Forest organisations are cautiously optimistic about the outcomes of the Montreal biodiversity summit but call for greater regulation and accountability
Activist groups are cautiously optimistic about the outcomes of the COP15 biodiversity summit in Montreal but remain critical on what’s been agreed regarding private capital flows in the Global Biodiversity Framework.
“What is missing”, says Mereld van der Mark of the Forests&Finance Coalition, “is a clear mechanism that holds financial institutions accountable when they finance biodiversity destruction.”
“All in all, a great outcome”, commented Jessica Smith, Nature Lead at UNEP Finance Initiative on LinkedIn. Because the agreed text of the framework leaves room for different interpretations, she added they “will be unpacking in the coming weeks what the framework means for banking, insurance and investment”.
The Global Biodiversity Framework‘s Goal D calls for the alignment of all financial flows public and private. In addition, targets 15 and 19 focus specifically on the role and responsibilities of large companies and financial institutions.
“Target 15 is a smart compromise that calls for assessment and disclosure of nature on most of the world’s economic and financial activity,” according to Smith.
Target 19 elaborates on the need to get rid of harmful flows and leverage private finance by promoting blended finance, implementing strategies for raising new and additional resources, and encouraging the private sector to invest in biodiversity, including through impact funds and other instruments.
Several forest activist groups voiced mixed feelings about the outcome of the conference. The Global Forest Coalition, Rainforest Action Network and Sinergia Animal said in a joint statement that the adoption of a target that calls on governments, industries and the financial sector to align their financial flows with the new Biodiversity Framework and thus divest from harmful activities is “an important breakthrough”.
“While the final text of the targets related to the redirection of harmful investments and subsidies are weaker than we had originally hoped for, they clearly mandate governments to take legally binding and other measures to reduce subsidies and prevent investments in sectors like industrial livestock farming, large-scale bioenergy, fossil fuels and other sectors that have proven to harm biodiversity and the climate,” added Simone Lovera, policy director of the Global Forest Coalition.
At the same time, forest campaigners expressed strong concerns that the final agreement opens the door widely to private sector financing of biodiversity policy, including through what they see as, “false solutions like biodiversity offsets and so-called nature-based solutions, which is code language for the carbon offset market”.
The organisations also warned that corporations must not be allowed to define what aligning financial flows with biodiversity goals looks like. As Shona Hawkes of Rainforest Action Network said: “For this to really work there need to be clear mechanisms for checks and balances, real accountability for environmental abuses and clear guard rails against allowing big companies to continue to profit from investing in sectors known to be inextricable from the biodiversity crisis.”
Taskforce on Nature-related Financial Disclosures
According to the forest campaigners, governments have ceded their responsibilities to regulate private businesses and the financial sector, only “encouraging and enabling” business to report and to label products, moving responsibility to consumers.
This approach, they say, suits the Taskforce on Nature-related Financial Disclosures (TNFD), a taskforce made up of 40 global corporations, including several that have come under fire for their environmental practices.
Last November, the TNFD launched a third draft on its proposed framework for how businesses should report on nature-related risks. A fourth draft is expected in February, before the final version is published in September 2023.
While the TNFD is a voluntary initiative, the taskforce is advocating for the TNFD framework to be made mandatory and adopted into national law and even international frameworks.
“The whole TNFD exercise is meaningless if it does not require a business to report on its full impacts on nature, indigenous peoples and local communities, and society at large”, says Merel van der Mark, talking to Impact Investor. “Without that, it is impossible to assess what impacts a company is really causing, and also what the cumulative impacts are in a specific region. Though the TNFD framework is not yet finalized, its latest draft leaves a lot of room for interpretation on what to report and what not”.
Van der Mark is the coordinator of the Forests&Finance Coalition, a coalition of campaigners and research organisations. In October they published an Open Letter to the TNFD to express their “profound concern” with its work.
The concerns of the coalition were further heightened with the announcement during the COP15 conference that Germany and Norway have pledged €30m to the TNFD. “We are alarmed at the high level support, including the UN, of a process driven by corporate executives”, Van der Mark says. “Not only are they drafting a blue print for disclosure regulation, but they also seem to be shifting the conversation away from regulation and accountability.”.
According to the Forest&Finance Coalition investors and central banks should also be wary. They say that under TNFD’s proposal, investors won’t have access to essential information to gauge whether their money is helping, or harming, biodiversity and the people who protect it.
“There is a lot of discussion on how difficult it is to have access to data, metrics and indicators for disclosure on biodiversity”, says Van der Mark. “But some things are really quite easy, like the disclosure on the location of a companies’ operations, and the disclosure of any grievances that might have been raised against them. This is information companies already have and their disclosure would provide important transparency about their behaviour.”