COP15 final biodiversity deal puts pressure on private finance disclosure

Two weeks of intense negotiation at the COP15 biodiversity conference in Montreal has resulted in a deal requiring large financial institutions to disclose their risks and impacts on biodiversity throughout their operations.

Missing from the final texts, however, was a biodiversity preservation fund for developing countries, in the manner of the climate fund established at the recent COP27 summit in Egypt.

A key provision of the COP15 deal was a commitment to protecting 30% of the world’s surface by 2030.

Chaired by China but hosted in Montreal due to Covid lockdown concerns, the UN convention adopted the “Kunming-Montreal Global Biodiversity Framework” (GBF), including four goals and 23 targets for achievement by 2030.

Tamsin Ballard, director of climate at the UN Principles for Responsible Investment (UN PRI), said: “The PRI particularly welcomes the call to align global financial flows with the goals and targets of the framework. It will now be essential that countries deliver on the agreement, by translating it into national plans and policies and ensuring the efficient mobilisation of resources.”

Silvia Merler, head of ESG and public policy at Algebris Investments said: “The importance of the COP15 biodiversity summit cannot be overestimated.

“The contribution of climate finance to tackling sustainability challenges in the food system – which has a heavy footprint both in terms of emissions and land use – has been marginal so far, and there is significant room for improvement when it comes to integrating biodiversity-related metrics in investment processes.”

The GBF also pledged to progressively phase out or reform by 2030 subsidies that harm biodiversity by at least $500bn per year, while scaling up positive incentives for biodiversity’s conservation and sustainable use.

However, the draft agreement was described as “an open opportunity to greenwash” by An Lambrechts, the Greenpeace International delegation leader for COP15, who also said: “In its present shape, it won’t halt biodiversity loss, much less reverse it. Protection targets must exclude activities that destroy biodiversity, even if they’re labelled as sustainable use.

“False solutions from climate talks seem to have been copied and pasted directly into the global biodiversity framework. Protections are moving sideways, not forwards.”

The GBF also included a pledge to mobilise by 2030 at least $200bn per year in domestic and international biodiversity-related funding from both public and private sources.

Another goal of the GBF is to raise international financial flows from developed to developing countries, in particular the least developed countries, small island developing states, and countries with economies in transition, to at least $20bn per year by 2025, and to at least $30bn per year by 2030.

Investor angle

With the conference reaching its close, Sylvain Vanston, executive director for climate investment research at MSCI ESG Research, said: “The biodiversity on our planet is declining at an alarming rate largely due to human activity, from habitat destruction, pollution, water stress to climate change-related pressures. This decline in the ability of nature to provide ecosystem services poses a major threat to the global economy.

“Important steps are being made at COP15, and the Taskforce on Nature-related Financial Disclosures is also aiming to redefine a standard reporting framework. However, for crucial action to be taken, capital markets participants need to have access to timely and robust data to make more informed investment decisions.”

Immediately prior to the conference, the Net-Zero Asset Owner Alliance called on private market asset managers to make a public commitment to set net-zero targets on Scopes 1 and 2 emissions no later than 2025.

Günther Thallinger of Allianz Investment Management has since been re-elected as chair of the alliance for the next two years, in the wake of Vanguard, the second largest asset owner in the world, leaving the alliance last week.