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Quantifying the impact of business on nature
ESG funds

Quantifying the impact of business on nature

A group of 36 financial institutions has published a joint statement urging governments to protect the ocean and avoid deep-sea mining.
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27 JUL, 2023

By RankiaPro Europe

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A group of 36 financial institutions*, representing more than €3.3 trillion in assets, has published a joint statement urging governments to protect the ocean and avoid deep-sea mining, which makes up 95% of the biosphere. The statement, coordinated by Fundación Finance for Biodiversity, comes ahead of the annual meeting from 24 to 28 July 2023 of the International Seabed Authority that governs and regulates these activities beyond national jurisdiction, that can grant commercial authorization for deep-sea mining for the first time.

Finance for Biodiversity observes widespread concern in the scientific community. According to the Environmental Justice Foundation, this practice would disturb millions of tons of seafloor sediment, releasing carbon accumulated over millions of years in the ocean cycle. "Assuming that deep-sea mining is a solution for the supply of minerals for climate change objectives is highly questioned. Research is showing that further investment in the circular economy can be a more effective way to achieve the transition to net-zero emissions economy," the letter states.

Indeed, Gabriel Micheli and Viktoras Kulionis, fund managers of Pictet ReGeneration, note that thousands of new marine species have been discovered in recent years, but much of the planet's biodiversity remains poorly understood.  They advocate quantifying species loss attributable to companies within the Stockholm Resilience Centre's Planetary Boundaries framework, along with a life cycle assessment and a regionalized impact assessment.

Biodiversity must be incorporated into climate risk reports

Psychropotes longicauda is a half-peeled banana-shaped sea cucumber.  It lives 5,000 meters below the surface of the ocean.  This strange sea creature is one of thousands of new species that have been discovered in recent years, thanks to advances in technology.  However, even as scientists have improved our understanding of the biosphere, much of the planet's biological diversity remains "dark matter," poorly understood and unclassified.

The fact is that carbon emissions make up the bulk of companies' environmental reports, but they offer an incomplete assessment of the impact on the environment. For example, the UN estimates that incorporating nature-based solutions, such as coral reef restoration and using natural materials in buildings, can reduce CO2 emissions 13 times more than vehicle electrification.

Fortunately, the December 2022 Global Biodiversity Framework is an important milestone. Signed by nearly 200 countries, it sets targets that require large companies and financial institutions to track and disclose their impact on nature and the risks associated with biodiversity loss.  It will apply to the entire value chain of a company and financial institutions in their investments.  Aside, the Nature-Related Financial Disclosures Working Group, which represents financial institutions and companies with $20 trillion in assets, will launch a new set of risk assessment and disclosure standards. 

It should make it easier for companies to align and direct capital towards positive impact activities. Another initiative is the International Sustainability Standards Board, a global standard for the disclosure of corporate sustainability information, which is in the process of incorporating biodiversity into climate risk reporting.

Earth Systems Impact

However, these "top-down" approaches alone cannot address the problem of biodiversity, as it is difficult to obtain accurate data. To overcome this challenge, the scientific community has established research programs with banks, asset managers, and asset owners. The idea is to develop datasets that can provide a clearer picture of the relationship between economic activity and nature. 

One example is the Earth Systems Impact metric, a prototype developed by researchers at the Royal Swedish Academy of Sciences under the Finance to Revive Biodiversity (Fin Bio) program.  In addition to climate change, it takes into account impacts on water and land use, which are also dimensions of the Stockholm Resilience Centre's Planetary Boundary Framework.

*Achmea, Achmea Investment Management, Aéma Groupe, Allianz France, Andra AP-Fonden, AP3, ASR Nederland N.V., Australian Ethical Investment, Avesco Sustainable Finance AG, Aviva Plc, Change Finance, PBC, CZ Group, Domini Impact Investments LLC, ERAFP, Etica Funds - Responsible Investments, Federal Finance Gestion, Federated Hermes Limited, Karner Blue Capital, La Banque Postale Group, La Financière de l'Echiquier, Mirova,  Montpensier Finance, Nordea AM, Oakham Wealth Management Ltd, Ossiam, Pictet Group, Rathbone Greenbank Investments, Robeco, Schelcher Prince Gestion, Storebrand Asset Management, Swedbank Robur, Tribe Impact Capital, Triodos Bank, UBP Asset Management, WHEB Asset Management, Zencap Asset Management. La declaración permanece abierta a otras instituciones financieras.

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