December 2022 marked a major milestone for nature and finance when 188 governments agreed at COP 15 to the Kunming-Montreal Global Biodiversity Framework (GBF) – a roadmap of four goals and 23 targets to halt and reverse nature loss by 2030.
Key to the agreement is Goal D, which seeks to ensure that all parties have adequate resources to implement it, alongside specific targets that provide the tools and solutions to do so. These include aligning public and private finance flows (Target 14), ensuring companies disclose nature-related impacts (Target 15), reducing harmful incentives and subsidies (Target 18) and mobilising private sector financing to bridge the $200 billion gap required to address our biodiversity crisis (Target 19).
The framework also signalled a turning point in the global economy’s relationship with biodiversity by acknowledging the importance of private capital for the first time. Nature-directed private finance has risen elevenfold in the past four years according to the United Nations, reaching $102 billion in 20231.
Yet, despite the GBF’s laudable intentions and the surge in private finance, most capital flows – including private investments – remain misaligned with achieving its goals that are vital for the future of our planet.
Ahead of COP 16 next month, we therefore call on Nordic nations to lead the fight against nature loss by providing ambitious, coherent and credible biodiversity plans.
All countries must submit updated National Biodiversity Strategy and Action Plans (NBSAPs) detailing how they intend to achieve the goals and targets agreed at COP 15 before they reconvene in October. So far 20 countries have done so, and we await those from the Nordic countries and others specifying how they will improve disclosure requirements and align finance flows in order to tackle biodiversity loss.
Coherent and decision-useful disclosure
Financial flows will become easier to align if nature-related disclosures are improved. Having agreed at COP 15 to ensure that large companies “regularly monitor, assess, and transparently disclose their risks, dependencies and impacts on biodiversity”, governments must now act. We encourage the Nordic countries, alongside others, to include disclosure requirements in their national strategies that are consistent with international standards such as the Taskforce on Nature-related Financial Disclosures (TNFD). The greater the level of consistency across jurisdictions, the greater the ability to align public and private financial flows for cross-border businesses and transactions.
The implementation of Target 15, which ensures disclosure of nature-related impacts, dependencies and risks by all large and transnational companies, as well as financial institutions, is a step in the right direction, but it also needs to be complemented by effective policy measures and transformative action across many sectors of the economy. Put simply, we must make supporting business practices that do not harm nature a more attractive investment proposition than those that do.
Financial flow alignment
The $700 billion biodiversity finance gap that governments agreed to close in Goal D of the GBF requires additional funding at scale and pace. The most important first step, however, is to implement measures that will progressively reduce existing financial flows that are harming nature and prevent potential future financing activities from continuing in the same damaging direction. Increased public spending in support of biodiversity will remain ineffective as long as existing harmful financial flows both public and private, continue to work against it.
Allied to this is the need for finance ministers to significantly increase their focus on biodiversity. They have influence over sectors providing finance and those driving nature loss, as well as control of important financial levers that can help drive alignment, such as taxes and economic incentives.
Governments can utilise fiscal policy to ensure that national budgets do not support activities harmful to nature, particularly by reforming environmentally damaging subsidies, which are pervasive globally, with OECD countries alone transferring at least US$400 billion annually to various sectors. We therefore call on Nordic finance ministers to lead a ‘whole of-government approach’ in direct collaboration with environment ministers.
Nordic leadership
In April, the Finance for Biodiversity Foundation – whose public policy advocacy working group of 76 financial institutions Storebrand co-chairs – outlined a series of recommendations for governments to implement the GBF and we hope to see these adopted in Nordic countries’ plans. These concrete actions have universal application and, whilst acknowledging that countries are at different stages of development, we also recognise that Nordic nations are among the worlds’ most advanced and encourage them to take a leadership role.
By setting ambitious biodiversity action plans that improve disclosure and properly align capital flows, COP 16 can be another important step in winning our fight against nature loss.
