Making Finance Work for Nature: a growing momentum

Acknowledging that biodiversity is clearly a social and economic issue and that public development banks are directly concerned, IDFC announced last year during Finance in common summit (FICS) its first ever common position to harness the power of biodiversity to build a more inclusive and resilient future. This common position came from the IDFC dedicated group Making Finance work for Nature. One year later, as the momentum is growing internationally, notably with the COP15 opening session last week, what are the main outcomes of this working group?

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Public Development Banks have a unique role to play in shifting financial flows towards sustainability. Taking the full measure of this role and responsibility, at FICS 2020, IDFC members committed to mitigating negative impacts and risks on biodiversity, developing positive biodiversity impacts in their investment portfolios, better assessing impacts and risks on Nature, tracking biodiversity contributions and co-benefits and actively exploring all opportunities to contribute to the objectives of the future Post-2020 Global Biodiversity Framework. Three key words can sum up this position : mobilizing, mainstreaming, implementing.

PDB’s role was also highlighted by the general declaration of all PDBs at FICS and its paragraph on biodiversity : “We stand ready to help align all financial flows with the future post-2020 Global Biodiversity Framework to be adopted at the COP15 of the Convention on Biological Diversity. Nature-based solutions, sustainable resources and land use as well as better consideration of nature-related risks will be used to promote a biodiversity-positive economy as well as climate neutrality.”

A toolbox to mainstream biodiversity

In 2021, one of IDFC’s main activities has been to develop a toolbox on the integration of biodiversity in PDB’s. If the potential of mobilizing these banks all over the world on biodiversity is to scale with the needs identified to solve the biodiversity crisis, the levels of commitment and know-how is very different among them. PDB community is heterogeneous. For most of them, it is first of all necessary to strengthen the risk management and safeguards policies, but it is also crucial to go beyond to markedly increase biodiversity co-benefits and harness Nature based Solutions.

The overall objective of this toolbox is to collect, distribute and raise awareness for tools and methods, which can help IDFC members to integrate biodiversity into their investment decisions, projects, processes and activities. It will contribute to set clear strategies and action plans on biodiversity integration in PDBs in order to increase Nature-Positive investments. Therefore, the toolbox will also provide IDFC members and other banks with the opportunity to learn from each other and disseminate good practices.   The toolbox, divided in various strategic steps, is designed to summarize the key characteristics of each tool and approach, with key references and other publications. A first version of the toolbox will be ready by the end of 2021.

A successful step towards COP 26 and COP 15

IUCN World Conservation Congress held in Marseille was a crucial and successful step to relaunching the dynamic and building momentum towards COP 26  in Glasgow and COP 15 in Kunming. During the congress, IDFC organized a specific session “How can Public Development Banks support the post-2020 Global Biodiversity Framework?”. Panelists from IDFC members (KfW, CAF, BNDES, AFD) also in addition to AsDB and CBD delivered key messages on the complementary and interlinked approach needed: greening finance and financing green... Financing green through protected areas, ecosystems restoration and effective area-based conservation measures and greening finance by addressing global drivers of biodiversity decline through mainstreaming biodiversity in investments, planning, policies and decision making process.

Another key message was delivered on resource mobilization. To reverse biodiversity loss by 2030, we need to spend around US$700 bn a year (1% of annual global GDP) for the next ten years. Today, investments are about US$140 bn a year and the lion’s share comes from public funds. To fill the gap, more money, including from private sources, is crucially needed as well as the redirection or elimination of harmful subsidies (500 bn a year).

As the panel was moderated by WWF, it was also the opportunity to discuss the findings of its report on “Public development banks and biodiversity. How PDBs can align with the Post-2020 Global Biodiversity Framework” published in June 2021. This report, based on a thorough analysis of PDB’s practices includes recommendations and practical steps that PDB’s can take towards nature-positive investments. The input from WWF symbolizes the initiation of a constructive dialogue with civil society.

Towards Common principles for biodiversity finance tracking?

For the first time this year and in response to the growing international mobilization, biodiversity is included in IDFC’s Green Finance Mapping, the club’s flagship report. Out of the $ 185 billion reported in green finance in 2020, US$14 billion is reported in biodiversity finance from 7 out of the 26 IDFC members in 2020. Despite only giving an incomplete picture of IDFC members’ activity related to biodiversity, this is a first and crucial step on biodiversity reporting which will be improved and refined for future years.

Common principles for biodiversity finance tracking, as they exist for climate finance, still need to be built, in coherence with the forthcoming post 2020 Global biodiversity framework. Enhancing PDB’s capacity to report on their biodiversity investments and impacts through a science-based, reliable and transparent metric, aligned to the international biodiversity finance best standard is important. One of the expected effect is to better mobilize both public and private resources towards biodiversity-oriented objectives at new scales. Helping to build these common principles, along with OECD and CBD, is therefore an ambitious but inspiring challenge for the PDBs coalition..

Risk disclosures: a Development Finance Hub for TNFD

The new Taskforce on Nature-related Financial Disclosures (TNFD) held its first plenary in Paris in October 2021. TNFD’s goal is to provide a universal disclosure framework useful to all finance institutions, be they North- or South-based, private or public. 

A Development Finance Hub convene by AFD within TNFD’s secretariat in coordination with IDFC and FiCS will coordinate the contributions of the global public development finance into the forthcoming disclosure framework through sectorial and strategic input and outreach.

The Dev Hub will promote a better understanding of biodiversity related risks and will bring to the taskforce PDBs’ experience in reporting and assessing impact, safeguards, transparency, innovative financial mechanisms and green standards. Conversely, TNFD will help PDBs to strengthen disclosures on biodiversity-related risks and impacts.

Net Zero & Nature Positive

Climate change and biodiversity loss are two sides of the same coin. Reaching holistic solutions for the planet implies to further explore and articulate the synergies between biodiversity and climate change. The IDFC working group aims to deepen and operationalize this convergence, notably by implementing nature-based solutions and share tools and methodology. Our economies can not become net zero without being nature positive.

Biodiversity mainstreaming and financing are gaining traction within the PDB community (through tools, biodiversity finance tracking, assessing risks, operationalizing climate and biodiversity convergence) – which the FiCS helped to bring to light, en route for COP15 and the post-2020 Global Biodiversity Framework.