Biodiversity and Nature-related Disclosures

BIODIVERSITY AND NATURE-RELATED DISCLOSURES

4. WHAT’S NEXT FOR GOVERNMENTS?

I n addition to backing business-led frameworks such as the TNFD , and enforcing regulations that prevent biodiversity loss and ecosystem destruction, governments can also participate through innovative climate finance mechanisms that actively facilitate net-positive projects. A few of these mechanisms are listed below. Sovereign debt: Linking biodiversity gains to the cost of a government’s sovereign debt is expected to become a more common approach in the coming years, as more emerging countries look to secure cheaper funding to invest in climate and nature. For instance, in 2022, Chile became the first country to issue a sovereign sustainability-linked bond, raising US$2 billion to help fund its climate goals. Ecuador is also holding talks with banks and nonprofits to reach a deal that would refinance about $800 million of its debt more cheaply.10 These efforts can be focused specifically on biodiversity-positive endeavors. Blue bonds. Blue bonds work similarly than traditional bonds but differ in that the issuing entities must use the resources generated for the conservation of marine (or blue) ecosystems. The conservation of oceans is usually linked to the protection or restoration of habitats and biodiversity. As an example, Philippine lender BDO Unibank raised US$100 million in May 2022 to “help prevent marine pollution and preserve clear water resources”.11 Biodiversity-related credits/offsets. Valuing nature through the generation of credits or offsets is still in its infancy, yet there are already some frameworks such as the Climate, Community & Biodiversity Standards that can be applied to any land management project that delivers climate, community, and biodiversity benefits.This mechanism works in a similar fashion to carbon compensation credits or offsets. Biodiversity-specific taxes. Another option for governments to help finance biodiversity efforts is to levy a special tax to companies responsible for causing damage to ecosystems and biodiversity, to help pay for that damage to be restored. In some countries, it can be called a compensation tax (for instance, Mexico has a law that mandates companies to compensate for the environmental damage they cause through project development, although it has not been enforced), whilst other countries/states prefer to use the money collected to recycle it into the general economy. The EU Nature Restoration Law is a good example of how the European Union requires member states revive forests, wetlands, and other landscapes marred by human development. See Table 1 in the Appendix for a complete list of the multiple standards and frameworks that are meant to tackle this issue through government- and private-led efforts.

10Reuters, “Ecuador reaches deal with China to restructure debt” (2022), Link. 11Binnie, I., et.al, “Factbox: Biodiversity finance options grow, but pace of investment still slow”, Reuters (2022), Link.

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February 2023