Day 2 of pan-regional dialogues: working with finance sector no longer an option – it’s a must

By Sonika Agarwal
By Sonika Agarwal

The second day of BIOFIN's online pan-regional dialogue, joined by experts from Asia, Pacific, Eurasia, Europe, the Arab States, Africa Latin America and the Caribbean, triggered dynamic discussions around how governments, private sector, and civil society can innovate for biodiversity protection and restoration with a major focus on the finance sector.

Emerging areas: financial disclosures and insurance

Malika Bhandarkar, UNDP’s Stakeholder Engagement Lead for the Taskforce for Nature-related Financial Disclosures (TNFD) Secretariat presented their work and priorities, outlining how valuing risk from biodiversity loss is now a global top priority for the finance sector. As such, the TNFD has already been opening doors with some of the biggest private-sector players in the world and help them better understand how incorporate nature-related risks and opportunities into their strategic planning, risk management and asset allocation decisions.

Faraz Amjad from UNDP's Insurance and Risk Finance Facility (IRFF), then discussed how they are working to protect vulnerable communities through insurance. Economic losses from disasters cost 77 poorest countries an average of US$29 billion annually – with only 3% covered by insurance, forcing many to bear response and reconstruction expenses alone, or rely on aid. In 2020 alone, 980 disasters caused by natural hazards cost the global economy over US$210 billion. Following the COVID-19 crisis, 150 million people have been pushed back into poverty.  

Insurance and risk financing provide a critical safety net, protecting assets, lives and livelihoods from the impact of crises. The work of the IRFF is not limited to insurance, using instead risk analysis as the starting point. Country participants indicated the major risks to biodiversity included extreme weather events, overexploitation of biodiversity resources and human wildlife conflicting, with extreme weather events strongly increasing in recent years.

A green recovery

With countries across the world reeling from the economic impacts of COVID-19, governments are seeking solutions to reignite economies. At a time when the health of the planet is in balance, these solutions should ensure that the world is put on a greener, more sustainable path. As such, experts from across Africa came together to see how this can be done.

Rwanda, South Africa and Uganda discussed the important role both tourism and the finance sector plays in recovery strategies in Africa. In Rwanda, Emmanuel Nsabimana from the Rwandan Development Board discussed how conservation projects can be prioritized and supported by the National Tourism Recovery Strategy.

Rebecca Nabatanzi, Technical Advisor to the Ministry of Finance, Planning and Economic Development (MFPED) from Uganda delivered an analysis of how they are mobilizing resource to support the Uganda’s recovery plan while at the same time greening the finance sector, promoting eco-funding, green procurement, and biodiversity funding.

In South Africa, Flora Mokgohloa, BIOFIN National Coordinator at the Department of Environment, Forestry & Fisheries, discussed how they are using the tourism sector to raise money for livelihoods and nature. They carried out a financial needs assessment to clarify how much finance would be needed for their conservation areas to recover from the pandemic.

In a similar vein, BIOFIN Zambia presented how the country is setting up green bonds as a way to both support the economy and nature at the same time.

Unlocking the sector of the private sector for nature

Payong Srivanich, President of Krung Thai Bank in Thailand, explained how they launched in cooperation with UNDP-BIOFIN a crowdfunding campaign for the island of Koh Tao which recently won a global best practice award for Corporate Social Responsibility as a result. The campaign supported some 200 taxi boat and small fishing boat drivers in Koh Tao Municipality who were paid for 3 months to clean up the island’s beaches and coral reefs.

Mr Ney Villasenor,  Head of Government and Corporate Relations of UBX Philippines, shared the range of digital platforms currently deployed by UBX spanning payments, credits, and insurance. With 73 million Filipinos being active social media users, such platforms augur well for financial inclusion including for MSMEs engaged in biodiversity-positive businesses.

Katy Mathias from the Wildlife Conservation Society later shared an overview of the tools and methods they use for capitalizing trust funds for biodiversity - an area of vast potential for mobilising funds for nature. The number of such funds has continued to grow during the past years, with over 100 being operational currently. While contributions from the private sector to date have remained relatively modest, the funds expect these to be a much more important financing source in the years to come.

Sameer Shisodia from Rainmatter, an Indian fintech fund and incubator, described how they are trying to bridge the gap between what we intuitively understand but find lacking in economic models, capturing the reality of the ecological world.

Emerging opportunities to align financial flows from the finance sector to biodiversity

Experts from Latin American and the Caribbean illustrated how a multidimensional approach is necessary for working with the finance sector, one which encompasses many actors, products and financing mechanisms.

Mexico, Costa Rica, Ecuador and Cuba shared their work showing an array of opportunities to develop green financial products in the short term, include biodiversity-related criteria and taxonomy into financial regulations, support specific quantitative analysis on bank’s exposures to climate and biodiversity-related risks, work closely with central banks to gather information on natural capital and develop specific financial mechanism to promote women’s financial inclusion in biodiversity-related projects, such as the program in Costa Rica called “More Women More Nature”.

The Inter-American Development Bank presented an overview of the “Multilateral Bank Declaration: Nature, People and Planet” signed by over 10 development banks. The Declaration aimed at integrating nature into all operations promoting nature positive investments.

Some of the challenges highlighted by Mexico and Ecuador included working with a wide array of environmental, social and governance disclosure standards and frameworks, lack of available key performance indicators related to nature, gaps in terms of information and the quantification systems of ecosystem services, and the lack of knowledge (e.g., users and potential beneficiaries) on financial instruments.

Participants welcomed the work by the four countries and highlighted the opportunities that the Latin America and the Caribbean region offer to boost financial flows from the finance sector into biodiversity-positive investments and reduce potential risks and costs both for the finance sector as well as for biodiversity.