The financial sector can play a significant role in biodiversity conservation including:
- The management of biodiversity risks in lending and investment decisions, and
- The setting up of new innovative financial mechanisms for pro-biodiversity businesses and biodiversity conservation areas.
For example, the study “Biodiversity offsets and the mitigation hierarchy: a review of current application in the banking sector”, introduces some interesting findings regarding the management of biodiversity risks:
- The finance sector is at a relatively early stage in understanding, assessing and managing biodiversity risks,
- Bank policy frameworks and procedures seem to lack a broader, strategic consideration of biodiversity risks, and
- Whilst the implementation of a biodiversity management framework is largely focused at the asset level, the application of the mitigation hierarchy and offsets is in its infancy.
Further, financial valuation of biodiversity-rich areas and areas that provide key ecosystem services can be achieved in various ways – for instance as direct ‘asset value’ or through a ‘return on investment’. With regard to asset value, investing in biodiversity-rich areas requires a long-term commitment to ensure continuity of value. Opportunities for ‘returns on investment’ include:
- sustainable agriculture and forestry,
- natural resources management (e.g. sustainable timber), and
- carbon credits
For institutional investors to invest in certain areas, it is crucial to assign a certain value to these areas and translate that into a concrete financial product. In general, the market for these financial products needs a push. Therefore, it is the right timing to intensify and extend the dialogue to the international level, involving the relevant stakeholders. One of the main obstacles to the development of pro-biodiversity businesses has been the lack of dedicated funding sources. Regarding financial institutions, there is a need for targeted information about the existing project opportunities. Also, capacity building to develop bankable biodiversity-relevant projects that comply with bank investment criteria is needed.