoiding clearing forests, with the overarching goal of protecting or restoring 1.5 million hectares of natural habitat.

Source:  Picture adapted from Dialogo Chino Blog

Payment for Environmental Services: These mobilize and direct finance from various government funds, including fuel tax and water charges, towards farmers or landowners for providing an ecological service, such as watershed protection.

Some countries have mainstreamed Payment for Ecosystem Services into national policies, including Costa Rica which uses fuel taxes, carbon credits and strategic alliances with the public and private sector to raise capital for forest and ecosystem conservation. IFAD, for instance, has collaborated with the non-profit organization, The Nature Conservancy on the Upper-Tana Water Fund in Kenya. It directed finance from public and private water-dependent organizations to pay farmers to manage their land sustainably and restore degraded land.

Biodiversity credits: Biodiversity credits are an emerging innovative finance mechanism that serve as an asset resulting from investments in biodiversity restoration, conservation, and development. These credits are sold to companies seeking to fulfil their ESG (environmental, social, and governance) commitments. They support endeavors that generate net positive biodiversity gains, allowing companies to undertake nature-positive actions and contribute to long-term conservation and restoration efforts. Biodiversity credits help both the private and public sectors achieve a nature-positive economic system.

Blending opportunities

Blended finance can include a mix of guarantees, grants, concessional loans, equity investments, and insurance to address distinct investment challenges. This approach presents an opportunity to narrow the divide between the requirements of small-scale farmers and investors’ uncertainties regarding how to effectively engage with them in rural areas.

One example is in Maharashtra, India. IFAD partnered with the Government of Maharashtra and employed blended finance to empower women in 1 million households to start and expand competitive businesses.

Prioritizing communities and biodiversity in money at scale

Most investments from international finance institutions include mandatory safeguards which mitigate biodiversity and pollution risks. As part of these safeguards, it is important to ensure that nature-positive investments increase communities’ rights to resources, and they are given an active role in decision making. Engagement with local communities through Free, Prior, and Informed Consent is critical at this stage.

As we navigate the intricate balance between economic development and environmental conservation, these financial innovations will be crucial building blocks for a harmonious coexistence between nature and humanity.

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The loss of biodiversity, the decline in ecosystem health and the rise in climate change’s adverse impacts are no longer surprising news. The consequent impacts on human wellbeing, from food insecurity and income loss, through to illness and displacement, are also well established.

However, despite all the evidence, government organizations are still woefully slow to adopt decisions and take financial and technical actions that address these problems.

A welcome move in intergovernmental policy, however, comes courtesy of the Kunming–Montreal Global Biodiversity Framework. Adopted under the Convention on Biological Diversity (CBD), the Framework acknowledges the need to motivate people across multiple scales – from individual consumers and producers, through to businesses and policy-makers – to work towards its vision of a world living in harmony with nature by 2050.

The Framework advocates for a whole of society and whole of government approach to achieve its goals and targets. This requires all CBD Parties to align their national policies in this direction.

Adopting this approach involves difficult administrative challenges and needs careful reflection, design, and uptake. But it has the potential to be a game changer because it forces us to look at human society and ecosystems as one socio-ecological system. This is not a new concept, but it certainly could be considered a novel approach in policy-making.

What are socio-ecological systems?

A socio-ecological systems approach to decision-making takes into consideration the interdependence between people and nature. It allows a more nuanced understanding of the factors and actions that affect the integrity and wellbeing of ecosystems and human societies. Furthermore, it helps show how choices and decisions made in one sector affect others in various contexts.

For example, monocropping (growing one type of crop on the same piece of land) may support food security. But it is bad for nature. It results in the loss of biological resources, like plants, animals and minerals, as well as ecological processes. Ultimately, humans lose options to support their health and wellbeing, e.g. plants for medicine or climate/pest resilient varieties.

Socio-ecological systems essentially recognize that, within a landscape or seascape, multiple actors seek multiple benefits from its diverse array of contributions to society and the economy.

Depending on the stakeholder, these non-mutually exclusive benefits could be:

• Relational: i.e. where people have a relationship with different aspects of nature. For example, with a sacred or aesthetically beautiful place. Nature can also be educational, or produce special varieties of crop linked to cultural identities, for instance. Relational benefits, in fact, inform the production, consumption and management habits of populations in different contexts.
• Instrumental: where nature provides a good, such as food, medicine or fiber, or something that helps produce a good.
• Intrinsic: the value of certain resources is that they simply exist.

The uniqueness of the socio-ecological systems approach is that it embraces the diversity of social and ecological dimensions across different types of socio-political, environmental, and economic contexts. Furthermore, it allows informed choices to be made about the trade-offs that arise during human–human and human–nature interactions. That is to say, issues of equity and broader sustainability are embedded in the conceptual design of such systemic approaches.

Socio-ecological systems approaches go beyond the better-known nexus approaches, which look at interconnections between related sectors, such as the food-energy-water nexus) as well as systems approaches within a sector (e.g. agri-food systems or health systems). Nexus and systems approaches still do not adequately factor in the full gamut of activities and inherent values across a landscape or seascape.

