Time to value nature

With a million species at risk, companies and investors call for biodiversity reporting and targets.

We need bees. About a third of the plants we eat depend on them for pollinisation. Olam International’s almond plantations in Australia and California require two or three hives per acre, and the company currently has to buy in millions of bees to replace dwindling wild populations, Sunny Verghese, Co-Founder and Group CEO, told the BNP Paribas Sustainable Future Forum 2020 Live Series on 15 October.

Olam’s bees reflect a broader reality. We rely on nature for air, water, food, materials, medicines and much more – but we are running down this natural capital to dangerous levels. This is largely because having a negative impact on the natural world rarely comes at a direct financial cost to companies or consumers, creating the wrong incentives.

Mother Nature’s back office

“Anything that is free, we are going to consume indiscriminately,” Sunny told the Forum, which gathered investors and corporates to discuss ways that finance can contribute to saving biodiversity. “Mother Nature’s back office is not set up and it is not issuing us those invoices, and therefore we are not taking these externalities and costs in our supply chain and our production systems.” Depleting nature does have a financial cost in the long run, though. Take the bees for example: pollinator loss is estimated to threaten as much as $577 billion of annual crop output.

Protecting and restoring biodiversity will mean setting binding targets – as the world has for climate change – and ensuring that companies’ use of ‘ecosystem services’ can be measured and priced, speakers at the Forum said.

The stakes could not be higher: research by the World Economic Forum and PWC  found that these ecosystem services generate $44 trillion of economic value, with more than half of global Gross Domestic Product being moderately or highly dependent on nature. At the same time, 83% of all wild mammals and half of all plants have already been lost, while a million species are at risk of extinction over the next 100 years.

Not too late

It’s not too late for biodiversity to recover, said Dame Polly Courtice, Founder Director of the University of Cambridge Institute for Sustainability Leadership (CISL), who pointed out that marine life, for example, could recover by 50 – 90% by 2050 if action is taken now. But with none of the United Nations’ Aichi Biodiversity Targets for 2020 due to be fully met, it is clear that a voluntary approach has not worked.

Dame Polly called for international agreements and national policy to set legally binding targets, looking to the UN Biodiversity Conference, due to be held in China next May, to “be to biodiversity what the Paris Accord is to climate change.” She argued that businesses expected nothing less: “Pressure is coming not just from the planet, but also from the private sector, which realises that the fundamentals on which business is based are being undermined, and they’re calling for urgent, powerful, quality action.” 

To support an overarching goal and policy framework for protecting biodiversity, there needs to be a widely-accepted way of accounting for natural capital, said Robin Hu, Head of Sustainability and Stewardship Group at Temasek. “Nature is not free,” he argued. “Nature has a cost to it. We will need some kind of nature pricing scheme to really bring about nature protection and habitat protection.”

Measuring risk

Pascal De Petrini, Senior Vice President and Chairman for Asia at Danone said his company recognised the risks associated with its impacts on the natural world. “These risks are already material for us. It’s compulsory for us to try and identify these risks, anticipate these threats and work on them, to mitigate them,” said Pascal. He added that disclosing these risks along with commitments “creates an accountability that pushes us to do better.”

While many responsible companies are already measuring and reporting progress on nature-related risks, Sunny argued we need “mandatory disclosures of our footprints: carbon footprints, waste footprints, water footprints – and then clear, precise goals and targets”.

Investors also need metrics to understand a company’s dependencies and impact on ecosystem services and compare these against peers, said Jane Ambachtsheer, Global Head of Sustainability at BNP Paribas Asset Management. To this end, a group of French asset managers including BNP Paribas has selected a research provider that will develop a tool allowing them to measure the impact of their investments on biodiversity.

Mainstream corporate decision-making needs to factor biodiversity risk, argued Dr. Peter White, Ambassador for Biodiversity at the World Business Council for Sustainable Development (WBCSD). “We need to integrate nature into the normal running of business, and into normal business tools.”

Setting standards

Common disclosure standards will be required for nature, as they are for climate impacts, the panellists agreed. An Informal Working Group set up to convene a Task Force on Nature-related Financial Disclosures (TFND), similar to the successful Task Force on Climate-related Financial Disclosures (TCFD), has already attracted 62 members.

Financing will be critical in the shift towards a more nature-positive economy. While evidence is growing that investment strategies aligned with Environmental, Social and Governance (ESG) principles can outperform broader markets, not all projects that benefit the natural world will make sense for commercial investors, said Robin at Temasek.

“We desperately need blended finance,” he said, referring to the combination of concessionary development lending with private capital. “Innovative financial solutions are exceedingly important because investing in natural capital isn’t always good financial investment.” Blended finance can make un-bankable projects marginally bankable, and marginally bankable projects into bankable ones, he added.

We need to integrate nature into the normal running of business, and into normal business tools.

Dr. Peter White, Ambassador for Biodiversity, World Business Council for Sustainable Development (WBCSD)

Underscoring the importance of governments in the race to protect and finance biodiversity growth, the Republic of Indonesia has raised $2.75 billion to finance sustainable growth via green sukuk issuance since its pioneering first transaction in 2018, said Dr. Luky Alfirman, Director General of Budget Financing and Risk Management in Indonesia’s Ministry of Finance. “This is innovation, a breakthrough for us.”

Ultimately, restoring biodiversity will require collaboration between groups that do not always see eye-to-eye. “NGOs and civil society see the private sector as evil; the private sector sees civil society and NGOs as troublemakers, so we are always at odds and at cross-purposes,” concluded Sunny. “We cannot achieve transformational change if we do not collaborate.”

That is the critical message of this year’s Sustainable Future Forum.