2024 United Nations Biodiversity Conference of the Parties (COP 16) – Three Key Takeaways for the Financial Services’ Sector
BDO was delighted to attend the UN COP 16 Biodiversity Conference in Cali, Colombia, in person. This was a landmark event, drawing 23,500 delegates and marking the largest Convention on Biological Diversity (CBD) COP ever. The atmosphere was charged with enthusiasm and cautious optimism about achieving nature-positive outcomes and financial sector leadership, despite uncertainties about the timeline for change.
COP 16 overview
The biennial meeting of the 1993 UN Conference on Biological Diversity (CBD), also known as COP 16, took place from October 21 to November 1, 2024, two years after the historic adoption of the 2022 Kunming-Montreal Global Biodiversity Framework (GBF) at COP 15. Promoted as the “Paris Agreement for Nature”, it seeks to contribute to the achievement of the Sustainable Development Goals (SDGs) and aims to halt and reverse biodiversity loss by 2030 with ambitious targets including:
- Protecting at least 30% of the world's land and marine areas by 2030
- Restoring at least 20% of degraded ecosystems
- Reducing pollution from plastics and excess nutrients
- Ensuring sustainable use of biodiversity.
The GBF also emphasises equitable benefit-sharing from genetic resources and the need for increased financial support for biodiversity conservation.
Key takeaways for the financial services’ sector
1.Achieving net zero targets is unrealistic without addressing nature and biodiversity
As the Glasgow Financial Alliance for Net Zero (GFANZ) put it in their consultation on Nature Net Zero Transition Plans published on 29 October 2024; “There is not net zero without nature”. Financial institutions and other organisations will need to manage risks arising from climate, biodiversity and nature together, because they are interlinked. Restoring and protecting land, ocean and freshwater sources, and creating or increasing greenhouse gas (GHG) carbon emissions sinks, will reduce emissions, accelerating zero targets.
This will create the need for businesses to incorporate nature and biodiversity into existing climate strategies, transition plans, risk assessments and ultimately their sustainability reporting.
2. Loss of natural capital becomes an area of focus for regulators, which can accelerate progress for financial institutions
Given the interaction between nature, climate and the economy is exceptionally complex, the role of central banks in progressing this agenda is essential and welcomed by businesses. Central Banks present at COP 16 agreed that they have a key role in helping the sector manage the macroeconomic and financial risks arising from nature degradation through the establishment of policies and actions, and by providing nature-related scenarios.
The De Nederlandsche Bank (DNB) framework for assessing how damages to ecosystem services can impact banks’ resilience through increasing credit risk, using the ENCORE 1 framework for evaluating the impact of environmental risks on resilience was an insightful example of how banks, supervisors and policymakers can begin addressing nature degradation within their risk assessments.
The Cali-Baku Pledge, published on 25 October 2024 by the Network for Greening the Financial System (NGFS), a coalition of 141 central banks and financial supervisors and 21 global observers, reaffirmed their commitment to consider the economic impacts and financial risks arising from climate change and nature degradation. Highlighting an integrated approach to fulfil monetary policy and financial stability mandates, the NGFS confirmed that it will provide central banks with analytical frameworks, tools and guidance in the near future.
3. The financial services’ sector must assess and manage nature and biodiversity-related risks - using the Taskforce for Nature Financial Disclosures (TNFD) framework will help
Like climate change, nature and biodiversity are key drivers of risk that impact traditional financial institutions risk categories such as credit, operations, investments, market and reputation. Some practical examples already exist from first-time TNFD adopters.
Taking credit as an example, Hirotaka Hideshima, a member of the TNFD taskforce, explained that nature and biodiversity risk management can start with grouping borrowers by creditworthiness, estimating the probability of default for each group and calculating expected and unexpected losses. Risk assessment will ultimately reveal opportunities for actions to converse and restore nature, reducing long-term risks. Organisations will only be able to demonstrate genuine contribution to the transition through identifying nature positive opportunities for sustainable finance.
This will inevitably lead to increased demand for nature and biodiversity financial-related disclosures, which will be incorporated into existing climate reports, to inform investment decision-making.
Our reflections from the field
Colombia excelled in creating an open and inclusive environment. COP 16 was, originally labelled, the ‘people’s COP’. Under the slogan ‘Peace with Nature’, it brought together a wide range of stakeholders - indigenous people, local communities, and stakeholders in restoration and conservation efforts.
A significant development was the establishment of the “Cali Fund” - a voluntary global fund for benefit-sharing from the commercial use of genetic data though Digital Sequence Information (DSI). This initiative encourages companies to contribute a portion of their profits, representing a major step toward benefit-sharing in biodiversity conservation. Through DSI, companies can record genetic information that has been gathered from the natural environment and it can be made available for use in research which will help to identify, for example, infectious diseases, predicting which plants will survive in a warming climate, or help protect threatened species.
Despite the positives, finance for nature and biodiversity will be delayed as a result of 66% of the parties to the CDB, including the UK, missing the deadline to submit National Biodiversity Strategies and Action Plans (NBSAP)
Article 6 of the Convention on General Measures for Conservation and Sustainable Use, requires that each Contracting Party develops an NBSAP and updated plans. In 2024, the Parties had to submit updated plans to achieving the goals of the 2022 BDF ahead of COP 16. Unfortunately, most Parties missed the deadline. By the end of COP 16, only 44 Parties, out of 196 had submitted NBSAPs, with 119 (including the UK) only adopting related national targets.
In addition, the lack of agreement on a new global biodiversity fund for nature disappointed many. This is because the conference had to be paused after midnight on the 1 November without the expected agreement on a new global fund for nature under the existing Bezos Earth Fund (BEF). Some parties felt the BEF was not versatile enough to meet developing countries' needs, leading to calls for the creation of a new fund with a different setup. However, conversations will continue in inter-sessional meetings to find a solution over the coming months.
Conclusion
It is evident that despite ongoing efforts, biodiversity is deteriorating worldwide at rates unprecedented in human history and the financial sector has an important role to play in financing the transition.
As the UN Secretary-General Antonio Guterres highlighted in his speech at the conference, “Biodiversity is the defining task of the century.” Since the adoption of the SDGs in 2015 and the UN COP 15, attention to nature and biodiversity has gained momentum, but the topic remains far from mainstream. The Nature Action 100 benchmark report released at COP 16 revealed that while many companies aspire to be nature-positive, very few have made any concrete commitments.
This is set to change. Financial institutions, including insurers, asset managers, and banks, showed unprecedented engagement, signalling a growing interest in investing in nature-based solutions and a desire for supportive policies and regulations.
The sustainability agenda is rapidly progressing, and it will continue to do so, with an increased focus on social impacts, and disclosures – given the level of attention more investors will want to see publicly disclosed information on nature-related financial risks and impacts.
How can we help?
Engaging with nature and biodiversity disclosures is still voluntary although early adoption is recommended.
At BDO, we understand the challenges smaller, medium-sized, as well as larger financial institutions face in incorporating nature into their climate strategies. Our team of experts in financial services, sustainability and ESG-related risk management are here to support you with advisory services, governance, risk management and reporting.
From risk assessments to strategy development, training, programme implementation, resource augmentation and disclosures assurance, we can support you in improving your sustainability resilience and leverage opportunities to support nature positive transition through investment finance.
If you would like to find out more about COP 16, what it means for your business and managing your nature and biodiversity risk exposures, do not hesitate to get in touch with our team.