COP15: outcome of global biodiversity summit

As discussed in our recent podcast and briefing (see here and here), the 15th Conference of the Parties to the United Nations Convention on Biological Diversity (“COP15”) was held in Montreal on 7 – 19 December 2022.

The main aim of COP15 was for nations to agree on a post-2020 global biodiversity framework with targets and actions on tackling nature and biodiversity loss. In the early hours on the last day of the conference, COP15’s President announced that the nations at COP15 had agreed on, and formally adopted, a new biodiversity framework called the Kunming-Montreal Global Biodiversity Framework (the “Framework”) as well as 23 targets to be achieved by 2030 (see final text here).

We explain below what has been agreed in the Framework and what the new targets mean for companies and financial institutions.

The Framework

According to the final text, the vision of the new Framework is, that “by 2050, biodiversity is valued, conserved, restored and wisely used, maintaining ecosystem services, sustaining a healthy planet and delivering benefits essential for all people”.

To achieve this vision, the Framework states that in the period up to 2030, the mission is to “take urgent action to halt and reverse biodiversity loss to put nature on a path to recovery for the benefit of people and planet by conserving and sustainably using biodiversity, and ensuring the fair and equitable sharing of benefits from the use of genetic resources, while providing the necessary means of implementation”.

The Framework includes 23 targets to be achieved by 2030. These targets include:

• ensure at least 30% of degraded terrestrial, inland water, and coastal and marine ecosystems are under effective restoration (“30 by 30”);
• reduce global food waste by half and significantly reduce overconsumption and waste generation;
• ensure harvesting and trade of nature is sustainable, safe and legal;
• prevent overexploitation;
• eliminate, reduce and mitigate the impact of invasive alien species on biodiversity;
• reduce pollution from all sources;
• manage agriculture, aquaculture, fisheries and forestry in a more sustainable way;
• minimise the impacts of climate change and ocean acidification;
• eliminate, phase out, or reform incentives, including subsidies harmful for biodiversity by 2025 and progressively reduce those subsidies by at least USD 500 billion;
• provide USD 200 billion a year in domestic and international biodiversity-related funding from public and private sources; and
• raise international financial flows from developed to developing countries to at least USD 20 billion per year by 2025 and to at least USD 30 billion per year by 2030 (these funds will be managed by a new biodiversity fund created under the Global Environment Facility).

The Framework also recognises the rights of indigenous communities and calls for a fairer approach to genetic resource sharing (meaning the distribution of benefits, including profit) that come from using genetic information found in the world’s living organisms to create new products.

A specific target has also been set for the private sector which requires large and transnational companies and financial institutions to regularly monitor, assess and transparently disclose their risks, dependencies and impacts on biodiversity. Businesses are expected to provide consumers with information enabling them to make “nature-positive” choices.

Whilst the Framework is not legally binding (there are no strict legal consequences for breach of the Framework) and no specific country targets are set in the document, the Framework asks nations to set biodiversity targets and to provide, at least every five years, updates on their progress in the form of national biodiversity plans. These plans will be similar to ‘nationally determined contributions’ which are the documents prepared by nations under the Paris Agreement setting out their climate change targets. Whilst this means that there is no immediate urgency for states to report on biodiversity, nations will be expected to closely monitor biodiversity changes and to ensure domestic policy aligns with the intentions of the Framework.

One notable feature of the Framework is that it does not include the term “nature positive”, which many financial institutions and international bodies had hoped would be in the final text. “Nature positive” broadly means reversing the decline in biodiversity. The World Economic Forum, WWF and European Commission have all endorsed the term on the basis that they think it is a rough equivalent to the “net zero” concept which has been helpful in guiding financial investment towards decarbonisation. However, the term is contentious, with groups interpreting it in different ways and members of the scientific community criticising the valuation models underpinning the term.   

Despite many celebrating the fact that an agreement was reached, there has been some criticism of the Framework on the basis that it includes several loopholes, vague language and unambitious timelines around actions. The Framework has also been criticised for lacking detail on how to measure progress. Some nations (mostly developing nations) are also disappointed by the financing targets, saying that developing nations need more financial support to realise the transition. Developing countries were pushing for USD 100 billion a year to flow to developing nations, but in the end, the negotiators settled on USD 20 – 30 billion a year. There was also disagreement over whether a new fund should be established for biodiversity. Developing countries such as Brazil, the Democratic Republic of Congo and Malaysia expressed disappointment that a new, separate fund was not set up to hold the biodiversity funds given indigenous groups have had difficulty in the past accessing funds from the existing Global Environment Facility fund. There are also fears that the Framework will share the same fate as the Aichi Targets, which were the targets set on biodiversity last decade which were largely ineffective.

It was hoped that COP15 would do for nature what the Paris Agreement did for climate change back in 2015. We will have to wait and see if COP15 was in fact the “Paris moment” for nature. In any case, what is likely is that the Framework will play an important role in guiding future discussions amongst financial institutions, investors and companies on biodiversity. In short, private sector may be able to make faster progress on this than national governments.

What does this mean for clients?

Whilst the Framework has not accomplished everything people wanted, it is clear from the tone of the agreement that biodiversity will be an increasingly important consideration for nations and businesses to take into account in their decision-making. In particular, the target specifically set for the private sector will require companies and financial institutions to have systems in place to understand how their business operations and supply chains interact with the environment. 

Whilst the requirements in the Framework are not legally binding and do not require mandatory disclosure of nature-related impacts (yet), an increasing number of companies and financial firms will likely seek to align themselves with voluntary disclosure initiatives (such as the Taskforce on Nature-related Financial Disclosures (TNFD)) to meet the expectations of the Framework. As part of this exercise, companies will need to closely monitor the impacts of their supply chains and business operations on nature. It is also expected that some national governments will make biodiversity disclosures mandatory in due course (see for example the EU’s recently proposed Corporate Sustainability Due Diligence Directive (CSDDD) which will require companies to diligence their supply chains for, among other things, biodiversity risks).

As was the case with climate change, the private sector is rapidly realising that biodiversity risks can have significant financial implications for their operations, as well as promising business opportunities. It has been estimated that USD 44 trillion (around half of global GDP) is highly or moderately dependent on natural capital and the ecosystem services that it provides. Given there is an estimated USD 700 billion funding gap which needs to be plugged to address biodiversity loss, there is huge demand for the private sector’s funds. Already, investors representing over USD 16 trillion in assets have signed up to the Finance for Biodiversity Pledge which involves pledging to collaborate, engage, assess, set targets and report on biodiversity by 2024 at the latest.

In a speech delivered at COP15, Mark Carney (co-chair of GFANZ) has urged private finance to ensure net-zero transition plans include clear priorities on deforestation, protecting nature, and restoring biodiversity. And MSCI has announced it will launch in early 2023 a new set of tools aimed at helping investors identify and screen companies at risk of contributing to biodiversity loss and deforestation, with a number of other organisations developing similar tools.

It is also likely that new financial mechanisms for biodiversity such as debt-for-nature swaps, biocredits and natural capital funds will become increasingly prevalent as companies seek to manage their biodiversity impact. A number of firms including BNP Paribas SA, Lombard Odier Group and Aviva Plc have launched nature-based funds and other products aimed at generating profits from investors’ increasing appetite for exposure to nature-based solutions. HSBC Asset Management and climate change investment and advisory firm Pollination, amongst others, have also made significant commitments to nature-positive financing (see here).

What is certain is that this is a rapidly evolving space, so we expect to see more focus on biodiversity and nature-positive finance in coming years. If not already, companies and financial institutions should be preparing for this shift in thinking.