Could corporates end up paying USD 2bn for genetic data?
The recent Biodiversity COP in Colombia agreed to establish a mechanism for funding the protection of global genetic resources. It proposes that sectors such pharma, biotech, and animal & plant breeding, which benefit from genetic material, should share those gains with developing countries and Indigenous Peoples and local communities. The present draft suggests either a revenue or profit-based formula. The former is estimated to raise USD 2.2 billion and the latter USD 2.1 billion from corporates in countries that have ratified the Convention on Biological Diversity. Will existing multilateral mechanisms that successfully raise funds be used as a basis for ongoing negotiations?
What is DSI?
Although digital sequence information (DSI)i has been referenced in a few international discussions and agreements, such as the 1992 Convention on Biological Diversity, the UN Convention on the Law of the Sea (BBNJii), and most recently the Conference of the Parties to the Convention on Biological Diversity Sixteenth meeting in Colombia (COP16),iii there is no agreed definition. Broadly, DSI refers to DNA,iv RNAv and protein sequences,vi but can be extended to anything connected with the original genetic resource. One of the major difficulties in defining DSI is determining what constitutes data and identifying the circumstances under which data is transformed into information.
This genetic information is usually obtained from plants and animals in biodiversity-rich, developing countries and is utilised by companies, primarily based in the Global North, to create products such as pharmaceuticals, cosmetics, and food. Consequently, developing and mega-biodiversity diverse countries have advocated for an international mechanism to ensure that the benefits of DSI – whether financial or otherwise – are shared with countries and local communities, including Indigenous groups, in regions where these resources were originally found.
What happened at COP16?
The agreement on the so-called “Cali Fund” was one of the most important achievements to emerge from the biodiversity COP in Colombia . It agreed on the establishment of a “multilateral mechanism for the fair and equitable sharing of benefits from the use of digital sequence information on genetic resources, including a global fund.” vii
The decision underlines the desire of the majority of parties for the fair and equitable sharing of benefits arising from the use of digital sequence information on genetic resources in achieving Goal C and Target 13 of the Kunming-Montreal Global Biodiversity Framework, adopted by parties in 2022.
Goal C: Share Benefits Fairlyviii
“The monetary and non-monetary benefits from the utilization of genetic resources and digital sequence information on genetic resources, and of traditional knowledge associated with genetic resources, as applicable, are shared fairly and equitably, including, as appropriate with indigenous peoples and local communities, and substantially increased by 2050, while ensuring traditional knowledge associated with genetic resources is appropriately protected, thereby contributing to the conservation and sustainable use of biodiversity, in accordance with internationally agreed access and benefit-sharing instruments.”
Target 13: Increase the Sharing of Benefits from Genetic Resources, Digital Sequence Information and Traditional Knowledgeix
“Take effective legal, policy, administrative and capacity-building measures at all levels, as appropriate, to ensure the fair and equitable sharing of benefits that arise from the utilization of genetic resources and from digital sequence information on genetic resources, as well as traditional knowledge associated with genetic resources, and facilitating appropriate access to genetic resources, and by 2030, facilitating a significant increase of the benefits shared, in accordance with applicable international access and benefit-sharing.
The Cali Fund is frequently advertised as the first global fund to which companies using genetic data should contribute through a multilateral mechanism. However, Planet Tracker notes that the FAO’s International Treaty on Plant Genetic Resources for Food and Agriculture has the stated objective of conserving plant genetic resources.x Now the challenge is for the Secretariat of the Multilateral Mechanism, with the help of the Steering Committee, to make the Cali Fund a reality.
Key agreed features of the Cali Fund
The Cali Fund is to be financed via contributions of users of DSI on genetic resources in sectors “that directly or indirectly benefit from its use in their commercial activities”; companies “should contribute a proportion of their profits or revenue to the global fund, according to their size”.xi
As outlined in the DSI draft decision, “entities which on their balance sheet dates exceed at least two out of three of these thresholds (total assets: USD 20 million Sales: USD 50 million; Profit: USD 5 million) averaged over the preceding three years, should contribute to the global fund one percent of their profits or 0.1 percent of their revenue, as an indicative rate”. Presently, the text indicates that contributions in the draft are defined as voluntary because of the use of the term “should contribute”. However, this does not prevent countries from making them mandatory through national legislation.
Once studies have been completed on national and international standards which identify small, medium and large entities and on suitable contribution rates, including implications for revenue generation and economic competitiveness, in 2026 (at COP17 in Armenia), parties will finalise thresholds and contribution rates, and keep these periodically under review for the future.