On the ground, socio-ecology gives a greater sense of agency to every actor group, including marginalized peoples, such as indigenous peoples and local communities, and others including migrant populations in cities. It empowers them to be part of the solution to biodiversity loss and climate change impacts, and to help ensure a thriving human population. It further allows the space for other non-mainstream planning and assessment models (e.g. inclusive wealth, the degrowth economy and the caring economy) to capture the growth and prosperity of an economy.

What is socio-ecological resilience?

Socio-ecological resilience is “the capacity to adapt or transform in the face of change in social-ecological systems, particularly unexpected change, in ways that continue to support human well-being”.

Simply put, it is a state of anticipatory preparedness that ensures that we can cope and adapt to various disruptions to the socio-ecological system that may arise from natural, social, or economic factors.

This needs to be actively cultivated, however, and it must address several imperatives, including:

• Basic human needs: e.g. food, health, income, and shelter.
• Security-related needs: e.g. access to natural resources, rights, and the agency to take decisions.
• Belonging needs: e.g. sense of place, identity, equity, and fairness.
• Self-esteem needs: e.g. confidence to negotiate and education.

All of these are linked to the health of ecosystems and biological resources, and the capacities, skills, and knowledge of the people using them. Further, achieving socio-ecological resilience requires multiple and diverse sets of actors to collaborate to identify solutions tailored to different contexts.

Aligning human activities towards promoting resilience requires multi-pronged initiatives to ensure that, among others:

• Different sectoral policies do not have conflicting goals.
• Planning and implementation follow principles of co-learning, co-design, peer review, and support.
• Developing inclusive partnerships and co-operation between different actor groups is actively sought and promoted.
• Adequate finance that is required at points of intervention is accessible and fit for purpose.
• Agencies (whether state led or non-state organizations) invest in effective communication measures and reflexive capacity development activities that allow peer learning and learning across different types of expertise.

Although this may seem like an idealistic wish list, it is necessary that everyone is involved to achieve the goal of living in harmony with nature. Many examples across the world show that such an approach works (see, for instance, examples from the International Partnership for the Satoyama Initiative). What we need now is the political will at every scale of implementation to make the feasible a realistic possibility.

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What can be done to address the global biodiversity crisis and deliver “nature-positive” solutions for sustainable development? This was the central theme of the 2023 Global Development Network (GDN) conference. Researchers, policymakers and practitioners from across the world came together at the event in Quito, Ecuador, to discuss this conundrum – and potential solutions.

Advocating dramatic action to address potentially devastating losses of flora and fauna might rely on a moral case about respect for species and the intricate relationships between them. We are all part of that global ecosystem, after all. It might equally focus on self-interest, however. The natural world provides numerous essential ecological services, including food, medicine and clean water, without which humanity would be in dire straits.

The latter argument should certainly work well with private sector organizations, which increasingly need to account for both their impact on the natural world and their reliance on its resources in the form of raw materials and other inputs for production processes. The material risks to business that are associated with biodiversity loss are a critical matter for both companies and investors.

What’s more, emerging evidence not only shows that “‘biodiversity risk’” affects the prices of privately issued financial assets, such as equities, research also suggests that it hurts sovereign credit ratings in places where ”partial ecosystems collapse” has harmed fisheries, tropical timber production and wild pollination. Financial markets are no longer ignoring nature.

Food and agriculture

One sector with a particularly substantial impact on nature is food and agriculture. As the World Bank notes, “it is the foundation of food security, yet extremely vulnerable to climate change and a major contributor to greenhouse gas emissions as well as habitat and biodiversity loss.” Managing the trade-offs between ecological conservation and providing enough for everyone to eat is one of the big challenges for nature-positive development.

The GDN conference featured a plenary session on balancing production and conservation goals, at which Jyotsna Puri of the International Fund for Agricultural Development said: “We are already producing enough food for ten billion people, and the food industry contributes to a third of carbon emissions. We need to rethink the food production system to treat nature in its own right.” Elena Lazos Chavero of the Universidad Nacional Autónoma de Mexico added: “What we have to bring in the discussion of sustainable agriculture, food security and biodiversity is food justice and social equity.”

But is Big Food doing enough for sustainability? No, suggests the latest Food and Agriculture Benchmark from the World Benchmarking Alliance which ranks the 350 most influential companies in the sector on their environmental, nutritional and social impact. According to the data, the vast majority of companies fail to recognize their responsibility to protect the Earth and feed the world’s population in an equitable way.

Trade

International trade is another key area for trade-offs. Trade can exacerbate biodiversity degradation, but it also has the potential to support conservation, sustainable use and restoration. Leading a session on nature-positive trade for sustainable development, Marianne Kettunen of TRADE Hub said that international cooperation and the alignment of trade policies with environmental regulations, removal of harmful subsidies and promotion of sustainable practices can help to address the biodiversity crisis.

