EU discuss Business and Nature – Key Takeaways for FIs

Last week, European businesses, financial institutions, entrepreneurs, NGOs and policymakers gathered at the 2023 European Business and Nature Summit (EBNS)ⁱ in Milan, Italy, to discuss sustainable business models focused on biodiversity. Held one year before the next CBD COP16 (United Nations Convention on Biological Diversity), special attention was placed on empowering businesses to take transformative action towards a nature-positive society.ⁱⁱ

What should financial institutions take away from this European Business and Nature Summit?

1. Unlocking the Climate-Nature nexus

There was widespread agreement that actions on climate and nature should not be treated separately. Their connectivity is evidenced by scientific research and one can rarely be addressed without considering the other. It is therefore important that financial institutions also adopt this approach. To make this possible, there are several synergies and trade-offs to be considered. Addressing nature and climate solutions in an integrated way should be viewed through a risk management lens. At the EBNS event, Finance for Biodiversity (FfB) Foundationⁱⁱⁱ published a guide for financial institutions on how to manage the biodiversity and climate nexus in their investments and lending.^iv Its five key recommendations to financial institutions are to:

1. Finance synergy-generating solutions for the biodiversity and climate nexus and those minimising trade-offs (e.g. R&D, start-ups, innovation);
2. Identify and prioritise sectors with a high impact on biodiversity and climate;
3. Engage with companies on important nexus topics by leveraging relevant and existing frameworks;
4. Set up sector policies, considering synergies and trade-offs between biodiversity and climate; and
5. Integrate biodiversity into climate targets, policy and reporting.

2. Moving from the why worry about nature, to the how?

Following the adoption of the Kunming-Montreal Global Biodiversity Framework (GBF), there appears to be an increasing awareness that a business-as-usual approach materially impacts climate, biodiversity and ecosystem services, while they in turn pose risks to business (i.e. double materiality).^v Such awareness is now placing companies and other financial institutions in the space of “how”: how to change, how to de-risk activities, how to set targets, and how to measure them.

There is guidance available, or imminent, on tools to unlock the “how”.

For example:

• The monitoring framework of the GBF, despite being under review until COP16, is available for consultation offers a good framework to mainstream biodiversity in monitoring and reporting systems.^vi
• A Tools Catalogue aligned with The Taskforce on Nature-Related Financial Disclosures (TNFD) LEAP approach provides nature-related data tools to help assess nature-related issues.^vii
• FfB Foundation is currently working on a target-setting guidance publication to be published by the end of 2023 and a target-setting framework for financial institutions by 2024, to be used to report commitments.^viii

3. Prepare your nature strategy

Through a new Nature Strategy Handbook, the campaign ‘It’s Now for Nature’ encourages businesses to develop and publish a nature strategy and enables them to make a meaningful contribution towards a nature-positive world.^ix

This will become increasingly important because it not only gives a company a competitive advantage, but also because legislation will inevitably require more and more detail, as will investors. This trend is also aligned with the implementation of Target 15 of the GBF.

This very useful table created and shared by Etifor Valuing Nature ^x during the event:

Planet Tracker recommends that financial institutions:

• Undertake a portfolio analysis to ensure alignment with GBF targets and other disclosure regulations, notably the EU Corporate Sustainability Reporting Directive (CSRD).
• Leverage learnings from climate investing into nature integration.
• Establish partnerships with the scientific community;
• Examine nature-based tools already available.