What happened at COP16?

After nearly a fortnight of negotiations and side events in Colombia, COP16 came to an anticlimactic end on Friday.

The international biodiversity summit, which in 2022 resulted in the Kunming-Montreal Global Biodiversity Framework (GBF) – hailed as nature’s version of the Paris Climate Accord – saw major deals postponed this time around. 

Negotiators failed to reach an agreement on the creation of a fund to support poorer countries with their biodiversity efforts, for example, with EU officials claiming such a fund would “further fragment the biodiversity-related financial landscape”.

The bloc was joined by Norway, Switzerland, Japan, Canada, Australia and New Zealand in opposing its establishment, resulting in Brazil refusing to negotiate other issues during the summit.

The UK, Germany, Denmark, Norway, France, Austria and New Zealand agreed to stump up around $200m between them, but it’s a far cry from the $20bn per year rich countries pledged to provide between now and 2030, let alone the $200bn annually it was agreed would be needed to meet the goals of the Kunming-Montreal framework.

And only around a fifth of the countries that promised to submit a game plan for achieving their biodiversity goals, known as National Biodiversity Strategies and Action Plans, did so by last week’s deadline.

Jan Erik Saugestad, chief executive officer of Storebrand Asset Management, lamented the low number of national strategies that were submitted.

“We have advocated for governments to develop ambitious transition plans, and that they should require financial institutions and companies to develop their own,” he said. “We need a whole of government approach. Strong reporting requirements and actionable transition plans from both corporates and governments are needed.”

Progress on engagement, reporting and transition plans

Investors and the private sector were busy on the sidelines of the summit.

The Church Commissioners for England and Universities Superannuation Scheme (USS) were among 13 financial institutions to sign the Finance for Biodiversity Pledge at the event, committing to assess their impact on ecosystems and nature, and set targets to mitigate it.

The pledge also requires them to collaborate with peers to share knowledge on the topic, engage with portfolio companies, and report on progress within two years.

USS and the Church Commissioners were also on a list of asset owners, along with most of Sweden’s AP funds, Brunel Pension Partnership, Scottish Widows and AkademikerPension, calling for “effective, robust nature and biodiversity policies and regulations” to safeguard the global economy.

The group signed a statement urging governments to establish ambitious national targets and plans to tackle biodiversity loss, and introduce mandatory disclosure rules for companies, including a requirement for them to develop nature-related transition plans.

To help with the latter, the Taskforce on Nature-related Financial Disclosures (TNFD) launched guidance on how to produce transition plans for nature, and the Glasgow Financial Alliance for Net Zero published a report on how to integrate nature into climate strategies.

More than 500 entities have now committed to publish a report aligned with the TNFD’s recommendations by 2026, it announced last week.

The 57% increase since January brings the number of financial institutions adopting the framework to 129, with $17.7trn under management.

Abrdn and Manulife Investment Management are among the latest recruits.

To make it easier to comply with the expectations, TNFD wants to create a free library of data to help entities with the first phase of its disclosure process: identifying where key exposures and impacts sit within their business activities.

Companies and investors have expressed frustration over the lack of suitable data on the state of nature, which makes it difficult to manage the problem.

Nature Action 100, the shareholder network set up to mirror Climate Action 100+, assessed the 100 companies it is engaging with, and found limited progress – although most had disclosed some kind of commitment to protect nature.

Asset allocation

There haven’t been many new financial products announced around COP16: asset manager Ninety One launched a sovereign biodiversity index in the run-up to the event, and Bloomberg unveiled a data set for nature-related dependencies and impacts.

Aviva also seeded a carbon removal fund this week that will invest in afforestation and restoration projects across areas of peatland and mangroves. Mirova was selected by 11 French institutional investors to run a biodiversity fund primarily focussed on small and medium-sized European companies.

Much of the focus has instead been on blended finance, with a series of instruments launched to crowd private finance into projects to protect oceans, for example.

The European Investment Bank and WWF said this week that “nature-based solutions face significant obstacles including a lack of awareness among investors”.

To combat this, the pair formed a four-year partnership at the summit to develop projects that restore European ecosystems associated with agriculture, energy, and urban resilience.

WWF will develop the pipeline and EIB will provide guidance on bringing in finance.

It was one of a series of announcements from the EU, as it moves to double its external funding for biodiversity to €7bn by 2027.

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