Biodiversity and Financing– the importance of scaling investment into nature restoration

On Wednesday 20th March, IEMA held a webinar on the importance of nature finance and the policy developments that are underway globally to scale investment into this area. It was an incredibly useful overview of the different UN entities and their work on the nature investment landscape. Throughout the session the scale of the challenge ahead of us all became acutely evident. Emily Hamilton who is on the Steering Group for IEMA’s Biodiversity and Natural Capital Network, tells us more.

The panel was moderated by Rufus Howard, Sustainable Finance Policy Lead from IEMA with distinguished speakers including Rodrigo Cassola, Senior Programme Officer from the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC), Romie Goedicke den Hertog, Co-Head for Nature, United Nations Environmental Programme for Financial Institutions (UNEP FI) and Sylvaine Rols, Senior specialist for Nature at the UN Principles for Responsible Investment (UN PRI).

Rodrigo kicked off the session by explaining the difference between biodiversity and nature.

Nature was defined as: the natural world with emphasis on living components with biodiversity relating to the variability between living organisms and diversity of species. Essentially the variability of the living components within nature. He shared the alarming facts that ecosystems have declined by 47% on average, relative to their earliest estimates and 25% of species are already threatened with extinction. That is one quarter of all the world’s species. How did we end up like this?! It was a stark reminder that we are running out of time to change this narrative and the critical importance of the work the UNEP–WCMC and partners are doing to reverse this trend.

Rodrigo then moved on to discuss the trends impacting how the finance industry is starting to act, with shifting financial flows to areas such as oceans investment (blue bonds), forestry and other natural capital investments. Furthermore, the emergence of Science Based Targets for Nature was helping to ensure corporates address the climate and biodiversity crisis jointly, by setting science-based nature targets alongside their carbon emissions reduction targets.

Finally, investor preferences for impact-related products were shifting financial flows, including the emerging nature market, with biodiversity credits as one example. In my role at Savills Investment Management, as Head of ESG, we are certainly seeing this shift particularly from UK institutional funds. However, as Rodrigo reminded us, we need to stem the flow of capital into destructive activities as economic growth is drawing down on natural capital at an alarming rate. Close to $7 trillion each year is invested into nature extractive activities – roughly 7% of GDP (Source: UNEP 2023). That is shocking.

Rodrigo concluded there is a huge opportunity to reverse this trend which set up the conversation nicely for the next speaker, Romie Goedicke den Hertog from UNEP FI.

Romie spoke about how UNEP FI bridged the gap between the finance sector and the scale of investment needed to have a thriving planet for people and nature. UNEP FI members combined have a staggering $170 trillion dollars between them, so this organisation is a powerful conduit to scaling investment into nature-based solutions and UNEP FI concentrated their efforts on developing a suite of guidance documents including nature positive guidance for the insurance and banking sectors.

Overall, Romie highlighted that UNEP FI encouraged their members to take a progressive approach and be ambitious. Romie then went onto explain how since 2022 the narrative in the finance sector has shifted from the creation of Montreal Biodiversity Global Framework in 2022 outlining the why, to the development of the Task Force for Nature Related Financial Disclosures in 2023 focusing on the ‘what,’ to 2024 where now with focus is on the ‘how’ are we going to scale investment into nature.

Romie talked about the three areas of:

• mainstreaming action, this is where the finance sector raises awareness of the importance of nature to their internal teams and stakeholders;
• portfolio alignment where they start to invest in products aligned that reverse biodiversity decline and enable nature positive action; and,
• disclosure, which involved members transparently reporting on their progress.

Romie closed her session signposting some exciting developments that were underway for the UN Biodiversity Conference of the Parties ( COP 16) to be held in Cali, Columbia in October 2024.

Sylvaine then moved on to outline the role of the UN PRI and how they seek to navigate the plethora of nature based working groups across the finance sector by acting as a gateway for investors on this topic. The UN PRI seek to use their convening power to empower asset owner members to drive change throughout their value chain, focusing on policy engagements and stewardship activities.

One of their flagship initiatives, launching soon, is the PRI Spring Initiative. Spring seeks to use the convening power of UN PRI members to undertake engagement with an initial 40 companies identified which have the biggest opportunity to influence the policy landscape when it comes to deforestation. It is important to note that a company’s inclusion in the list of 40 companies does not mean the company has acted irresponsibly. The list includes companies headquartered from Europe, Americas, Africa and Asia pacific with influential voices from a variety of forest risk supply chains including from food, agriculture, mining, chemicals and automotive industries.

More companies will be identified later in the year. Importantly, UN PRI seeks to convene voices from indigenous communities and well as typical NGO and investor alliances.

The initiative is working across three interlinked areas:

• activities to reduce forest loss and degradation,

• systemic policy alignment to support these outcomes and;
• responsible political engagement.

The session wrapped up with questions from the audience with the key message being that whilst there are leaders in this area, the work on these UN nature groups is focussed on bringing along the majority of the sector so that investment is scaled rapidly.

As the session finished, I reflected on the policy levers we currently have in my sector, real estate. It cannot be overstated the importance of legislation such as England’s Biodiversity Net Gain regulations, requiring developers to deliver a 10% net biodiversity gain on site or offsite as part of development activities. It made me think - wouldn’t it be great to see similar requirements for extractive sectors liking mining or the automotive industry? These are the scale of interventions needed to reverse these trends.

The time for voluntary action is over, we need systemic transformation, involving governments, NGOs and businesses, with nothing short of a complete rethink of how our economy is rewired to ensure both the nature and people flourish. It would be fantastic to look back in 10 years and see that the $7 trillion each year currently invested into extractive activities was now invested into a nature positive economy. IEMA will be exploring how to stimulate more investment into these nature positive markets, so watch this space for further updates.

Emily Hamilton is Head of ESG at Savills Investment Management

Please note: the views expressed in this blog are those of the individual contributing member and are not necessarily representative of the views of IEMA or any professional institutions with which IEMA is associated.

Emily Hamilton

Head of ESG at Savills Investment Management