COP16 Calls For Action On Nature Positive Future

Nature and climate change are inextricably linked and building new models and process to address the crises they bring will challenge countries and companies alike. As the nature COP takes place in Colombia it’s critical that lessons are learned from the challenges in implementing action on climate change

The GBF Set Strong Market Signals

The 2022 Kunming-Montreal Global Biodiversity Framework included a target to protect 30% of the world’s degraded terrestrial, coastal and marine ecosystems by 2030 (the 30×30 target), as well as mobilizing at least $200 billion per year by 2030 from all public and private sources to close the biodiversity financing gap. Target 15 calls on governments to require corporates to disclose their nature impacts, adding pressure to existing demands for risk reporting.

The Framework has been described as the ‘Paris Agreement for Nature’ and they are complementary. As Jennifer Morris, chief executive of The Nature Conservancy points out, “Climate and biodiversity are two sides of the same coin – you cannot protect one without the other. For too long, the policy responses have been in parallel rather than interdependent. COP16 holds the promise of weaving these two strands together.”

Failure To Launch

By this year’s Conference of the Parties in Cali, Colombia, countries were expected to submit their National Biodiversity Strategies and Action Plans (NBSAPs) and to develop Biodiversity Finance Plans to help close the biodiversity funding gap. Yet in a similar vein to the glacial speed of the climate negotiations, it has not gone according to plan.

One of the most important aspects of this meeting was to be the assessment of countries national biodiversity strategies but according to Marcelo Furtardo, Principal, NatureFinance and co-lead of the Secretariat for the Taskforce on Nature Markets, around 90% have failed to submit their strategies prior to the meeting. Analysis from Carbon Brief suggests that twelve of the world’s 17 most biodiverse nations, home to 70% of the planet’s species, will miss the deadline.

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The Business Case For Biodiversity

Despite this, the business case for biodiversity and nature is stronger than ever. Nature has moved from being a corporate social concern to a strategic risk for business and finance – the resilience of business, and the cash flows on which they depend, are dependent on the resilience of nature.

There is a widening recognition of the interconnected nature of biodiversity, climate and the economy. Patricia Zurita, chief strategy officer at Conservation International highlights that nature and biodiversity hold an intrinsic role in supporting the global economy, food security, climate stability, and planetary health. She warns, ““Right now, nature is underfunded to the tune of $700 billion per year – and negotiators cannot leave Cali without deciding where some of that funding will originate, when it will be delivered, and what groups will receive it.”

Nature Risk Is On The Rise

Managing nature risk is increasingly becoming an operational issue, especially in terms of the supply chain. Shocks to the global economy related to biodiversity loss and ecosystem damage in terms of water, pollution and pollination could cost upwards of $5 trillion, according to 2023 research from Oxford University’s Environmental Change Institute.

Beyond immediate shocks, research from PwC has warned that $58 trillion is at risk, well over half of global GDP—a level of risk that has increased by one third since 2020. To look at this in terms of market assets, on the LSE and the NYSE, 47% and 47% of listed companies respectively are considered to be ‘highly dependent’ on nature.

According to the report, “The health of natural ecosystems and biodiversity will have far reaching implications, with more than half (50.6%) of the market value of listed companies on 19 major stock exchanges exposed to material nature risk–nearly $45 trillion.” In terms of domestic economies, the World Bank has estimated that nature-related risks could have a direct impact of around 7%-10% of GDP, particularly for low- and lower-middle-income countries. Such impacts will have a knock-on effect in a globalised system.

Economic Signals Are In The Wrong Direction

Business as usual approaches are exacerbating the problem. Part of the nature challenge is the sheer scale of environmentally harmful subsidies as trillions of dollars are spent on subsidies for agriculture, fishing and fossil fuels every year. According to the World Bank, direct government expenditures in these three sectors alone are $1.25 trillion a year. That means that concern about funding for climate and nature isn’t about whether the money is there, but where its being spent.

