COP15: New tool revealed to track finance flows for biodiversity alignment

Published 23:29 on December 10, 2022  /  Last updated at 23:29 on December 10, 2022  /  Biodiversity  /  No Comments

A new tool that tracks and rates $31 trillion in global financial flows for their biodiversity impact was launched on the sidelines of the UN's COP15 biodiversity summit on Saturday, touted as a first step for broad-based financial realignment towards nature-positive outcomes.

A new tool that tracks and rates $31 trillion in global financial flows for their biodiversity impact was launched on the sidelines of the UN’s COP15 biodiversity summit on Saturday, touted as a first step for broad-based financial realignment towards nature-positive outcomes.

Cross-stakeholder group NatureFinance announced its Alignment Tool in Montreal as global governments continue to hash out their differences on the draft post-2020 Global Biodiversity Framework (GBF).

“The nature finance alignment tool helps us look at private and public financial flows, and can assess which of these flows are nature-positive,” said Canada’s Minister of Environment and Climate Change Steven Guilbeault at the launch event.

“Closing the biodiversity finance gap is one of the key pieces of the puzzle,” he added, noting that the tool is the first of its kind to help build much needed transparency, while also providing a sample methodology for ranking nature impacts.

Goal D of the GBF seeks to ensure adequate means of implementation through resource mobilisation, with a bracketed option to ensure all “public and private financial flows (are) aligned with the 2050 Vision” to live in harmony with nature.

In a sense, the GBF divides its finance “asks” into two, with the first being direct transfers from developed to developing countries to help close the needs gap estimated at over $700 billion per year, and the second to mainstream biodiversity considerations into all public and private financial flows.

The dual goals have been framed as “finance for green, and greening finance” by some observers.

“I don’t need to tell you how critical it is for [parties] to build consensus on resource mobilisation for the implementation of the framework,” said Elizabeth Mrema, executive secretary of the Convention on Biological Diversity secretariat.

“The challenge now is how can we measure the level of alignment of financial flows? … It requires the convergence, and the common adoption, of credible science-based methodologies, which is why this data finance alignment tool has such great importance at this time.”

The alignment tool provides a score of 1-10 for each financial transaction in its database, aiming to shed light on which financial flows are deemed good or bad for biodiversity.

Government subsidies to unsustainable fishing or agriculture practices, for example, or private-sector flows towards harmful mining, would both be given a negative score, for example.

On the other end of the spectrum are finance flows that result in positive biodiversity impacts, such as those to sustain protected areas.

Of the total financial flows analysed, the average alignment score was 6.4, implying a slightly positive alignment. However, only 13% of all flows assessed demonstrated “high alignment” with nature-positive outcomes.

The most misaligned countries for private-sector finance flows were Australia and Malaysia, followed by South Africa, China, and India, the data showed.

“What’s so exciting about this development at this moment in time, is that this tool is the first attempt to bring this kind of insight at scale to the market,” said Vian Sharif, CEO of biodiversity-footprinting company NatureAlpha.

The tool’s project team hopes that by tracking and proving transparency around finance flows, biodiversity-positive realignment can begin.

“National, international and corporate financial actors [need] to assess their degree of alignment and support the changes needed to put them on the path to a nature-positive, net zero future,” the group said.

At $31 trillion currently, the tool tracks roughly around 30% of total finance flows worldwide.

However, the data is heavily skewed towards the public sector, with only $3 trillion of private-sector finance flows captured in the dataset.

NatureFinance acknowledges that data is currently incomplete, and that the initiative needs to ramp up to capture greater volumes.

“What we need is more public data, and private data, more granular data, and for you to tell us how you can help us do that,” said Jeremy Eppel, principal at NatureFinance.

He said that the team only started building the tool some nine months ago, realising there was a transparency gap in terms of real-world data of where financial flows are directed.

Eppel added that while the tool was developed at speed, his team will be working to strengthen it going forward.

By Katherine Monahan – katherine@carbon-pulse.com

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