What is it?
Following the COP 21 Paris Agreement to limit the rise in world temperature to 1.5°C, the impact from financial markets gave rise to new challenges and opportunities. It is not about the “business case for sustainability.” Rather, the focus is on the “sustainability case of business.” In other words, the Finance sector is expected to deliver a positive impact. Indeed, there is a growing acceptance among the financial sector that the ambitious SDGs cannot be achieved without financial support from all players.
Both in private and public markets, investors can be the drivers for change. Via coalitions and funds allocations, they can push companies to better their products, processes, and strategies. Ultimately, this may lead to a positive impact on the ecosystem and biodiversity. Incorporating impact-related aspects in this framework requires contemplating both positive & negative externalities.
For instance, biodiversity-positive investments include funding the enhancement of existing biodiversity and/or restoring biodiversity to a determined previous state.
Other types of investments can reduce or avoid negative impacts, such as addressing economic activities that harm biodiversity and ecosystems or investing in interventions to prevent future harm. However, these investments must be critically assessed to avoid remediation, and the analysis must consider the whole picture.
It is vital to assess the entire impact, thus, total investments impacting biodiversity and ecosystems.
Companies have a wide array of environmental impacts, depending on their activities, such as through:
Investing in forest-risk sectors (beef, palm oil, pulp & paper, rubber, soy, and timber) leads to increased greenhouse gas emissions, drought, land infertility, soil erosion, flooding, biodiversity loss, etc.
Oil & gas exploration and production that lead to land alterations, habitat destruction, biodiversity loss, among others.
Sourcing and depleting marine life, causing aquatic ecosystem destruction.
If you are unsure about debt financing and equity investments, please refer to this guide.