Aligning financial portfolios with biodiversity goals: discover the new addition to the ENCORE tool

26 May 2021

In a critical decade for climate and nature, banks and investors can now explore their portfolio’s impact on species extinction risk and ecological integrity, and take immediate action to reverse biodiversity loss.

  • New UN-backed ENCORE biodiversity module has been launched, enabling financial institutions to explore to what extent their financial portfolio indirectly drives species extinction risk and impacts ecological integrity. 
  • Focused on the mining and agriculture sectors which are particularly exposed to biodiversity risks, the tool includes guidance for engagement, enabling financial institutions to take immediate action to transition these sectors towards a nature-positive future.
  • Analysis using the new module suggests that:
    • Over 40% of mining activity globally occurs in ecoregions with strong declining trends in ecological integrity. 
    • 50% of the mining sector’s potential for reducing species extinction risk lies with just over 2% of mines globally. Ambitious biodiversity management within these locations is crucial for avoiding species extinctions.
    • Over 60% of the global potential for reducing species extinction risk across all land area falls within cropland. 
  • The module allows financial institutions to identify pathways to increase positive impacts within agricultural and mining portfolios, as well as transition mining portfolios to a low energy future.
  • Over 30 financial institutions have taken a pioneering role in the development and testing of the module (full list in ‘notes to editor’).

Geneva, 26 May 2021: New ENCORE biodiversity module launched today by the Natural Capital Finance Alliance a collaboration between the UN Environment Programme World Conservation Monitoring Centre, the UN Environment Programme Finance Initiative and Global Canopy, enables banks and investors to analyse the potential impact of their financing and investment activities in agriculture and mining on biodiversity loss, in particular species extinction and the loss of ecological integrity. 

Financial institutions face escalating risks from nature loss. US$44 trillion of economic value generation, over 50% of global GDP, is moderately or highly dependent on nature and its services, but the world’s ecosystems have declined by 47% globally on average compared to their earliest estimated states, with 1 million species at risk of extinction. This creates material risks and opportunities for banks, asset owners and asset managers, as they invest in and lend to companies facing increasing physical, market, regulatory and reputational threats associated with biodiversity loss.

Biodiversity loss is fast rising up the global policy agenda with an ambitious post-2020 global biodiversity framework expected to be agreed by governments in Kunming in October 2021. Momentum is building and leading financial institutions are increasingly taking biodiversity into account, seeking ways to align financial flows to global biodiversity goals. Over 30 financial institutions took a pioneering role participating in the development of the ENCORE biodiversity module.

The new module lies at the cutting-edge of sustainable finance, allowing financial institutions to take immediate action, activate stakeholder engagement, and transition their portfolios towards a nature-positive future. Banks and investors can use the module to map their current exposure, and explore future scenarios, identifying potential pathways to increase positive impacts within agricultural and mining portfolios, as well as transition mining portfolios to a low energy future. The module provides guidance on company engagement, enabling financial institutions to work with stakeholders in high-priority areas to adapt production practices with the aim of making them nature-positive. 

The ENCORE biodiversity module is an extension of the free-to-use, online ENCORE tool (‘Exploring Natural Capital Opportunities, Risks and Exposure’) which assists the finance sector in visualising the links between the economy and nature. ENCORE allows banks, investors and insurers to identify nature-related risks, opportunities and exposure in their activities by setting out how each industry and sub-industry depends and impacts on nature. The ENCORE tool and biodiversity module are available by signing up here.

 

Corli Pretorius, Deputy Director, UN Environment Programme World Conservation Monitoring Centre said:

“Financial institutions are increasingly aware that biodiversity loss is an urgent issue they must tackle. The challenge has been to gain a more granular understanding of how biodiversity risks and opportunities show up in specific portfolios. Now, financial institutions can use the new module to understand the biodiversity risks and opportunities in their portfolios; they can prevent or account for the negative impacts on nature, while directing investments to better outcomes for people and planet.” 

Eric Usher, Head of the United Nations Environment Programme Finance Initiative said:

“The ENCORE biodiversity module lies at the cutting edge of sustainable finance, allowing financial institutions to take material action to pivot the real economy towards a nature-positive future. Replenishing and rebuilding biodiversity is an urgent global priority and those financial institutions which show market leadership by being early movers may have a considerable competitive advantage.”

