COP15: Biodiversity develops investment ecosystem

In March, green central banking network NGFS urged its members to “recognise biodiversity loss as a potential source of economic and financial risk and commit to developing a response strategy to maintain financial and price stability”.

That same month, the Taskforce on Nature-related Financial Disclosures, which hopes to standardise expectations for reporting on biodiversity risk in the same way the Taskforce on Climate-related Financial Disclosures has for climate, launched its first draft framework. A final version of that framework is due to be released this spring.

In December, nearly 200 governments gathered for COP15 in Canada to discuss a global agreement on stemming nature loss. An agreement was emerging at the time of writing. A suitable deal will give investors and regulators a shared set of objectives, becoming a sort of Paris Agreement for biodiversity.

Investors including Robeco, Federated Hermes and AXA are joining forces to launch Nature Action 100. Modelled on Climate Action 100+, it will identify companies that are systemically important to biodiversity loss and push them to adopt better practices.

There is a growing list of funds dedicated to biodiversity investing and, according to recent figures from HSBC, 17% of outstanding green bonds (about $274bn) make reference to biodiversity in their documentation.

Last month, MSCI announced it was launching data tools to identify companies’ contribution to nature loss and deforestation.

Biodiversity was barely a topic of conversation in financial markets two years ago. Now it has an investment ecosystem all of its own, which is being built on the back of a decade of lessons learnt in the climate finance space. From global agreements, supervisory interventions and standardised reporting guidelines through to data, investment products and a collaborative engagement initiative, the pieces are quickly falling into place to ensure the private sector knows what it’s meant to do to manage nature-related risks in 2023 and beyond. 

Sophie Robinson-Tillett, Contributing Editor
sophie.robinson-tillett@ipe.com