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COP16 to challenge governments to deliver on Biodiversity Plan

EOS Insight
11 October 2024 |
Ahead of the Biodiversity COP16 in Colombia in late October, Sonya Likhtman, Ingrid Kukuljan, and Gemma Corrigan set out our expectations of policymakers and highlight the key developments to watch out for.

Fast reading

  • We expect to see progress towards the successful and comprehensive implementation of the Biodiversity Plan at COP16.
  • Resource mobilisation and scaling up financing for nature from all sources will be key focus areas for negotiations.
  • Financial institutions will address their nature-related risks and impacts through underlying changes at the companies they invest in or lend to.

The dramatic decline of biodiversity within our lifetimes is one of humanity’s most pressing issues. According to the International Union for Conservation of Nature (IUCN) red list of threatened species, 28% of assessed species are threatened with extinction. With nature under severe stress from pressures including habitat destruction, climate change and pollution, governments will be challenged to come up with plans to prevent further loss of critical species later this month at COP16.

The financial materiality of biodiversity loss and the decline of ecosystem services, including the systemic risk posed to the global economy, is well documented. Investor portfolios, bank loan books, and company business models are increasingly exposed to physical, regulatory, financial, and reputational nature-related risks, meaning that there is a fiduciary duty to address biodiversity loss.

The Biodiversity COP15 in Montreal in December 2022 led to the agreement of the Kunming-Montreal Global Biodiversity Framework (also called the Biodiversity Plan), with four goals for 2050 and 23 action-oriented targets for 2030. Federated Hermes Limited (FHL) joined the Finance for Biodiversity Foundation delegation to COP15 and contributed to the finance sector’s voice. You can read here about our involvement, what was achieved, and the implications for investors and companies.

The Biodiversity COP16 will occur in Cali, Colombia between 21 October and 1 November 2024. FHL will again attend as part of the Finance for Biodiversity Foundation delegation in its capacity as co-chair of the Public Policy Advocacy working group. There will be a second Finance and Biodiversity Day at COP16 on 28 October, following the success of the first in Montreal. Private sector attendance is expected to be high again, as companies and financial institutions increasingly recognise their role in halting and reversing biodiversity loss in this decade – the mission of the Biodiversity Plan.

Making progress

Since COP15, nature and biodiversity have remained critical focus areas for company stewardship, investment and policy engagement. EOS at Federated Hermes Limited has continued to increase engagement with companies on nature and biodiversity (see pages 20-22 of the latest Annual Review). EOS has also welcomed the opportunity to increase collaborative engagement on nature-related topics, including through Nature Action 100, FAIRR, PRI Spring, the Ceres Valuing Water Finance Initiative, the Investor Initiative on Hazardous Chemicals, and the Finance Sector Deforestation Action initiative.

After beginning to integrate nature-related disclosures into climate reporting in 2023, FHL became an Early Adopter of the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations in 2024. FHL has continued to enhance its own practices, including evolving its approach to deforestation due diligence (see the latest Deforestation Report).

FHL’s proprietary Biodiversity Impacts database, which is used for the Biodiversity Equity Fund, has featured in numerous industry conferences and by the TNFD, showing that data challenges should not impede action. FHL and EOS continue to play an active role in various industry initiatives, including the Finance for Biodiversity Foundation, the Investor Policy Dialogue on Deforestation, the Sustainable Markets Initiative, and the International Advisory Panel on Biodiversity Credits.

We believe the role of business and finance in addressing biodiversity loss must remain on the agenda at COP16.

Expectations for COP16

FHL and EOS expect to see progress towards the successful and comprehensive implementation of the Biodiversity Plan at COP16. Governments should submit National Biodiversity Strategies and Action Plans (NBSAPs) ahead of COP16 to clearly articulate their plans for translating the goals and targets of the Biodiversity Plan into policy, regulation, and action by all stakeholders at the national level.

We believe the role of business and finance in addressing biodiversity loss must remain on the agenda at COP16. Resource mobilisation and scaling up financing for nature from all sources will be key focus areas for negotiations. As articulated in the Finance for Biodiversity Foundation position, we hope that discussions about resource mobilisation will be complemented by an ongoing focus on aligning public and private financial flows with biodiversity goals and targets.

The concept of “aligning financial flows” – reducing financial flows that are currently harming nature and increasing financing for nature – goes to the heart of the transition required across sectors of the real economy. The goal should be to mitigate the negative impacts on nature caused by companies’ operations and supply chains and increase companies’ contribution to biodiversity protection and restoration. Financial institutions will address their nature-related risks and impacts through underlying changes at the companies they invest in or lend to.

A paper by the Finance for Biodiversity Foundation, for which we were one of the lead authors, outlines recommendations for governments to implement the alignment of financial flows. Governments should enable and accelerate action from the private sector through measures such as nature-related disclosure requirements (eg making TNFD reporting mandatory), combined climate and nature transition plans, action by central banks and supervisors, and incentive structures that encourage and support companies to reduce their nature-related risks and impacts.

We also hope to see a discussion at COP16 about biodiversity credits and a robust market mechanism to help address the lack of financing for nature at scale. When used alongside a transformation in business practices and following the mitigation hierarchy, biodiversity credits could be a viable tool for biodiversity protection and restoration, including for the blue economy (maritime industries), in “nature-positive” supply chains, and across developing countries.

Other important 2030 targets, which FHL and EOS expect to be addressed in NBSAPs and progressed at COP16, include restoring 30% of degraded ecosystems; conserving and managing at least 30% of land, freshwater and ocean ecosystems; addressing the pollution risks from pesticides and highly hazardous chemicals; ensuring sustainability and long-term resilience of agriculture, aquaculture, fisheries and forestry; implementing nature-based solutions to align climate and biodiversity action; and halving global food waste. Organisations such as the IUCN and WWF have published their positions and priorities for COP16.

The theme for COP16 is “peace with nature”, although a recent report by Global Witness found that in 2023, Colombia had the highest number of environmental activists killed for the second year in a row. It is a stark reminder that action on nature and biodiversity should be accompanied by a close focus on human and Indigenous rights.

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