The Finance for Biodiversity Foundation has published a guide for financial institutions on how to manage the biodiversity and climate risk in their investments.
The guide, titled “Unlocking the biodiversity-climate nexus”, was written by members of a subgroup of the FfB Foundation’s Impact Assessment working group for banks, insurers, asset managers and asset owners. It relates to climate and nature crises including agricultural solutions, alternative energy sources, circular economy and nature-based solutions. Its five key recommendations to financial institutions are to:
1. Finance synergy-generating solutions for the biodiversity and climate nexus and those minimising trade-offs (e.g. R&D, start-ups, innovation);
2. Identify and prioritise sectors with a high impact on biodiversity and climate;
3. Engage with companies on important nexus topics by leveraging relevant and existing frameworks;
4. Set up sector policies, taking into account synergies and trade-offs between biodiversity and climate; and
5. Integrate biodiversity into climate targets, policy and reporting.
One author, Deepshikha Singh, Head of Stewardship and Deputy Head of Sustainable Investment Research at La Francaise Asset Management, says, “By using renewable energy to power solutions, taking a results-based approach and considering the impact of activities on both climate and nature at every step, financial institutions can help mitigate trade-offs and exploit synergies. As we approach the 1-year anniversary of COP15 and gear up for COP28, it is important to handle nature and climate not isolated but approach them as two sides of the same coin. We cannot solve for one while ignoring another. Our paper unravels the understanding of climate-nature nexus by discussing the trade-offs and synergies that are associated with climate and/or nature action. We hope the guide provides the necessary foundation for all kinds of financial institutions to start their work on the nexus.”