First open for signature at the first Earth Summit in Rio in 1992, the CBD has been in force since 29 December 1993, with three main objectives:
- the conservation of biological diversity;
- the sustainable use of the components of biological diversity; and
- the fair and equitable sharing of the benefits arising out of the utilisation of genetic resources.
The aim of the CBD is to improve global sustainability and sustainable development so as to reduce the negative impacts on biodiversity and to further biological conservation.
COP15 came at a critical time for biodiversity with WWF’s Living Planet report (a biennial report which takes account of the state of the planet) explained that from 1970 to 2016 there was an average 68% decline in the Living Planet Index (data which monitors living vertebrate species). Meaning that mammals, birds, reptiles and fish have dropped by more than two thirds in just over 45 years and that one fifth of all global coral reefs and one third of all mangrove forests have declined.
Key outcomes of COP15
COP15 ended with the adoption of the Kunming-Montreal Global Biodiversity Framework (GBF) which aims to address biodiversity loss, restore natural ecosystems and to protect indigenous rights, including the 30x30 commitment to protect 30% of the planet and 30% of degraded ecosystems by 2030.
The GBF has four main goals which include within them overarching considerations such as:
- ensuring the integrity, connectivity and resilience of all ecosystems are maintained, enhanced or restored, to substantially increase the area of natural ecosystems by 2050;
- human induced extinction of known threatened species to be halted and by 2050, extinction rate and risk should be reduced tenfold;
- sustainable use of biodiversity including the restorations of ecosystem services and functions which are in decline; and
- adequate means of implementation, including from financial resources, capacity building, technical and scientific co-operation and access to and transfer of technology to fully implement the framework's goals.
Monitoring and reporting
To achieve these goals, the delegates decided on a variety of agreements and targets, including the creation of national action plans which will be periodically reviewed to ensure that goals and targets are being implemented and progressed. The aim of the national action plan approach is to avoid the same failures that accompanied the targets set at COP10 known as the Aichi biodiversity targets, where no single target was achieved.
Effect of the agreement on UK business and financial services
UK commitment
In September 2020 the UK Government committed to protecting 30% of the UK’s land by 2030. Although certain policy changes have been taken forward, for example in the Environment Act 2021, published reports suggest that the UK is not on track to meet this target. It is expected that in response to these reports and the agreement at COP15 that further policy changes will be effected in order for the Government to meet these targets.
Portfolio management
The Treasury commissioned 2021 Dasgupta report highlighted the extreme economic risk posed by the rapid decline in nature and reiterated the role of nature as the infrastructure required to support the economy, in the form of pollinators for crop production, water for use in manufacturing processes and the cooling of equipment in data centres.
Asset managers are tasked with maximising the value of their portfolio and provide healthy IRRs to investors, however Dasgupta highlighted that the UK has done a poor job of the portfolio management of the UK’s natural capital to date. Economists argue that with additional policies to protect and restore natural capital in the UK (a potential outcome of COP15) we should see consequential reduced risks to the wider economy as a result of nature loss, benefiting businesses and funds investing in UK situs assets.
Impact reporting by companies
It was agreed at COP15 that signatories will take legal, administrative or policy measures to encourage and enable large and transnational companies to report, monitor and disclose their risks, dependencies and impacts on biodiversity, including in their operations, value chains and portfolios.
The Taskforce on Nature-Related Financial Disclosures (the TNFD), is expected to provide the framework for reporting. The TNFD is a new global market-led initiative aiming to provide financial institutions and corporates with a complete picture of their environmental risks and opportunities, following in the footsteps of the Taskforce on Climate-Related Financial Disclosures (TCFD). The TNFD has listed priority sectors where specific sector guidelines will be produced. These have been chosen due to these sectors being more likely to be susceptible to financial impacts due to their dependency on natural resources as part of their global supply chain or business, as well as the opportunities to improve the impact on nature, including: infrastructure, healthcare, consumer goods and transport.
An intention of the TNFD is to support more informed and robust capital allocation decisions and active ownership strategies based on clarity, confidence and trust in data relating to nature-related risks. Given two of the core groups the TNFD is produced for are financial institutions and corporates, many asset managers and large businesses have been paying close attention to the development of the framework and have been analysing their preparedness for reporting.
The TNFD will finalise its disclosure recommendations by September of this year and it seems likely, given the agreement at COP15 that, after a period of voluntary reporting, much like TCFD, that TNFD reporting will become mandatory for large businesses and asset managers in the UK.
Finance for nature
Delegates at COP15 agreed to ensure that $200bn of both public and private sector money each year be utilised for conservation initiatives, with more economically developed countries contributing at least $20bn of this each year by 2025, increasing to $30bn yearly by 2030.
However, any country which decides to "voluntarily assume" similar obligations, are expected to increase their international finance flows substantially and progressively for nature by similar sums. The aim is to reduce the biodiversity finance gap which stands at roughly $700bn per year and a new "Special Trust Fund" called the Global Biodiversity Framework Fund will be established in 2023 until 2030 to support this goal.
To enable the $200bn a year to be funded, in part by private capital, it seems likely that we will see policy changes to incentivise this capital allocation, potentially creating new markets for nature investment and new nature based financial products.
This article was co-authored by Riley Forson, Trainee Solicitor.
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