A report for the UN Environment Programme remarks that the Kunming-Montreal Global Biodiversity Framework (GBF), adopted in December 2022, provides a fresh reference point for the relevance of trade policy to the biodiversity agenda. The increasing focus on the environment and sustainable development at the World Trade Organization also presents an opportunity to discuss where trade policy could support delivery of the agenda – and align it to the UN 2030 Agenda for Sustainable Development and its Sustainable Development Goals – with sustainable trade as part of the solution.

Finance

What about interactions between nature and the financial system? As with climate change in recent years, biodiversity loss is increasingly recognized as a source of financial risk that may threaten financial stability. It thus falls within the mandates of central banks and financial supervisors. A report from the Network for Greening the Financial System recommends that these public authorities start to assess the degree to which financial systems are exposed to the risk, by developing biodiversity-related scenario analysis and stress tests, and dashboards of biodiversity metrics.

The report also calls for “the necessary financial architecture for mobilizing investment for a biodiversity-positive economy.” This challenge was extensively discussed at the conference, including reference to the “Summit on a New Global Financial Pact” convened in Paris by President Macron in June 2023. Its aim was “to lay the foundations for a renewed international financial system, creating the conditions for a financing breakthrough so that no country has to choose between reducing poverty, combating climate change and preserving biodiversity.” 

A key part of the financing agenda is creating new classes of nature-positive assets. These were discussed at a conference plenary on financing biodiversity conservation. Camilo Santa of the Inter-American Development Bank (IDB) cited a number of examples, including Ecuador’s “debt-for-nature” swap, which involves selling “blue bonds” that will funnel money into conservation of the Galapagos Islands, one of the world’s most precious ecosystems. This Ecuadorian case may be a model for other highly indebted but nature-rich countries. The IDB has also helped countries, such as Colombia and Costa Rica, to develop post-pandemic recovery strategies based on natural capital.

The way forward

The ultimate aim of all these projects and programs around biodiversity and sustainable development is to support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes. As was broadly agreed by participants at the GDN conference, that must involve a combination of public and private sector initiatives, as well as a variety of carrots and sticks to encourage the required changes in individual and collective human behavior.

Much can be learned from our response to the threat of climate change. For example, the Task Force on Climate-related Financial Disclosures, which galvanized corporate reporting on climate risks, has inspired the Taskforce on Nature-related Financial Disclosures (TNFD). The latter describes itself as “a market-led, science-based and government-backed initiative providing organizations with the tools to act on evolving nature-related issues.” The TNFD has issued detailed guidance for business and finance on how to integrate nature into decision-making.

Governments are also beginning to draw lessons from the response to climate change by providing funding for nature conservation – for example, in Brazil’s National Green Growth Program and the European Green Deal. And representing more of a stick than a carrot is the European Union’s (EU) proposed nature restoration law. As with previous EU legislation to tackle climate change, this law would establish legally binding targets for forest, marine, urban and agricultural ecosystems.

Such initiatives effectively constitute self-imposed pressure on governments to deliver on conservation objectives – and they, in turn, will put pressure on the private sector and society as a whole.

In the end, the case for biodiversity protection can be made on the basis of the economic, social and health benefits of nature. Nature-positive development is good for both people and the planet.

The photograph accompanying the article and titled ‘Before the sun sets’ was captured by Santiago Sainz-Trápaga. It earned 3rd place preserving biodiversity section of the photo contest held by GDN in collaboration with WWF Ecuador during GDN’s 2023 conference on biodiversity and development.

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“In a world where cities are growing and expanding at an unprecedented rate, it becomes increasingly clear that we must make strategic investments in green urbanization to ensure a sustainable future… To keep our cities healthy, clean and prospering, biodiversity must be a priority and financing must follow.”

These are the words of David Cooper, acting executive secretary of the Convention on Biological Diversity, on World Cities Day in October 2023. His call to action coincided with his appearance at the 2023 Global Development Network (GDN) conference in Quito, Ecuador, where researchers, policymakers and practitioners from diverse backgrounds came together to discuss the threat that the loss of the variety and abundance of species and ecosystems poses to sustainable development. A central focus of the event was the potential of the Kunming-Montreal Global Biodiversity Framework, which seeks to drive actions that will protect 30% of the Earth’s lands, oceans, coastal areas and inland waters by 2030, and achieve “a world living in harmony with nature by 2050”.

In the context of the urban environments, in which two-thirds of the global population are likely to live by mid-century, the key to delivering on the latter objective lies in “nature-based solutions”. These elements of green infrastructure might include trees, plants, wetlands, parks and open spaces that generate oxygen, take in carbon, mitigate air pollution, absorb rainfall and provide wildlife habitat. In general, they promote both a healthy environment and the well-being of inhabitants.

This blog presents key policy lessons from the GDN conference on how to bring nature-based solutions into the mainstream and our cities for a more sustainable future.

Urban futures

The importance of preserving species and ecosystems is not just an issue about oceans and tropical rainforests. At the opening plenary of the conference, Thomas Elmqvist of Stockholm University noted an emerging consensus: in our “urban century”, the health of the Earth depends on the coexistence of rapidly growing cities and the natural world.

One strategy for guiding cities towards the goal of conserving nature for biodiversity and human well-being is to facilitate a planning process based on positive visions for urban systems among stakeholders. Elmquist outlined the Urban Nature Futures Framework, a way of developing alternative visions and scenarios for the management of nature in cities based on three sets of values.

First, there is “urban nature for nature”. This is based on the intrinsic values of biodiversity and supports, for example, the rewilding of urban parks with native species. Second, there is “urban nature for society”, which is based on utilitarian values of what is best for human well-being and which encourages nature-based solutions, such as green infrastructure, green roofs and artificial wetlands to improve climate, air and water quality, and physical and mental well-being. And third, there is “urban nature as culture”. Based on relational values[MK1]  – the values of interactions between people and nature, and those among individuals in society – this is manifested in parks, botanical gardens and urban agriculture, and is celebrated in festivals and art.

Mainstreaming biodiversity for sustainable development

Several GDN conference sessions focused on the need to broaden discussions on the values and benefits of nature to as wide an audience as possible and at all levels of society, from local to global. Gabriel Quijandría of the International Union for Conservation of Nature explained that such “mainstreaming” means integrating biodiversity considerations into decision-making processes and policies in key areas like poverty reduction, climate change mitigation, and trade and international cooperation. It also applies to sector-specific plans in agriculture, fisheries, forestry, mining, energy, tourism and transport.

But as many participants recognized, mainstreaming is a complex and challenging task. It might range from talking to local communities about the importance of river dolphins in the food chains and freshwater ecosystems of Ecuador – as described by Jessica Pacheco of WWF-Ecuador – to persuading international investors of the benefits of investing in bonds, trust funds and other financial instruments promoting conservation – as referred to by Camilo Santa of the Inter-American Development Bank.

The OECD has produced a “blueprint for action” on biodiversity mainstreaming, the central message of which is for governments to “establish a strong social and business case”. That proposes a national assessment of ecosystem services and their full social benefits, including monetary values, where feasible, and a database of evidence on the drivers, pressures and state of biodiversity. The report also recommends developing targeted messages for stakeholders and working together to identify solutions, an idea that was echoed repeatedly during the conference.

Research, policy and education

Bridging the gap between research and policy is a core GDN objective – and there was much discussion at the conference about how this can be achieved most effectively in the areas of the biodiversity crisis and sustainable development. As ever, there is a need for more research. The natural sciences need to keep improving our understanding of ecosystems and the social sciences need to show us how human behavior, social structures and institutions influence conservation efforts – and how to build capacity for research and policy impact in low- and middle-income countries.

All agreed that a huge educational effort is needed, not just with students and the general public, but with policymakers. Gabriel Quijandría highlighted a key challenge of mainstreaming the environment and biodiversity in public policies: “When you discuss the proposals with a cabinet of decision-makers in the public sector, no one goes against the idea of protecting biodiversity. The problem lies in implementing the proposals. The idea of approaching the issue is limited by the budgets, the bureaucracy and the idea of changing things.”

But there is hope of change. The words of Carolina Rosero Cordero of Conservation International Ecuador in the opening plenary offer a suitable call to action: “We need to be ambitious and dedicated, and collaborate across all sectors to address biodiversity and development issues. And we all need to work together – non-governmental organizations, business enterprises, academia, civil society organizations and governments, while integrating indigenous people and communities into policymaking and implementation.”

The photograph accompanying the article and titled ‘Geoffroy´s Cats Fate’ was captured by Santiago Sainz-Trápaga. It earned second place general and first place in the biodiversity loss section of the photo contest held by GDN in collaboration with WWF Ecuador during GDN’s 2023 conference on biodiversity and development.

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“Truly sustainable economic growth and development means recognising that our long-term prosperity relies on rebalancing our demand of nature’s goods and services with its capacity to supply them. It also means accounting fully for the impact of our interactions with Nature across all levels of society.”

With these powerful words, Partha Dasgupta of the University of Cambridge launched his independent review of the economics of biodiversity, commissioned by the UK Government and published in 2021. In a similar way to the Stern Review of 15 years earlier, which warned of the costs of inaction on climate change, Dasgupta’s final report explores the dangers of biodiversity loss – declines in the variety and abundance of species and ecosystems – and what can be done to preserve the ecological underpinnings of our economies, livelihoods and well-being.

The Dasgupta Review was published before the 15th Conference of the Parties (COP15) to the UN Convention on Biological Diversity in December 2022, which culminated in a new international agreement. The Kunming-Montreal Global Biodiversity Framework (GBF), agreed at COP15, spells out a plan to preserve nature and make sure it is a long-term engine of jobs and growth that also reduces carbon emissions. Key commitments include, by 2030, to:

• protect 30% of the Earth’s lands, oceans, coastal areas and inland waters – the ‘30×30’ aspiration;
• reduce the annual government subsidies that encourage environmentally wasteful activities by $500 billion;
• and cut food waste by half.

