Two sets of guidance for financial institutions on setting nature-related targets will launch this year, led by the UN Environment Programme Finance Initiative (UNEP FI) and the Finance for Biodiversity foundation (FfB).
UNEP FI’s guidance launching next month will focus on banks, followed by FfB’s guidance for asset owners and managers in December, representatives said.
The FfB guidance will initially cover nature-related ‘initiation targets’ for building knowledge at board and staff level, impact assessments, and implementing Taskforce on Nature-related Financial Disclosures (TNFD).
Further guidance on targets for sectors, engagement, and portfolio coverage will follow in the first half of next year, it said.
The release from UNEP FI for banks will first address targets for internal operations, before expanding later to include impacts, according to Thao Fabregas, co-chair of the organisation’s working group on the topic.
SETTING TARGETS IN 2024
The 153 signatories of the FfB pledge, including some of the biggest names in finance, have committed to disclosing targets to reduce negative impacts on biodiversity by 2024 at the latest.
Anita de Horde, executive director of FfB said: “We need to have some guidance for financial institutions to help them get started.”
“We are aligning [the guidance] with the principles of Science Based Targets Network (SBTN), TNFD, and net zero frameworks,” de Horde told Carbon Pulse on the sidelines of the EU Business and Nature Summit in Milan.
UNEP FI and FfB first announced cooperation around nature targets in April 2022. Although SBTN has published target guidance for corporations, an equivalent does not yet exist for financial organisations.
NO NATURE POSITIVE FOCUS
FfB’s guidance for asset owners and managers will not focus on reaching nature positive by 2030, de Horde said. The ‘nature positive’ term has been mooted to take on a similar role to ‘net zero’ in carbon emissions despite the lack of a globally agreed definition.
“Claiming that you’re nature positive could be interesting as a company, but as a financial institution, it’s much more difficult to claim that all the companies that you have in your portfolio are nature positive.”
“Companies in, for instance, the food sector will always have some negative effects,” said de Horde. Instead, the guidance will ask investors to target drivers of nature loss such as water use and pollution, she said.
SECTOR GUIDANCE
FfB will publish guidance on setting targets for 10 sectoral categories with the highest biodiversity impacts. Earlier this year, the foundation released a study of 250 listed companies on the MSCI World Index, finding that ‘food, beverage and tobacco’ to be the most damaging sectors.
The foundation will produce guidance for this category and nine others:
- Materials
- Energy
- Capital goods
- Consumer staples distribution and retail
- Utilities
- Pharmaceuticals, biotechnology and life sciences
- Health care equipment and services
- Household and personal products
- Automobiles and components
“To develop a sectoral approach is very important for our framework, in order to develop portfolio reference targets,” de Horde said.
“We need to make setting targets on nature as practical as possible for investors. But the challenge is that it needs to be science-driven in order to contribute to the overall vision of the global biodiversity framework to reversing nature loss before 2030.”
The detail on the forthcoming nature-related guidance was largely commended by Nicolas Poolen, senior manager of nature positive finance at WWF, for enabling financial institutions to get started with setting targets despite the lack of metrics.
However, he also noted they lacked detail on policies around excluding companies who fail to address their biodiversity impacts from an investment portfolio.
By Thomas Cox – t.cox@carbon-pulse.com
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