Contributions to the global fund are expected to be made directly but may also be made through a national authority and therefore it is important that the countries take administrative, policy or legislative measures to incentivise contributions from users of DSI in their jurisdiction. This could include royalties, technology transfer, capacity building, or other resources meant to support biodiversity-rich communities. Furthermore, rather than one-time compensation, the fund promotes ongoing investment in biodiversity conservation and sustainable development. It is designed to enable countries build the capacity to manage and protect their genetic resources, whilst also assisting other countries in meeting their commitments under international framework. Overall, this reflects a proactive approach to support biodiversity conservation and sustainable use while fostering global cooperation. Finally, funding of this mechanism is expected to be allocated in line with the objectives of the GBF for least developed countries and small island developing states “to generate, access, use, analyse and store digital sequence information on genetic resources”.
Public databases, academic, and public research institutions are not expected to make monetary contributions to the global fund.
Learning from other global financial mechanisms
Clues as to how the Cali Fund could be implemented can be gathered by examining other similar mechanisms, such as the Fund of the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA), informally called the Seed or Plant Treaty.xii Adopted in November 2001, it currently has 151 parties. The fund’s objective is conserving and sustainably using all plant genetic resources for food and agriculture and the fair and equitable sharing of the benefits arising out of their use, for sustainable agriculture and food security. Funding is raised through contributions from contracting parties, private sector donations, and other international bodies involved in agricultural development. The fund’s target range is for USD 0.9–1.1 billion per year over a period of 10 years, with a milestone of 40 percent to be achieved by 2026.xiii However, the amount of funding available for grants for the Fifth Call for Proposals is expected to be “at least USD 7 million”’.xiv Resources are allocated to farmers, enhancing crop resilience, and conserving plant diversity through a global system of germplasmxv exchange.xvi Since its inception it has accumulated around USD 30 million of funding.xvii
Another mechanism which would be worthy of consideration are multilateral compensation funds, but these are different from benefit-sharing ones. The former aim to compensate for damages or losses, rather than sharing profits and other benefits, as in the case of the Cali Fund.
The International Oil Pollution Compensation Funds,xviii based on two conventions, are financed by levies on certain types of oil carried by sea.xix The levies are paid by entities which receive oil imported by sea, and normally not by States, of more than 150,000 tonnes of oil (i.e. crude and/or heavy fuel oil) in ports or terminal installations in a Member State. Anyone who has suffered pollution damage in a Member State may make a claim against the IOPC Funds for compensation, subject to certain rules. There are currently 122 States Parties to the 1992 Fund Convention and 33 States Parties to the Supplementary Fund Protocol. To date over 150 incidents have been considered, although not all received compensation.xx
Who pays and how much?
The COP16 agreement specifies the sectors “that may directly or indirectly benefit from the use of digital sequence information on genetic resources”. Those specified are:xxi
- pharmaceuticals
- nutraceuticals (food and health supplements)
- cosmetics
- animal and plant breeding biotechnology
- laboratory equipment associated with the sequencing and use of digital sequence information on genetic resources, including reagents and supplies
- information, scientific and technical services related to digital sequence information on genetic resources including artificial intelligence
Using these sectors, Planet Tracker complied a universe of over 1,900 companies that could be expected to pay into the Cali mechanism. To create this universe we applied the three financial parameters outlined in the draft agreement:
- total assets of at least USD 20 million
- sales of at least USD 50 million
- profit of at least USD 5 million
Corporates that meet two out of three of these thresholds, as specified in the draft and with values averaged over the last three years,xxii were included in the Planet Tracker universe if they are headquartered in a country that is a signatory of the CBD. This means that US domiciled corporates were excluded as the US is not a party to the CBD, leaving 58 countries impacted.
Planet Tracker’s initial assessment, based on the existing draft’s “indicative” rates for raising funds – i.e. 0.1 percent of their revenue or one percent of profits – could raise a total of USD 2.2 billion on a revenue basis and USD 2.1 billion on a profit formula.xxiii xxiv While the Cali Fund mechanism recognises the importance of the fair and equitable sharing, interestingly the present profit split between corporates in this universe is presently 70% OECD-domiciled companies versus 30% located in the Rest of the World (ROW). See Figure.
In terms of sectors impacted, the greatest effect on profits will be to the pharmaceutical sector, followed by those with activities in laboratory equipment and cosmetics. See Figure.
Source: Planet Tracker
The companies appearing in the top 10 list on a revenue or profit-based formula are shown below. See Figure. Note that only those companies headquartered in a country which has ratified the CBD are included.
