Forty-four trillion dollars – roughly over 50% of global GDP – is either highly or moderately dependent on nature and its services, according to the World Economic Forum's 2020 Global Risks Report. This report ranks biodiversity loss and ecosystem loss as one of the top five threats to humanity in the coming decade. Covid-19 has arguably had a magnifying effect among policymakers, focusing the debate on how governments, corporates and individuals can re-build a more resilient global economy with "natural capital" as a core variable.
BNP Paribas' Head of Engagement Transformation Gwen Yu discusses how sustainable finance can protect biodiversity and natural capital in a post Covid-19 world.
Sustainable finance will play a vital role. Gwen Yu, Head of Engagement Transformation at BNP Paribas, joined Euromoney Corporate Social Responsibility Editor Helen Avery and biodiversity experts from WWF and the Natural Capital Finance Alliance, to discuss these key risks and opportunities in the post Covid-19 world.
Greater integration of social factorsAs the pandemic swept across the world, many governmental agencies and supranational development banks, such as the European Investment Bank, BPIFrance and Italy's CDP, turned to the capital markets to support funding for their healthcare relief efforts and social services. Bond proceeds from these Covid-19 response bonds were earmarked for specific pandemic response projects, with a reporting framework in place to satisfy the requirements of ESG (environmental, social and governance) investors.
In 2020 to date, volumes issued have topped $150 billion, according to data from BNP Paribas and Bloomberg. While there is debate whether the recent focus on social metrics have come at the expense of environmental metrics, the pandemic has hit the most vulnerable the hardest – and a transition that takes account of this is critical.
"Social objectives must be at the same level as environment, and therefore nature," says Yu, who explains that the inability to support the most vulnerable will make it harder to achieve climate ambitions. "In the long-term, responses must incorporate both social and environmental needs. And if biodiversity and nature are core elements of businesses, incentives or products, solutions must be scalable, just and fair in terms of the transition."
Three paradigm shifts resulting from Covid-19The pandemic has had an impact on every aspect of the economy:
- Policy: some
governments are tying bailouts to climate targets, while the European Commission has underscored the need for a green new deal to be tied to recovery packages. The
European Green Deal provides a roadmap to boost efficiency of resources by
moving to a clean, circular economy, which also restores biodiversity and cut
- Corporates: the localisation of supply
chains will shape things in the months and years ahead. Governance challenges
will be important too – environmental requirements should not be rolled back,
while there should be safety nets and metrics to prevent the crisis being used
as an excuse.
- Personal behaviour change: during the crisis, consumers shifted their consumption habits, and some of those habits
– such as local food sourcing and domestic tourism – will stick.
The Taskforce for Nature-related Financial DisclosuresInvestors lack environmental data. However, Yu believes there are some challenges in applying existing data to address biodiversity risks. "We already have many data sources, but they may not be the right kind of data," she explains. "For example, some data may not be publicly audited because it is self-declared; in terms of structuring data, it may be unusable from a bank or investor integration perspective."
Some experts have called for a taskforce on nature-related financial disclosures (TNFD). Andrew Mitchell, founder of the Natural Capital Finance Alliance and the Global Canopy Programme (GCP), argues Covid-19 has highlighted the sheer size of biodiversity risk. "We need a Taskforce on Nature-related Financial Disclosure, as nature risk can be huge, fast and covers many sectors; yet it is unrecognised by many in the financial sector today. Covid-19 is changing all that and will be a driver to realise and understand how quickly we must accelerate addressing these nature-related issues."
|How is BNP Paribas supporting biodiversity and natural capital?|
The bank has taken steps to put greater focus on biodiversity as part of its environmental approach: