New ENCORE biodiversity module enables banks and investors to analyse their potential impact

New ENCORE biodiversity module launched today by the Natural Capital Finance Alliance a collaboration between the UN Environment Programme World Conservation Monitoring Centre, the UN Environment Programme Finance Initiative and Global Canopy, enables banks and investors to analyse the potential impact of their financing and investment activities in agriculture and mining on biodiversity loss, in particular species extinction and the loss of ecological integrity.Financial institutions face escalating risks from nature loss. US$44 trillion of economic value generation, over 50% of global GDP, is moderately or highly dependent on nature and its services, but the world’s ecosystems have declined by 47% globally on average compared to their earliest estimated states, with 1 million species at risk of extinction. This creates material risks and opportunities for banks, asset owners and asset managers, as they invest in and lend to companies facing increasing physical, market, regulatory and reputational threats associated with biodiversity loss.Biodiversity loss is fast rising up the global policy agenda with an ambitious post-2020 global biodiversity framework expected to be agreed by governments in Kunming in October 2021. Momentum is building and leading financial institutions are increasingly taking biodiversity into account, seeking ways to align financial flows to global biodiversity goals. Over 30 financial institutions took a pioneering role participating in the development of the ENCORE biodiversity module.The new module lies at the cutting-edge of sustainable finance, allowing financial institutions to take immediate action, activate stakeholder engagement, and transition their portfolios towards a nature-positive future. Banks and investors can use the module to map their current exposure, and explore future scenarios, identifying potential pathways to increase positive impacts within agricultural and mining portfolios, as well as transition mining portfolios to a low energy future. The module provides guidance on company engagement, enabling financial institutions to work with stakeholders in high-priority areas to adapt production practices with the aim of making them nature-positive.

Banks and investors can use the module to map their current exposure, and explore future scenarios, identifying potential pathways to increase positive impacts within agricultural and mining portfolios, as well as transition mining portfolios to a low energy future.

The ENCORE biodiversity module is an extension of the free-to-use, online ENCORE tool (‘Exploring Natural Capital Opportunities, Risks and Exposure’) which assists the finance sector in visualising the links between the economy and nature. ENCORE allows banks, investors and insurers to identify nature-related risks, opportunities and exposure in their activities by setting out how each industry and sub-industry depends and impacts on nature. The ENCORE tool and biodiversity module are available by signing up here.“Financial institutions are increasingly aware that biodiversity loss is an urgent issue they must tackle. The challenge has been to gain a more granular understanding of how biodiversity risks and opportunities show up in specific portfolios. Now, financial institutions can use the new module to understand the biodiversity risks and opportunities in their portfolios; they can prevent or account for the negative impacts on nature, while directing investments to better outcomes for people and planet,” Corli Pretorius, Deputy Director, UN Environment Programme World Conservation Monitoring Centre.“The ENCORE biodiversity module lies at the cutting edge of sustainable finance, allowing financial institutions to take material action to pivot the real economy towards a nature-positive future. Replenishing and rebuilding biodiversity is an urgent global priority and those financial institutions which show market leadership by being early movers may have a considerable competitive advantage,” Eric Usher, Head of the United Nations Environment Programme Finance Initiative.

“Data is key to unlocking finance sector action on biodiversity loss, and the missing link that financial institutions tell us they urgently need to shift their financing and investment away from nature-negative activities and towards nature-positive ones.”

“Data is key to unlocking finance sector action on biodiversity loss, and the missing link that financial institutions tell us they urgently need to shift their financing and investment away from nature-negative activities and towards nature-positive ones. The ENCORE tool has already been used by key finance sector players, like the Dutch Central Bank, to explore nature-related risks across entire markets. Now the new ENCORE biodiversity module enables individual financial institutions to take further targeted action in sectors like agriculture and mining which have high impacts and dependencies on nature,” Niki Mardas, Executive Director of Global Canopy.“Switzerland is committed to becoming a leading sustainable financial market place. With the ENCORE tool the financial sector globally is provided a unique tool with a powerful lever for halting biodiversity loss. We are proud to be supporting such critical efforts towards aligning financial flows with biodiversity targets,” Karine Siegwart, Vice-Director of the Swiss Federal Office for the Environment. All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.