Most exposed listed companies on a revenue or profit mechanism
Source: Planet Tracker
Looking forward
Planet Tracker urges both corporate management, financial investors, and lenders to remain mindful of the Cali Fund negotiations. Nothing is set it stone with a final agreement is timetabled for 2026. But COP16 Member States did propose high-level principles, including a way for raising funds. Although there is scepticism that multilateral negotiations can achieve widespread progress, especially on financial issues, it is worth recalling that there are operating instruments for benefit sharing and compensation schemes. The response from a major pharmaceutical trade body (IFPMA),xxv warning that COP16 failed to balance benefits and costs in the proposed mechanism, may indicate that the corporate sector is already on the case. It’s too early to say whether the Cali Fund will impact company valuations but the principle that the protection of global genetic resources incurs a cost, and beneficiaries should compensate accordingly, appears sellable.
i DSI has many other similar terms including digital sequence data, digital sequence data and information, genetic sequence data, genetic sequence data and information, digital genetic sequence data and information, digital sequence information of genetic resources, marine genetic resources in silico and [a combination of the above], marine genetic resources in silico. Source: Digital Sequence Information – Clarifying Concepts from Deep-Ocean stewardship initiative (March 2020)
ii The full name of this treaty is ‘Agreement under the United Nations Convention on the Law of the Sea on the Conservation and Sustainable Use of Marine Biological Diversity of Areas beyond National Jurisdiction’. It is also informally referred to as the High Seas Treaty.
iii Conference of the Parties to the Convention on Biological Diversity Sixteenth meeting Cali, Colombia, 21 October–1 November 2024 – Agenda item 9: Digital sequence information on genetic resources
iv Deoxyribonucleic acid (DNA) is the molecule that carries genetic information for the development and functioning of an organism. Each molecule of DNA is a double helix formed from two complementary strands of nucleotides held together by hydrogen bonds.
v Ribonucleic acid (RNA) is a nucleic acid present in all living cells that has structural similarities to DNA. Unlike DNA, RNA is most often single-stranded, although some viruses have doble strands of RNA. RNA is essential for most biological functions.
vi Protein sequences are a foundational technique in molecular biology and biochemistry that involves determining the precise order of amino acids within a protein molecule. These amino acids are the building blocks of proteins and are arranged in a specific linear sequence – i.e. the protein’s primary structure. This primary structure is used to decipher the genetic code of proteins.
vii Convention on Biological Diversity – Digital sequence information on genetic resources: Draft decision submitted by the President (1 November 2024)
viii Kunming-Montreal Global Biodiversity Framework – 2050 Goals
x FAO – International Treaty on Plant Genetic Resources for Food and Agriculture states under Article 1 (Objectives) that “The objectives of this Treaty are the conservation and sustainable use of plant genetic resources for food and agriculture and the fair and equitable sharing of the benefits arising out of their use, in harmony with the Convention on Biological Diversity, for sustainable agriculture and food security.”
xi Convention on Biological Diversity – Digital sequence information on genetic resources: Draft decision submitted by the President (1 November 2024)
xiii FAO – International Treaty on Plant Genetic Resources for Food and Agriculture: The Funding Strategy (2024)
xiv FAO – The Benefits-Sharing Fund: Call for proposals for the 5th funding cycle (May 2023)
xv Germplasm is a collection of genes for use in the improvement of plants”. These genes must be in a form that is accessible to the plant breeder, so are usually embedded into plant genomes and stored as seeds or other types of propagules. Alternatively, germplasm may take the form of cultured cells or tissues or may consist of a sequence of DNA in a transformation vector. Germplasm is regarded as “raw material” for breeding, a milieu from which desirable genes may be extracted and collected into the genomes of new commercial individuals and populations. Source: Science Direct – Germplasm and Genetic Variability (2020)
xvi FAO – International Treaty on Plant Genetic Resources for Food and Agriculture: BSF List of projects approved for funding
xvii FAO – Benefit -sharing Fund
xviii The IOPC Funds are two intergovernmental organisations (the 1992 Fund and the Supplementary Fund) which provide compensation for oil pollution damage resulting from spills of persistent oil from tankers.
xx IOPC – Summary of Incidents (accessed November 2024)
xxi Companies were selected if their main activity is in one of these six sectors. Companies where these six sectors are one of the company’s tertiary activities are not included in the analysis.
xxii Averages were taken from 2021 to 2023.
xxiii Using US Dollar (USD) exchange rates as of 15 November 2024 and for public companies only.
xxiv Revenue and profit values are taken at a company level and are not solely coming from the six sectors listed above. Negative profit values were also excluded from the calculation of the totals.
xxv The International Federation of Pharmaceutical Manufacturers and Associations (IFPMA)
