Green finance

[Green Finance Insights] Action on climate change pays off. Next up: Biodiversity.

By April 12, 2021 April 14th, 2021 No Comments

The alarm bell has rung for climate change – invest now in a net-zero economy and save costs

In recent weeks, hundreds of economists worldwide as well as the European Central Bank (ECB) and the Dutch National Bank (DNB) have called for more immediate and drastic climate action and policy. With their climate stress test, the ECB has found that there is a clear benefit to timely action as the investment needed to transition to a green economy is more than offset by the much lower costs to cover the physical risk. Prompt action pays off. Companies and societies at large already experience the negative effects of climate change, including failed harvests and damage to infrastructure. If we do not push for more effective action now, increased exposure to climate risk could substantially increase the probability of a company defaulting. This effect is amplified for the biggest polluting firms together with those in regions most vulnerable at risk, who could be exposed to up to four times as much climate risk as the average firm over the next 30 years.

The call for more ambitious climate action is becoming louder. About two-thirds of the economists surveyed by the New York University’s Institute for Policy Integrity indicate that the economic benefits from net-zero emissions by 2050 would outweigh the costs of achieving it, compared to just about half in 2015.

Biodiversity loss – the great looming threat for finance

We are very pleased to see that climate has become an integral aspect of modern economics and that the financial sector is stepping up to accelerate action on mitigating climate change. But there is another threat looming. A threat that has become increasingly visible for conservationists and people who work closely with our land and water, but which urgency still needs to be recognized as such by the financial sector at large: the unprecedented loss of biodiversity. Over half of global GDP depends on nature (WEF, 2020), and over a third of financial portfolios is highly or very highly dependent on biodiversity (PBL & DNB, 2020).

Hence, if the financial sector does not act now, it will have to pay for it later. We need the same call for action on biodiversity as for climate. And let it be a loud call, combining action for climate and biodiversity. We can never meet the climate targets if we do not strengthen our valuable ecosystems. Nature-based Solutions, both in urban areas as well as in the form of large-scale landscape restoration, are promising solutions to confront the greatest challenges of our time: biodiversity loss and climate change.

The examples are out there – start financing biodiversity now

There are promising opportunities for financing nature solutions. And the practical examples are already out there! Just look at the blueprint book that we have recently developed for WWF NL, showcasing inspiring examples of bankable nature solutions across the globe. Nature-based Solutions can work across sectors including agriculture, forestry, fisheries, energy, and real estate & construction. In September 2020, 26 financial institutions around the globe have shown a frontrunner status on the topic of biodiversity by committing to make a positive contribution to biodiversity through their activities and investments.

Now it’s time to materialize these commitments and to get the broader financial sector to act on reversing the trend of biodiversity loss. Take biodiversity into account when valuing an investment, ask businesses the right questions, and invest in green funds and projects. Yesterday is lost, but we can start moving as of today.