Niki Mardas, Executive Director of Global Canopy, said:

“Data is key to unlocking finance sector action on biodiversity loss, and the missing link that financial institutions tell us they urgently need to shift their financing and investment away from nature-negative activities and towards nature-positive ones. The ENCORE tool has already been used by key finance sector players, like the Dutch Central Bank, to explore nature-related risks across entire markets. Now the new ENCORE biodiversity module enables individual financial institutions to take further targeted action in sectors like agriculture and mining which have high impacts and dependencies on nature.”

Karine Siegwart, Vice-Director of the Swiss Federal Office for the Environment, said: 

“Switzerland is committed to becoming a leading sustainable financial market place. With the ENCORE tool the financial sector globally is provided a unique tool with a powerful lever for halting biodiversity loss. We are proud to be supporting such critical efforts towards aligning financial flows with biodiversity targets“.

 

NOTES TO EDITOR

 

Media Contact: Miranda Barham |  miranda@mirandabarham.com |  +44 (0)7899 030304

 

Financial Institutions which participated in the development of the ENCORE biodiversity module:

 

Access Bank, AMERRA Capital Management LLC, APG AM, Bank of Montreal (BMO), Banque Socredo, Barclays, BNDES, BNP Paribas Asset Management, BT Financial Group, Citi, Credit Suisse, Development and Investment Bank of Turkey (Türkiye Kalkınma ve Yatırım Bankası A.Ş.), Development Bank of Southern Africa (DBSA), First Rand, Fondaction, GLS Bank, Hermes, ING, Jyske Bank, Kasikornbank, Land and Agricultural Development Bank of South Africa (Land Bank), NAB, National Bank of Canada, Natixis, NatWest Group, Nedbank, Piraeus Financial Holdings, Scotiabank, Sudameris Bank S.A.E.C.A., Swiss Re, UBS

 

This module uses goal-relevant metrics, but does not currently provide an explicit link to the potential post-2020 global biodiversity framework, as this is currently being deliberated and will be formally agreed at the 15th Conference of the Parties to the Convention on Biological Diversity (CBD COP-15). This module will be updated in accordance with the final negotiated text of the post-2020 global biodiversity framework once available.

 

About the ENCORE tool

The ENCORE tool (‘Exploring Natural Capital Opportunities, Risks and Exposure’) is a free, online resource which helps global banks, investors and insurance firms assess the risks that environmental degradation, such as pollution or destruction of forests, causes for financial institutions. The tool was developed by the Natural Capital Finance Alliance, and has been made possible with funding initially from the Swiss State Secretariat for Economic Affairs (SECO) and the MAVA foundation, and subsequently from the Swiss Federal Office for the Environment (FOEN), which has funded the development of the ENCORE biodiversity module. Work to support the development of ENCORE has also been undertaken by PricewaterhouseCoopers LLC and the Norwegian University of Science and Technology (NTNU).

 

About the Natural Capital Finance Alliance

The Natural Capital Finance Alliance (NCFA) is a finance sector led initiative, providing expertise, information and tools on material aspects of natural capital for financial institutions, including ENCORE. The NCFA secretariat is run jointly by the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC), the UN Environment Programme Finance Initiative (UNEP FI) and Global Canopy.

https://naturalcapital.finance

Twitter: @NatCapFinance | Linkedin: Natural Capital Finance Alliance

 

About UNEP-WCMC:

The UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) is a global Centre of excellence on biodiversity. The Centre operates as a collaboration between the UN Environment Programme and the UK-registered charity WCMC. Together we are confronting the global crisis facing nature.

https://www.unep-wcmc.org

Twitter: @unepwcmc | Linkedin: UNEP-WCMC

 

About UNEP FI:

The UN Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. UNEP FI works with more than 350 members – banks, insurers, and investors – and over 100 supporting institutions – to help create a financial sector that serves people and planet while delivering positive impacts.

https://www.unepfi.org

Twitter: @UNEP_FI | Linkedin: UN Environment Programme Finance Initiative

 

About Global Canopy:

Global Canopy is a data-driven think tank that targets the market forces destroying nature by providing innovative open-access data, clear metrics, and actionable insights to companies, financial institutions, governments and campaigning organisations worldwide. 

www.globalcanopy.org

Twitter: @GlobalCanopy | LinkedIn: Global Canopy 

Facebooktwitterlinkedin