Nature-positive targets: what can financial institutions learn from their work on climate change?

23 March 2022

Nature and climate are intrinsically linked. Indeed, climate change is one of the five major drivers of the global loss in biodiversity, diminishing the variety of plant and animal species and available genetic material, and degrading the natural resources which underpin supply chains across the global economy.

The interconnectedness of nature and climate means the financial sector needs to take an integrated approach to these crises. Thus far, the ‘E’ in ESG has mostly been linked to climate change. We need to widen the scope to other impacts and risks to the financial system – including biodiversity loss, deforestation, declining ocean health and pollution.

Building blocks for financial institutions

Nature-positive activities are clearly a hot-topic, with G7 leaders recently announcing “our world must not only become net zero, but also nature positive, for the benefit of both people and the planet.” This echoes the IPCC 6th Assessment Report which underlines that climate change adaptation cannot be delivered without considering nature and biodiversity.

But how can this be applied in practice? Thus far, corporates mostly have been involved in the discussion, with both the World Business Council for Sustainable Development and Science-Based Targets Network calling for actionable targets that capture nature’s complexity and connectivity, from genes to ecosystems.

We encourage financial institutions to take a similar approach, leveraging their progress in the climate space to develop nature-positive commitments. We suggest a three-step approach, mirrored in the Principles for Responsible Banking:

  • Step 1: Analyse impact and dependency on nature at the portfolio level. Financial institutions can use tools such as ENCORE in order to achieve this step.
  • Step 2: Set robust targets, based on the outcomes of step 1, committing to ambitious, time-bound, science-informed targets to both halt and reverse the loss of nature, using the mitigation hierarchy. UNEP FI is currently working with the financial community to start setting targets, and has published guidance on biodiversity target setting. These targets are the starting point to measure impact and look at ways to eliminate impact by combining exclusion criteria, engagement, and opportunities to invest in nature-positive projects.
  • Step 3: Report publicly on progress to ensure transparency and accountability, as is best practice in leading international frameworks such as the Principles for Responsible Banking and the Principles for Sustainable Insurance.

From net zero to nature positive 

Following the developments in the climate space, we share the following lessons that can equally be applied in the nature space:

  • Actions must follow commitments: Building a strong commitment is only the first step in creating impact on the ground. UNEP FI works with members to build robust, ambitious commitments based on best available science, designed to drive real impact across a financial institutions’ client base.
  • Supporting a strong global framework: Article 2.1.c of the Paris Agreement was an important milestone for the financial sector as it connected private finance to the overarching policy goals of member states worldwide. In a similar way, UNEP FI is working to ensure that the upcoming Global Biodiversity Framework includes an explicit goal for financial institutions and businesses to align financial flows to global goals.
  • Understanding the unique nature of nature: Unlike the global effects of climate change, nature-related impacts may be far more local in their manifestation. For example, ocean health is both a global and a local issue. This means the actions of the financial sector often need to be catered to local circumstances. Users must apply a variety of tools to determine these actions and impacts. Pressure-based tools such as ENCORE give insights on the largest impacts and dependencies, and tools such as the IUCN STAR helps you measure the contribution that investments can make to reducing the risk of species extinction.
  • Building capacity: UNEP FI actively works with financial institutions to build capacity, and to convene an open space for dialogue, peer learning and co-creation of industry guidance and best-practice.

How UNEP FI supports banks, insurers and investors

UNEP FI is uniquely positioned to support the financial sector to understand nature and is currently working with banks, insurers and investors to align portfolios to global goals, understand risks and impacts, bring market transparency through disclosure frameworks and support an enabling environment. UNEP FI has a strong track-record on both climate and nature, including convening three major net-zero financial alliances and leading piloting work on the Taskforce on Climate-related Financial Disclosures (TCFD) since 2018. On Nature, UNEP FI has been a founding member and implementation partner of the Taskforce on Nature-related Financial Risks (TNFD), as well as convening a global community of practice on sustainable ocean (‘blue’) finance, and a high ambition group on food systems. Working closely with the financial sector, UNEP FI builds innovative guidance, training and tools on biodiversity.

One of our 2022 priorities through the Principles for Responsible Banking involves accompanying the banking community on their journey towards nature-positivity. This includes a two-tier approach, building a learning pathway for banks less familiar with the risks and impacts of nature loss, as well as advanced working groups for those already well on their way. UNEP FI will also be developing a series of pilots in support of the TNFD this year.

Interested to learn more about how your financial institution can get involved? Contact us.

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