In agriculture for example, direct subsidies of more than $635 billion a year are driving excessive use of fertilizers that degrade soil and water and harm human health. Subsidies for products such as soybeans, palm oil, and beef are driving deforestation and said to be responsible for 14% of forest loss every year. Meanwhile fisheries subsidies, which exceed $35 billion each year, are a key driver of dwindling fish stocks, over-sized fishing fleets, and falling profitability.

The problem isn’t just that funds are being deployed in support of destructive practices, but that harmful finance is accelerating. Updated 2024 research from Earth Track estimates current environmentally harmful subsidies at least $2.6 trillion, equivalent to 2.5% of global GDP. This is about $800 billion higher than two years ago, or roughly $570 billion higher, net of inflation.

Nature Finance Must Be A Core Outcome Of COP16

Channelling finance to nature positive solutions will not be simple. As Julie McCarthy, chief executive of NatureFinance says, “There is a huge discrepancy between investment priorities and aligning the global economy with nature conservation. We are still in denial that close to $7 trillion a year still flows to activities that are bad for nature: destroying our forests, polluting our water, and devastating biodiversity.”

While public policy direction is needed, fundamental change is needed in the provate sector. Zurita points out that, “Governments alone cannot close this funding gap. We also need to mobilize all the private capital currently sidelined by risk and uncertainty. It is critical that we continue to develop new business models and a financial system that can generate healthy returns while also conserving and restoring the ecosystems that underpin the global economy.”

Taking A Nature Positive Approach

Action on nature will require a fundamental shift in the way we think about markets and finance. While increasingly businesses are setting nature targets, recent retreats from net zero targets have highlighted the difficulties in achieving effective action. There is increasing focus on making corporate actions ‘nature positive’ but measurable progress is crucial for its realization.

It is vital that the term ‘nature positive’ is used responsibly, with clear, time-bound definitions and measured through science-based targets that contribute to securing a nature-positive world. That means a single set of agreed metrics for what constituted nature positive—a common approach to measure nature’s decline or recovery.

Marco Lambertini, Convener of the Nature Positive Initiative says, “A very promising dimension of COP16 is the strong participation of businesses and financial institutions, where the majority of the impacts on nature come from and where awareness of the impact the loss of nature poses is growing. Only a transition from a nature-negative to a nature-positive economy can halt and reverse biodiversity loss as well as crucially contributing to mitigating climate change and global temperature rise.”

What’s needed is an enabling environment combining policy, finance and operational change. As McCarthy says,” Without looking at the financial architecture, money going to ‘fix’ biodiversity is a band-aid on the bigger systematic problem.” There are moves to reassess the impact of sovereign debt, through debt-for-nature swaps and Nature Performance bonds. In the climate sphere, the Bridgetown Initiative is looking at ways to reform climate finance. It includes a push for greater finance, debt relief and restructuring and reform of the multinational development banks. Its focus is on a more equitable approach to finance and as such, could provide a springboard for combined action.

One opportunity gaining salience is the potential of the bioeconomy with what Mcarthy describes as “different layers of nature-positive and equitable investments”. The bioeconomy holds the potential to become a trillion-dollar-a-year industry, advancing alongside the clean tech revolution. She adds, “This massive economic and job creation opportunity could shape the future of both biodiversity and global financial flows.”

What We Need To See In Colombia

What we need is an enabling environment for international co-operation on nature and climate. That means subsidies reform, effective finance, and robust measurement and monitoring of nature. Most of all we need to build the capacity to act. The potential for reorienting the economy is immense but the challenge remains as to how we rapidly scale up the ability of stakeholders to understand and address the scale of nature risk. As Tony Goldman, chief executive of the Taskforce for Nature-related Financial Disclosure says, “We can’t take ten years to scale up capacity.”

The name of the game is urgency and the mobilisation of resources. There is no future for the global economy without nature. As Nina Mikander, Director of Policy at BirdLife International put it, “We need a little less conversation and a lot more action.”