Can COP15 deliver a Paris Agreement for biodiversity?

investment viewpoints

Can COP15 deliver a Paris Agreement for biodiversity?

Thomas Höhne-Sparborth, PhD - Head of Sustainability Research

Thomas Höhne-Sparborth, PhD

Head of Sustainability Research

The world may be laser-focused on the much awaited climate change conference, COP26, beginning in Glasgow later this month, but there is another key UN biodiversity conference called the COP15 that deserves equal investor attention as it kicks off today. Here is quick 3-step guide to help you get up to speed.

 

1. What is COP 15?

While climate change has captured public’s attention and risen up political and corporate sustainability agendas worldwide, wider risks to nature and biodiversity are looming ahead.

Amidst increased recognition that climate action alone will be insufficient to stave off nature loss, and that nature is a vital and productive basis for our economy, attention to wider nature-related challenges is on the rise. The UN’s Convention for Biodiversity Development COP15 is a conference that builds on this momentum. 

Arguably, the biggest UN biodiversity summit in a decade, COP15 is tasked with elaborating on the post-2020 global biodiversity framework. A decade ago, an initial set of targets, known as the Aichi Targets, was agreed by 190 parties to the Convention on Biological Diversity in Aichi, Japan. These targets provided a framework initially intended to cover the years from 2011 to 2020, but this framework has been criticised for lacking, not being measureable, and being non-binding. COP15 is an opportunity to set this right, and agree a more substantive framework for the next decade, akin to the Paris Agreement on climate, but for nature.

Hosted by China and themed "Ecological Civilization-Building a Shared Future for All Life on Earth", the conference will be held online from 11 to 15 October. This will include a High-Level Segment expected to produce a ‘Kunming Declaration’ adding political momentum to the framework negotiations.

This will be followed by a second part of face-to-face meetings in Kunming, China from 25 April to 8 May 2022. It is here that that global framework agreement will be presented for final consideration and decision by CBD’s 196 Parties.

The first official draft of the framework was released in July and proposed 21 targets for 2030 including eliminating all plastic pollution and potentially ending US$500bn of annual government subsidies that harm nature. The document also noted that biodiversity loss needs to be halted by 2030 and a net-positive impact delivered thereafter.

Investors are hoping the event concludes with an agreement on nature similar to the Paris Agreement for climate change. What is needed are clear targets, large-scale political buy-in, clear roadmaps for how to achieve these targets and a clear understanding of what this means for businesses.

 

2. Why does COP 15 matter to investors?

Over half of the world’s GDP is moderately to heavily dependent on nature, according to the World Economic Forum.

Our agricultural and food systems rely directly on the productive capacity of nature. The same is true for key material industries, such as of forestry, timber, paper, and apparel. In tourism and real estate, much of the value of these sectors is directly linked to the intangible benefits of nature. In pharmaceuticals, nature-based and nature-inspired products remain vital.

And more broadly, the ecosystem services provided by nature include climate regulation, the support of air and water quality – with a direct relation to health and social impact. For these reasons, nature losses pose an immediate challenge that is both societal and economic in nature.

At the same time, nature also provides an investable opportunity. Investment of about US$440 billion is needed in funds that protect nature but the current investments barely reach US$55 billion1. This yawning gap illustrates the extent of the outsized opportunities that exist for investors who want to adapt to nature-related risks on one hand and capture opportunities that leverage the regenerative power of nature on the other.

To address this financing gap, CBD’s draft plan includes a policy milestone of committing to progressively deliver at least US$700bn in additional financing annually by 2030. This will be mobilized from governments and the private sector. If successfully ratified, it could set the stage for unleashing large scale capital re-allocation needed to arrest nature’s decline and seize opportunities therein.

The global investment community has also started to acknowledge the inherent value of nature and the importance of managing it sustainably. But perhaps what’s lacking is adequate investor action translating this awareness into allocating capital to companies providing bio-friendly solutions that protect and harness the power of nature for instance.

One of the key hurdles holding back investment in natural capital is lack of information on how to approach natural capital investments. What are the target key performance indicators (KPIs) investors need on their dashboard? What is the 1.5 degree equivalent for nature? COP15 could be a step in the direction to provide some clarity on these key issues.

 

3. What are investor’s expectations from COP15?

Investors are hoping the event concludes with an agreement on nature similar to the Paris Agreement for climate change. What is needed are clear targets, large-scale political buy-in, clear roadmaps for how to achieve these targets and a clear understanding of what this means for businesses.

Explicit recognition of the value of natural capital – by governments and companies is the need of the hour and conferences like the COP15 play a crucial role in helping achieve that.

In the same way that we have started to put a price on carbon, we need to value natural capital and embed it investment planning and decision-making in a way that nature-related impacts are given fair weight. That, in turn, would also boost the value of companies well-aligned to nature-friendly themes.

We also need to see recognition of the need for an expansion of investment in the bio-economy. This includes investment in nature-based solutions to mitigate climate change, but also wider nature-based materials and products that are more sustainable and can replace more damaging industrial alternatives.

The commercialisation of bio-based applications in fact presents a USD 4 trillion opportunity over the next 10-20 years2. We need a roadmap to unleash that potential and the type of comprehensive agreement that COP15 could provide would act as a guiding light for that.

Discover our Natural Capital strategy here

 

Sources

1 PWC, Nature is too big to fail (2020)
2 McKinsey Global Institute (2020)

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