The 2023 Global Development Network (GDN) conference focused on what these ambitions mean for public policy, business practices and civil society. The meeting, which brought together researchers, policymakers and practitioners from diverse backgrounds around the world, especially the Global South, was organized with Future Earth and hosted by the Universidad San Francisco de Quito, Ecuador. This location felt particularly appropriate given Ecuador’s status as one of the world’s megadiverse countries – those that harbour the majority of the Earth’s species and a high number of which are endemic.

The challenge of biodiversity loss for development

The Earth is experiencing a dangerous decline in nature as a result of human activity. According to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), one million species of flora and fauna – almost a quarter of the global total – are threatened with extinction due to deforestation, habitat loss, overexploitation, pollution and climate change.

This loss of biodiversity has far-reaching consequences, including the disruption of ecosystem services, such as pollination, soil regeneration and carbon sequestration, which are critical for human well-being.

But a change of direction is possible. As Odile Conchou of the Agence Française de Développement said in opening one of the conference plenaries, the GBF has set the path to “a world living in harmony with nature by 2050” and now it is time to act. That requires local, national and global cooperation among public policymakers, the private sector and civil society.

Adequate financing is essential to ensure protection of biodiversity, conservation of ecosystems and to avoid excessive depletion of natural capital (the world’s stock of natural assets). It is also critical for the alignment of these goals with the other objectives of sustainable development: tackling poverty, inequality and climate change.

Poverty, inequality and sustainable development

Several conference sessions focused on the links and possible trade-offs between biodiversity loss, climate change, poverty and global inequality. For example, Luciano Andriamaro of Conservation International, Madagascar, noted that many communities depend on the ecosystem services which are being altered by the climate crisis, and that resource exploitation is also causing biodiversity loss. And Deshni Pillay of the South African National Biodiversity Institute looked at the benefits of maintaining her country’s ecological infrastructures, which have the potential to create jobs and improve food and water security.

Independent consultant Ivan Borja described the need to raise agricultural productivity in Ecuador. This will not only increase farmers’ incomes, but also discourage the further loss of natural forests that harms both the climate and biodiversity. Hajer Kratou of Ajman University took a more macro perspective, exploring the effects of biodiversity loss on inequality in 60 countries over a 25-year period. Her analysis confirms the devastating impact of deforestation on the access to food and water for the most vulnerable communities.

Food systems and the balance between production and conservation were discussed at length during the conference, including in a conversation between Jyotsna Puri of the International Fund for Agricultural Development and Elena Lazos Chavero of the Universidad Nacional Autónoma de Mexico. They emphasized the importance of putting biodiversity concerns at the heart of the agriculture and fisheries sectors and, in particular, the need to address the one-third of food production that goes to waste, largely in the Global North. There are difficult issues here around ownership of land and production, when one-third of food is produced by smallholders and the rest by transnational corporations.

Indigenous peoples and local communities

Another recurring theme at the conference was the importance of working with local communities, including indigenous people who constitute 5% of the world’s population but live in the places that encompass 80% of the world’s biodiversity. Girma Kelboro Mensuro of the University of Bonn argued that in the tropics, people and nature “belong together” and interact more closely. For indigenous communities, he explained, biodiversity is more than a source of resources: it is also their history and belonging – ”culture defines nature and nature affects culture”.

How to respond in terms of policy-making is a challenge. Laila Thomaz Sandroni of the Inter-American Institute for Global Change Research pointed out that although ‘indigenous peoples and local communities’ are cited 16 times in the GBF, their inclusion is based in policies that are often led by other actors and institutions. The framework, she added, reflects increasing awareness, but it does not contemplate entirely changing pre-existing power asymmetries: the main instruments to protect 30×30 are the same ones that have produced injustices in the past.

Marla Emery, co-chair of the IPBES assessment report on the sustainable use of wild species, cited an example of the potential conflicts between scientific solutions to environmental threats, and the livelihoods of indigenous peoples. Wind turbines built in Norway on the ancestral lands of the Sami people have become a huge controversy, setting demand for renewable energy against the rights of reindeer herders to preserve their culture.

Targets and measurement

Among the GBF’s key elements are four goals for 2050 and 23 targets for 2030. In world affairs, these now sit alongside the net-zero commitments of the Paris Agreement on climate change, and the 169 targets of the Sustainable Development Goals.

Whether such targets are an effective way to make change happen was heavily debated at the conference. The balance of opinion seemed to be that they are a ”necessary evil”. Vanessa Ushie of the African Development Bank suggested that they enable a global coordination effort: “we need more research, knowledge and engagement from different actors in society, and integrated targets might help the private sector to understand”.

Plenty of other systems of measurement might also prove useful for addressing biodiversity loss. One is the International Union for Conservation of Nature’s Global Ecosystem Typology, which aims to identify the ecosystems that are most critical for biodiversity conservation, research, management and human well-being. Another, introduced by Alison Fairbrass of the University College London, assesses countries’ performance on “‘strong environmental sustainability” . This measure is based on scientific standards that represent the situation at which natural capital can maintain its functions over time.

An overarching theme of discussions around all these targets and measures was the need to address a continued failure to value nature in a way that has a real impact on human behaviour. As an August 2023 article in Nature began, “Twenty-five years since foundational publications on valuing ecosystem services for human well-being, addressing the global biodiversity crisis still implies confronting barriers to incorporating nature’s diverse values into decision-making.”

