Finance for Biodiversity Foundation
The Finance for Biodiversity Foundation (FfB) has released guidance to help financial institutions manage the relationship between biodiversity and climate in their investment activities.
FfB was initiated by 26 banks, asset management companies and insurance companies to assess the biodiversity impacts faced by financial institutions. Currently, 153 financial institutions around the world have become its signatories.
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Relationship between Biodiversity and Climate Change
FfB believes that biodiversity and climate change can have positive and negative impacts on each other. Overall, there are four main relationships between biodiversity and climate change:
- Climate change is the driver of biodiversity loss: The Intergovernmental Panel on Climate Change (IPCC) believes that climate change has caused damage to terrestrial and marine ecosystems, and these damages are difficult to reverse. Although animals and plants have the ability to adapt to climate and change their habitats, their effects re still very limited. In a scenario where the rate of warming doubles, endangered species will emerge at twice the normal rate.
- Protecting biodiversity is a necessary measure for climate action: both climate change mitigation and climate change adaptation are inseparable from the protection of biodiversity. For example, the carbon cycle in nature is directly related to various types of living things, and the carbon cycle is also an important part of reducing greenhouse gas emissions. Addressing climate change is based on protecting biological diversity.
- Biodiversity solutions can have a negative impact on climate: Only sustainable biodiversity solutions can have a positive impact on climate change. For example, desalination is a common solution to water shortages, but desalination requires fossil fuel power generation, which will increase carbon emissions. Only desalination using clean and renewable energy can address both biodiversity and climate change.
- Climate options may have negative impacts on biodiversity: Some options designed to address climate issues may also have negative impacts on biodiversity. For example, afforestation can increase the carbon capture capacity of an ecosystem, but it can also disrupt the previous balance of biodiversity, and monoculture also affects biodiversity.
FfB’s Recommendations for Financial Institutions
The FfB recommends that financial institutions integrate biodiversity and climate change into strategic planning and business processes, and consider the complex relationship between the two. Specifically, the FfB provides five recommendations for financial institutions:
- Finance solutions to biodiversity and climate change: Annual investment in global climate finance reaches US$632 billion, and these investments are still concentrated in the green building and energy industries (90% combined), with the proportion of investment in land less than 2%. Financial institutions should address underinvestment in biodiversity by providing financing for the agricultural or green infrastructure sectors.
- Identify the impacts of biodiversity and climate change on financial institutions: While most financial institutions have integrated climate change into their business assessments, there are still fewer assessments targeting biodiversity. Research shows that the food industry, materials industry and energy industry have a greater impact on biodiversity, and financial institutions should give priority to assessing the impact of financing activities on biodiversity in the financing of these industries.
- Use existing frameworks to address substantive topics: Financial institutions can work with companies to establish ESG strategies based on existing frameworks to help companies achieve sustainable development goals and increase climate resilience.
- Develop policies targeting biodiversity and climate change: Financial institutions can reduce some investments that have negative impacts on biodiversity and climate change and encourage sustainable financing activities. Commonly used measures include negative screening to set the right incentives for the company.
- Integrate biodiversity into climate goals: Financial institutions can integrate biodiversity into climate goals to enhance assessment and monitoring.