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Finance & Investment
New Tool Helps Banks, Investors Take Immediate Action to Reverse Biodiversity Loss

New ENCORE biodiversity module by the Natural Capital Finance Alliance enables banks and investors to explore their portfolio’s impact on species extinction risk and ecological integrity — particularly in terms of agriculture and mining.

A new ENCORE biodiversity module by the Natural Capital Finance Alliance — a collaboration between the UN Environment Program (UNEP) World Conservation Monitoring Centre, the UNEP Finance Initiative and Global Canopy — enables banks and investors to analyze the potential impact of their investment activities in agriculture and mining on biodiversity loss, with focus on species extinction and loss of ecological integrity.

The ENCORE biodiversity module is an extension of the free, online ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) tool, launched in 2018 — which assists the finance sector in visualizing the links between the economy and nature. Since then, more and more evidence — including startling research from CDP and the UK government (to name a few) — has reiterated the escalating risks from nature loss that financial institutions face in the coming decades. US$44 trillion of economic value generation (over 50 percent of global GDP) is moderately or highly dependent on nature and its services; but the world’s ecosystems have declined by 47 percent 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, and asset owners and managers, as they invest in and lend to companies facing increasing physical, market, regulatory and reputational threats associated with biodiversity loss.

Momentum is building and leading corporations and financial institutions are increasingly taking biodiversity into account, seeking ways to align financial flows to global biodiversity goals: Kering, for example, has committed to having a net-positive impact on biodiversity by 2025; the Science Based Targets Network recently issued interim guidance showing companies how to protect and restore nature in line with science; and just last month, HSBC, WRI and WWF launched their $100 million Climate Solutions Partnership, of which projects that protect and restore biodiversity are a key focus.

“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,” says Niki Mardas, Executive Director of Global Canopy. “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.”

Developed in partnership with over 30 financial institutions, the ENCORE biodiversity module lies at the forefront 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, as well as identifying potential pathways to increase positive impacts within agricultural and mining portfolios. 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.

“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,” says Corli Pretorius, Deputy Director of the UNEP World Conservation Monitoring Centre. “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.”

The ENCORE tool and biodiversity module are available by signing up here.