This problem was central to Partha Dasgupta’s review. He argued that gross domestic product is no longer fit for purpose when it comes to judging the economic health of nations. It is, he concluded, based on a faulty application of economics that does not include depreciation of assets, such as the degradation of the biosphere.

At the conference, Simon Levin of Princeton University and Dasgupta’s co-author of a recent study of economic factors underpinning biodiversity loss, talked about ”inclusive wealth”. This concept encompasses not just physical and human capital but natural capital too.  And it not only considers natural capital’s total stock, but also its distribution across humanity – while recognising that ”we are embedded in Nature”. It can be used to identify the institutional reforms that need to be introduced to manage global public goods, such as the oceans, the atmosphere and tropical rainforests.

Dasgupta and Levin’s conclusion serves as a call to action: ”Humanity’s embeddedness in Nature has far-reaching implications for the way we should view human activities – in households, communities, nations, and the world.” It was a theme that echoed throughout the conference and in the closing remarks by GDN president Jean-Louis Arcand.

Arcand urged continued collaboration to achieve “nature-positive” development. This has to happen at all levels: between the public and private sectors, local and global perspectives, the natural and social sciences, and between researchers and policy-makers.

The photograph accompanying the article and titled ‘Love is in the Ocean’ was captured by Santiago Sainz-Trápaga. It earned third place in the photo contest held by GDN in collaboration with WWF Ecuador during GDN’s 2023 conference on biodiversity and development.

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In recent years, there has been a growing awareness that biodiversity loss could undermine the stability of prices and financial systems. Case studies in Brazil, the Netherlands, France and Malaysia have revealed that significant portions of the assets held by banks (between 36% and 54% depending on the study) are highly dependent on the stability of at least one ecosystem service. These studies also highlighted the fact that significant proportions of financial assets were exerting considerable pressure on biodiversity. These pressures are such that there is a risk of loss of financial value, whether as a result of policies, changes in the behavior of responsible citizens, or competition from innovative companies aiming to reduce pressures on nature.

Consequently, it is vital to take swift action by exploring innovative approaches, while improving biodiversity data collection, in order to better understand the economic challenges and resulting financial repercussions. Against this backdrop, in September the Network for Greening the Financial System (NGFS) published its Conceptual Framework for Nature-related Financial Risks. Comprising of central banks and financial regulators, the NGFS aims to improve the integration of climate change and environmental risks into the forecasting models of central banks and regulatory authorities.

Scenarios for assessing nature-related financial risks

The Framework seeks to create a common science-based understanding of these nature-related financial risks and a shared language among NGFS members. Aware of the unprecedented nature of these new perils in human history, operators quickly realized that observing past financial market experiences or simply extrapolating current trends would not suffice. This is why the NGFS advocates risk assessment based on different scenarios of possible futures. These scenarios are used to establish the famous “stress-tests” designed to assess the resilience of financial systems in the face of natural degradation, or measures designed to prevent the destabilization of life on the planet.

Various hypotheses of possible changes in biodiversity are thus formulated, in order to project how they could affect financial systems (physical risk scenarios). Other scenarios focus on the changes needed to achieve the objectives of the new Kunming-Montreal Global Biodiversity Framework (GBF), signed in December 2022 (transition risk scenarios). Under this pact, signatory countries to the United Nations Convention on Biological Diversity will have to draw up new national trajectories for sustainable development and the protection of living things. These trajectories should aim to transform multiple economic sectors in order to halt biodiversity loss by 2030 and begin its recovery by 2050.

Some significant limitations

However, global quantitative scenarios for the world’s biodiversity have a number of limitations.

For example, there are no physical risk scenarios to project the non-linear degradation of biodiversity and the ecosystem services it provides, according to different socio-economic development trajectories.¹ Humanity’s exerted pressures on ecosystems can lead to irreversible change. And yet, the disappearance of these pressures does not systematically lead to the complete restoration of the system, but can sometimes give rise to the establishment of an alternative ecosystem. The few attempts we have identified attempting to measure the consequences of transition policies on the services provided by nature remain opaque. They also fail to take into account the possibility of tipping points being exceeded, and the resulting ecosystem collapse.

Furthermore, the scenarios generally only deal with the transition risks. They do not take into account possible feedbacks linked to the changes induced by the scenarios. For example, even if a scenario predicts drastic sobriety changes or massive biodiversity degradation, the economic growth of countries is not impacted accordingly. In addition,  the GBF targets are not defined at regional or country level, and the modelling of the effort required to bring about the transition of economies differs considerably from one scenario to another, which has a considerable influence on the results. For example, in some studies, the target of protecting 30% of land surfaces will be applied differently from one country to another, with some safeguarding more biodiversity-rich areas and others including desert zones in their share of protected areas. Finally, some crucial aspects of biodiversity, such as genetic and soil diversity are often neglected in certain models, that are limited to assessing the abundance of mammals and birds.

