Delivering Development Impact

QThanks for speaking with us. With the adoption of the Kunming-Montreal Global Biodiversity Framework (GBF) at the end of last year, biodiversity is getting a lot of attention. You have been involved in this space for over 30 years. How have you seen it evolve, and where is it headed?

AIt has been incredible watching the issue go from being viewed essentially as a local planning issue to being identified as one of the top three global risks by the World Economic Forum (WEF).

Awareness of the implications of biodiversity and ecosystem services decline has risen dramatically over the last 10-15 years. Alarming statistics from the Millennium Ecosystem Assessment, the Living Planet Index, and the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) back that up. More recently both the Dasgupta Review in 2020 and the WEF pointed out that the global economy was dependent on biodiversity, with the WEF putting the figure at "$44 trillion – over half the world’s total GDP". That has led to stronger ESG requirements for companies. The publication of IFC’s Performance Standards [Biodiversity Conservation and Sustainable Management of Living Natural Resources], including Performance Standard 6 in 2006 and revisions in 2012, was a game changer. The standards required lenders to take account of biodiversity and ecosystems services and ensure that IFC’s projects cause no net loss of natural habitat and create net gain for critical habitat. Financial institutions have extended this requirement through the Equator Principles [voluntary guidelines adopted by 138 participating institutions].

The Kunming-Montreal Global Biodiversity Framework (GBF), agreed by 188 governments in December 2022, sets out ambitious goals and targets to halt and reverse nature loss by 2030 and restore nature’s resilience by 2050. The GBF, which was launched at COP15, calls for better disclosure of nature-related risks. Companies will now need to disclose nature-related impacts and dependencies including supply chain risks under the framework developed by the International Taskforce on Nature-related Financial Disclosures (TNFD). This will hopefully move companies from site-based consideration of biodiversity to fully integrating this into their business strategies and contributing to a nature positive future.

Interesting – why is this important and what does it look like?

TNFD includes a broad range of stakeholders, but importantly the asset owners and managers amount to $20 trillion in assets under management so the expectation is that there will be a large uptake of TNFD. The framework has four pillars: governance, strategy, risk, and impact management, as well as metrics and targets. Companies will assess how they oversee nature related risks, how those risks are integrated into the business strategy and financial planning, and how they are integrated into their risk management systems. It also requires them to develop quantitative and qualitative performance indicators. The EU is incorporating the approach in its Corporate Sustainability Reporting Directive, which will require companies to report on the impact of corporate activities on the environment and society.

Climate change and biodiversity loss are interconnected. What opportunities and challenges do you see in this regard?

You’re right, climate change and biodiversity loss are intimately related. It is predicted that climate change could overtake land-use change as the leading cause of biodiversity loss by 2070 and biodiversity loss will in turn have huge implications for climate change. We are already seeing impacts on marine ecosystems, species ranges are shifting, and climate change is affecting tropical forests that play a huge part in regulating global climate.

I am excited to see the recognition that nature-based solutions can help mitigate climate change. It is particularly important to avoid deforestation. There is also new understanding of the valuable service species such as forest elephants provide in carbon storage; their services could be worth billions. The publication of IUCN’s Global Standard for Nature-based Solutions will ensure that the necessary safeguards and carbon accounting frameworks are used.

Did you say 'forest elephants'? How do they contribute to carbon storage?

It’s extraordinary. Apparently forest elephants contribute to increasing above ground carbon by reducing the density of small trees through trampling and consumption and by dispersing seeds of particularly large trees. Expanding the elephant population could generate a substantial carbon sink in the next 30 years, worth billions of dollars. That’s valuable enough to attract investors.

Speaking of investors, at the COP-15 Convention on Biological Diversity (CBD) in December 2022, the private sector was more visible than ever before. What do you think is behind this?

What’s driving this is the recognition that collaboration between governments, business and civil society will be key for the delivery of the GBF. Target 15 of the Framework explicitly references the private sector requiring it to disclose and reduce its impacts on biodiversity, increase positive impacts and promote actions to ensure sustainable patterns of production. The private sector also has a huge role to play in providing additional financial resources. This might be through direct investment in biodiversity-related activities (IFC has recently published a Biodiversity Finance Reference Guide[i]), funding of biodiversity conservation and/or restoration, and other nature-based solutions. The private sector is setting up protected areas to offset their own negative impacts, designed as Public-Private Partnerships.

In addition to working with MIGA, you also support several private sector clients. What are the most exciting things that they’re doing?

I am seeing changes in both processes; more effective application of the mitigation hierarchy and a greater focus on supply chains, but also enhanced understanding and management of risk though the use of innovative technology such as bioacoustics monitoring, eDNA, remote sensing, drones, camera trapping for Great Ape population estimates, and even machine learning to predict the location of unusual habitat types.. It’s also exciting to see the implementation of Nature Based Solutions coming to the fore alongside greater collaboration with other partners to manage risk and contribute to nature positive initiatives.

This sounds great, but it’s been difficult to get the private sector to invest in protected areas and offsets in the past, as these tend not to be revenue generating activities. What is motivating this increase in investment? Is it primarily to maintain primary production or inputs that underpin a project (e.g. water supply) or is it to access financing / regulatory requirements? Or CSR?

Initially it was a combination of regulation and access to finance, whereby companies are offsetting negative impacts either related to biodiversity (i.e. offsets) or carbon emissions (nature-based solutions), through certification or purchasing verified carbon credits. Increasingly, companies will simply want to make investments in nature-positive actions. Biodiversity credits are an emerging market proposition that could accelerate funding for biodiversity conservation while benefiting local communities.

So whether it’s through implementing our requirements or supporting some of these emerging initiatives like biodiversity credits – it sounds like there is a significant role for Multi-lateral Developments Banks, including MIGA in promoting biodiversity finance.

Yes – as I mentioned, the Performance Standards, and similar standards of other DFIs (e.g. WB ESF) have played a significant role in setting the standard for mitigating biodiversity risks. And I know that MDBs are developing a methodology for tracking nature finance. Hopefully this will create more opportunities to minimize impacts and direct financing to conservation, restoration and innovative approaches to impact mitigation. In general, if MDBs are more intentional in incorporating financing for nature into projects, this could increase the overall funding for addressing biodiversity loss.

Still, MDBs need to balance socio-economic development with conservation and restoration of biodiversity. Is that possible?

Yes, but it’s complicated. Poverty is most closely associated with subsistence activities and high birth rates, which are significant drivers of biodiversity loss. MIGA and other MDBs and private providers of finance are instrumental in providing alternative economic opportunities, supported by the right enabling environment. With higher living standards comes improved education and declining birth rates – so biodiversity benefits. However, it’s not always a win-win as some development activities also adversely impact biodiversity in ways that are difficult to mitigate.

So where do you think all of this is heading?

I am an eternal optimist, and the GBF agreement marks an important call to action. However, we have been here before. Rachel Carson rang the alarm bell in the 1960s. The CBD [Convention on Biological Diversity, established at the Rio ‘Earth Summit’ in 1992] set ambitious targets to halt biodiversity loss in 2010. Yet it’s hard to see how statistics on biodiversity decline can get more shocking. The latest Living Planet Index reveals that global wildlife populations have plummeted by 69% on average since 1970 and sadly none of the 20 Aichi Biodiversity Targets agreed by Parties to the CBD in 2010 have been fully achieved.