In celebration of the One Planet Summit for biodiversity held on January 11, OMFIF is publishing this Commentary from the latest edition of the Sustainable Development Institute Journal.
The planet is heading towards its sixth mass extinction, with 25% of plant and animal species at risk. Companies (and their financiers) are part of the problem and should become part of the solution.
The destruction of biodiversity has significant implications for the viability and profitability of companies. An estimated $44tn of global value added depends on the ecosystem services that biodiversity provides. As a result, businesses are exposed to poorly understood risks. At the same time, the negative impacts of many companies’ activities on biodiversity create significant societal risks, as well as liability risks for the companies.
Stopping biodiversity loss requires transforming production and consumption patterns. These changes can only be achieved through coherent and effective policies, and by aligning finance with biodiversity objectives. Global biodiversity spending is around $78bn-$91bn per year, mostly public expenditure. The challenge is not only to increase financing for biodiversity; it is also to reduce that which is harmful to biodiversity. Potentially harmful public support is more than five times total biodiversity spending. Total financing that is harmful to biodiversity is likely to be much higher.
Adopting an ambitious post-2020 global biodiversity framework with specific and measurable targets is vital for sending a clear policy signal to businesses and financial institutions. Governments should mainstream biodiversity into their own budgets and fiscal measures – reforming harmful subsidies, greening public procurement, and pricing biodiversity loss through economic instruments. The immediate priority, however, must be to factor biodiversity into Covid-19 recovery measures. With almost $12tn committed to date globally, spending decisions by governments could be decisive for biodiversity and therefore longer-term economic resilience and prosperity.
Businesses, investors, issuers and financial regulators need to systematically account for biodiversity in all areas of decision-making. This requires metrics, methodologies and a common framework for measuring and reporting biodiversity-related dependencies, impacts and risks. The future Taskforce on Nature-related Financial Disclosures will aim to address these needs, drawing on existing measurement approaches and instruments, such as the Organisation for Economic Co-operation and Development guidelines for multinational enterprises on responsible business conduct. The RBC guidelines represent international consensus on the responsibility of businesses regarding adverse impacts on society and the environment, including biodiversity.
Biodiversity loss and climate change are urgent and interlinked challenges. We cannot effectively address one without tackling the other. Yet until recently, biodiversity loss had been relatively neglected in policy and finance. The increasing attention that businesses, investors and central banks are giving to biodiversity provides some hope that that this is about to change.
Simon Buckle is Head of the Climate Change, Biodiversity and Water Division at the Organisation for Economic Co-operation and Development.
Edward Perry is Analyst at the Organisation for Economic Co-operation and Development.