Avenues for immediate action

In view of these limitations, the NGFS has just published recommendations for action to be taken before science has produced global models for the evolution of biodiversity and ecosystem services.

To this end, we advise all stakeholders to increase the number of approaches to collecting, openly publishing and distributing biodiversity data, including unconventional approaches (data crowdsourcing, satellite data, household and business surveys, etc.), to feed future models while guaranteeing the reproducibility of analyses.

The absence of projections on the degradation of ecosystem services and the materialization of physical risks for the financial sector should not be a reason to adopt a wait-and-see attitude. The Environmental Sustainability Gap Analysis Framework (ESGAP) can be used to develop short-term physical scenarios. It can help to determine whether or not countries are approaching a safe operating mode for the economy and, consequently, estimate the risk of reaching a tipping point.

When it comes to anticipating the financial risks of reducing pressures on biodiversity, recent work on analyzing transition risks for climate change can be adapted. This involves comparing economic sectors according to the pressures they exert on biodiversity, and taking into account the biome in which they occur. All these avenues of research are currently being explored by various research teams, and should produce useful new results for the financial community in the near future.

The complexity of the issues surrounding biodiversity demands immediate and innovative action from all stakeholders, both in terms of data collection and the development of financial risk scenarios. Given the urgency of the situation, it is imperative to multiply collaborative approaches and explore dynamic solutions in order to best apprehend the economic and financial challenges induced by the degradation of nature. Only concerted open science action, guided by a thorough understanding of risks, will enable us to achieve the ambitious targets of the Global Biodiversity Framework, thereby safeguarding the stability of financial systems and the future of our planet.

1. Cuando la degradación de un ecosistema es mayor que la suma de las degradaciones de sus partes ︎

The post Scenarios for achieving the targets of the Global Biodiversity Framework appeared first on Globaldev Blog.

Biodiversity loss is one of the greatest threats to humanity. Given that economies are ‘embedded’ in nature, the loss of ecosystem services such as fertile soil, flood protection, and erosion control can result in severe losses and disruptions to economic activity. These potential effects are often initially evident in negative spillover effects for the financial sector.

Biodiversity loss can affect the financial system through two main channels: physical risks, which refer to the financial impact of changes in natural capital; and transition risks, which result from the process of adjustment towards a more sustainable economy.

Changes in the stock and condition of natural capital can have material effects on businesses that depend on nature’s ability to provide ecosystem services, with implications for financial institutions. At the same time, financial institutions can have adverse impacts on biodiversity and ecosystem services through their operations and investment decisions (what is known as ‘double materiality’).

Against this background, and while efforts to develop a better understanding of the relationship between biodiversity loss and financial stability continue, it is important to build evidence on the exposure of financial institutions to nature-related financial risks.

In a recent study, which to the best of our knowledge is the first focusing on an emerging market, we explore how and to what extent banks are exposed to risk of biodiversity loss in the context of Brazil, the most biologically diverse country in the world, threatened among other things by deforestation and climate change.

The research follows similar pioneering efforts by De Nederlandsche Bank and, more recently, the Banque de France. But given that Brazil’s financial system is bank-centered, our focus is more narrowly on the banking sector rather than the whole spectrum of financial institutions.

Our results, which are preliminary given the uncertainty around transmission channels and the limitations of data and methodologies, suggest that Brazilian lenders’ exposure to the risk of biodiversity loss may be material.

As of March 2021, Brazilian banks had an outstanding credit exposure of BRL 811 billion to non-financial corporations operating in sectors that are highly or very highly dependent on one or more ecosystem service. This amount represents 46% of the total non-financial corporate loan portfolio and 20% of the total credit portfolio.

Based on the historical sensitivity of Brazilian banks’ asset quality to macroeconomic conditions and macroeconomic modeling of ecosystem services, the output losses associated with a collapse in ecosystem services could translate into a cumulative long-term increase in corporate non-performing loans in the order of nine percentage points, other things being equal.

Biodiversity and climate change mutually influence each other. This implies that Brazilian banks, which are already exposed to climate-related risks, may also face combined effects arising from the interaction between biodiversity loss, climate change, and natural disasters.

In terms of transition risk, Brazilian banks have an outstanding loan exposure of BRL 254 billion or 15% of their corporate portfolio to firms potentially operating in protected areas. Their exposure could increase to BRL 437 billion (25% of the corporate credit portfolio) should areas of very high priority actions for biodiversity conservation become protected, and to BRL 664 billion (38% of the portfolio) should all priority areas become protected.

Finally, for the 11 of 143 Brazilian listed firms for which environmental controversies have been recorded, as of 31 December 2019, banks had an outstanding loan exposure of BRL 109 billion (7% of the corporate credit portfolio).

Given the significant amount of money lent by Brazilian banks to potentially damaging projects and its dependency on nature’s provision of ecosystem services, the mainstreaming of biodiversity-related risk management practices in the banking sector presents enormous opportunities to prevent negative effects on biodiversity.

Our findings have implications for both banks and Banco Central do Brasil (BCB), the financial supervisor. Banks could begin taking steps to identify and measure their exposure to biodiversity loss with a view to monitoring and mitigating any material risks arising from their lending and investment activities.

