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Biodiversity Risks & Opportunitiesin the Financial SectorA scoping studyIvo Mulder (IUCN)www.iucn.orgFinancialsupport:
Introduction 140% increase CSR reporting FIsin G250 in 3 years (KPMG, 2005) Biodiversity: 30% loss comparedto 1970 (WWF Living PlanetIndex) LiabilitiesSeveral direct and indirect driversleading to degradation & loss(Millennium Assessment)Setting in motion a wheel ofseveral factors that contribute toand amplify each other leading toincreased corporate relevance ofbiodiversity lossFIs need to understand their(indirect) impacts and how thisrelates to biodiversity risks andopportunities5 April 2007Increased scrutinysupply chain andpressure groups(e.g. NGOs)Concerns fromPolicy makers/ legislationGrowingrelevance ofbiodiversityto businessesIncreaseddependence onecosystemservicesworkshop UNEP FI Biodiversity andEcosystem Service workstreamIncreasedInvestorexpectationsShifting consumerpreferences2
Biodiversity risksAn initial review providedsome cases on evidence of thebusiness case: individual,stand-aloneIndirect impacts Loans Bonds/EquityDirect risks FIs ReputationalriskRisks Reputational risk Legal & social licenseto operate Disruption of supply chain /increased costs Vulnerability to floods andother natural disasters5 April 2007Financial Institutionsworkshop UNEP FI Biodiversity andEcosystem Service workstreamImpact sectorsEcosystem dependent sectorsCorporate Value Chain Interview survey: 75% ofrespondents believed thereare reputational risks from theperspective of the financialsector. Other risks mentioned:default risk, reducedshareholder value, regulatoryconstraints (a.o.)Influences oncompetitiveness Indirect risks FIs Credit risk Shareholder valueEcosystemsDirect impacts Buildings Waste Energy use3
Integrating biodiversity issues inbusiness operations CitigroupXXXDeutsche BankXXGoldman SachsXXXJPMorgan ChaseXXRabobankXXXRoyal Bank ofCanadaXXXWestLBXXXWestpacXXXworkshop UNEP FI Biodiversity andEcosystem Service XXForestryBarclaysEnergyXOil & GasXAgriculturePlantationsXSeafood5 April 2007ABN AMROSector-policiesClimateDifficult to extrapolate to other banksas most of these banks can beconsidered race-leaders within theirsectorEP adoption Rabobank, but also HSBC and ABNAMRO appear to be on-top-of the issue( or CSR in general?)Company nameEnv. RiskStandard Biodiversity captured by differentterms, also depending on types ofsector (e.g. tropical moist forest,critical natural habitat, highconservation value areas)GeneralCSR report Assessing 11 banks on state ofintegrating biodiversity-related policiesinto business operationsXXXXXXXXXXX4X
Financial SectorCredit lendingRatingCostingPricingRisk identification Risk evaluationSector-specific international /national accepted standards: Conventions Industry guidelines Benchmarks Industry bodies Credit RatingAsset ManagementMonitoring InsuranceFinancial viabilityWorkoutExclusioncriteriaRisk controllingExisting RiskManagement ProceduresAccount for potential biodiversity risk inrisk management processBest-inclassVotingShareholdermeetings (Public)pensionsAmong other Overview available biodiversitytools. For example: CERES principles Biodiversity Benchmark Equator Principles VBDO Biodiversity Quick ScanPotential significant impacts expected onecosystems/biodiversitySpatial biodiversity impact analysis toolNo potential significant impact expectedon ecosystems/biodiversityNo specific inclusion of biodiversityconsiderations necessary in riskmanagement process5 April 2007workshop UNEP FI Biodiversity andEcosystem Service workstream5
Biodiversity opportunities Identifying risks at an early stage can create business opportunities A forthcoming study by IUCN and Shell identifies a number of biodiversity businessopportunities/markets, among other: Biocarbon, certified agricultural products,biofuels, ecotourism. Innovative equity products: e.g. a pilot on eco-securitization by HendersonInvestments and IFC Due diligence and advisory services: advise how to go about biodiversity sensitiveprojects/investments. Government-induced opportunities (e.g. stimulate sustainable investment throughtax advantages for private investors): e.g. Holland’s Green fiscal advantageAmong other 5 April 2007workshop UNEP FI Biodiversity andEcosystem Service workstream6
Recommendations Limit awareness yet in financial sector on biodiversity risks. Quantify business case by means of athorough study on evidence sector-specifically 1) high direct impact; 2) dependency on ecosystemservices; 3) considerable impact through supply chains Integrate biodiversity issues in such a way that it becomes practical on a day by day basis forclient relation managers, credit analysts, fund mangers, etc (easy to understand, easy to workwith)Identify sector-specific biodiversity indicators (based on accepted international/nationalstandards)Update/training of staff in order to build capacity Dealing with biodiversity in different segments of the financial sector (e.g.)Insurance sector: Linking climate change to changes in ecosystems and what this means forthe insurance sector (e.g. increase in severe weather events and reduce ability by coast toretain them: property finance)Governments: Relatively less attention has been placed on public pension funds, bonds, etc.There is a special obligation from a government’s perspective.Relatively less focus so far on Credit Rating Agencies. Identify if and how biodiversity issuescould be integrated in scoring assessments.Biodiversity impact indicators as a complement for the Biodiversity Benchmark (Insight &FFI)?5 April 2007workshop UNEP FI Biodiversity andEcosystem Service workstream7
The business case for biodiversity from a financial sector perspective20Number of respondents18Other stakeholders1614Financial %8%8%05 April 2007workshop UNEP FI Biodiversity andEcosystem Service workstream8
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Announces 20 Billion Environmental InitiativeCHARLOTTE, N.C., March 6 /PRNewswire/ -Bank of America Corporation announced today a 20 billion initiative to support the growth ofenvironmentally sustainable business activity to address global climate change. Bank of America's tenyear initiative encourages development of environmentally sustainable business practices throughlending, investing, philanthropy and the creation of new products and services.Bank of America will commit 18 billion in lending, advice and market creation to help commercialclients finance the use and production of new products, services and technologies: Commercial Real Estate Banking: Corporate & Investment Banking: Carbon Emissions Trading Environmental Lending ConsiderationBank of America currently is developing a set of products for individuals who consider theenvironmental impact of their purchasing decisions and want to offset or minimize their carbon emissions. The bank willannounce the launch of the following new products in the next year: Eco-friendly Credit Card WorldPoints Rewards for the Environment The Green Mortgage Program Environmental Home Equity Program Timberland Investment SolutionsSource: http://newsroom.bankofamerica.com/index.php?s press releases&item 76975 April 2007workshop UNEP FI Biodiversity andEcosystem Service workstream10
Identifying risks at an early stage can create business opportunities A forthcoming study by IUCN and Shell identifies a number of biodiversity business opportunities/markets, among other: Biocarbon, certified agricultural products, biofuels, ecotourism. Innovative equity products: e.g. a pilot on eco-securitization by Henderson