Banks could also take steps to disclose the biodiversity impacts of their investments and require the same from firms in their portfolios. In that regard, the recently established Taskforce on Nature-related Financial Disclosures could offer the appropriate framework.

The financial sector plays an instrumental role in promoting beneficial impacts of economic sectors on nature. BCB, which in 2014 was among the first central banks in the world to require supervised entities to measure social and environmental risks, recently added a sustainability dimension to its institutional strategy. The sustainability pillar of its work program already includes initiatives that can have positive effects on conservation and restoration of biodiversity.

Better management of nature-related financial risks would not only contribute to the safety and soundness of individual banks and the financial system more broadly: it could also help to reduce the flow of capital into economic activities that harm nature, thus reducing the need for funding to conserve and restore biodiversity and ecosystem services.

This article was initially published on GlobalDev on January 31, 2022.

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Biodiversity loss is one of the greatest threats to humanity. Given that economies are ‘embedded’ in nature, the loss of ecosystem services such as fertile soil, flood protection, and erosion control can result in severe losses and disruptions to economic activity. These potential effects are often initially evident in negative spillover effects for the financial sector.

Biodiversity loss can affect the financial system through two main channels: physical risks, which refer to the financial impact of changes in natural capital; and transition risks, which result from the process of adjustment towards a more sustainable economy.

Changes in the stock and condition of natural capital can have material effects on businesses that depend on nature’s ability to provide ecosystem services, with implications for financial institutions. At the same time, financial institutions can have adverse impacts on biodiversity and ecosystem services through their operations and investment decisions (what is known as ‘double materiality’).

Against this background, and while efforts to develop a better understanding of the relationship between biodiversity loss and financial stability continue, it is important to build evidence on the exposure of financial institutions to nature-related financial risks.

In a recent study, which to the best of our knowledge is the first focusing on an emerging market, we explore how and to what extent banks are exposed to risk of biodiversity loss in the context of Brazil, the most biologically diverse country in the world, threatened among other things by deforestation and climate change.

The research follows similar pioneering efforts by De Nederlandsche Bank and, more recently, the Banque de France. But given that Brazil’s financial system is bank-centered, our focus is more narrowly on the banking sector rather than the whole spectrum of financial institutions.

Our results, which are preliminary given the uncertainty around transmission channels and the limitations of data and methodologies, suggest that Brazilian lenders’ exposure to the risk of biodiversity loss may be material.

As of March 2021, Brazilian banks had an outstanding credit exposure of BRL 811 billion to non-financial corporations operating in sectors that are highly or very highly dependent on one or more ecosystem service. This amount represents 46% of the total non-financial corporate loan portfolio and 20% of the total credit portfolio.

Based on the historical sensitivity of Brazilian banks’ asset quality to macroeconomic conditions and macroeconomic modeling of ecosystem services, the output losses associated with a collapse in ecosystem services could translate into a cumulative long-term increase in corporate non-performing loans in the order of nine percentage points, other things being equal.

Biodiversity and climate change mutually influence each other. This implies that Brazilian banks, which are already exposed to climate-related risks, may also face combined effects arising from the interaction between biodiversity loss, climate change, and natural disasters.

In terms of transition risk, Brazilian banks have an outstanding loan exposure of BRL 254 billion or 15% of their corporate portfolio to firms potentially operating in protected areas. Their exposure could increase to BRL 437 billion (25% of the corporate credit portfolio) should areas of very high priority actions for biodiversity conservation become protected, and to BRL 664 billion (38% of the portfolio) should all priority areas become protected.

Finally, for the 11 of 143 Brazilian listed firms for which environmental controversies have been recorded, as of 31 December 2019, banks had an outstanding loan exposure of BRL 109 billion (7% of the corporate credit portfolio).

Given the significant amount of money lent by Brazilian banks to potentially damaging projects and its dependency on nature’s provision of ecosystem services, the mainstreaming of biodiversity-related risk management practices in the banking sector presents enormous opportunities to prevent negative effects on biodiversity.

Our findings have implications for both banks and Banco Central do Brasil (BCB), the financial supervisor. Banks could begin taking steps to identify and measure their exposure to biodiversity loss with a view to monitoring and mitigating any material risks arising from their lending and investment activities.

Banks could also take steps to disclose the biodiversity impacts of their investments and require the same from firms in their portfolios. In that regard, the recently established Taskforce on Nature-related Financial Disclosures could offer the appropriate framework.

The financial sector plays an instrumental role in promoting beneficial impacts of economic sectors on nature. BCB, which in 2014 was among the first central banks in the world to require supervised entities to measure social and environmental risks, recently added a sustainability dimension to its institutional strategy. The sustainability pillar of its work program already includes initiatives that can have positive effects on conservation and restoration of biodiversity.

Better management of nature-related financial risks would not only contribute to the safety and soundness of individual banks and the financial system more broadly: it could also help to reduce the flow of capital into economic activities that harm nature, thus reducing the need for funding to conserve and restore biodiversity and ecosystem services.

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