We tend to assume that biodiversity finance solutions will have only positive impacts, but this may not necessarily be the case. Imagine the impact that removing an agricultural subsidy can have on the income of farmers, or an increased entrance fee on tourism development of a region. To prevent adverse impacts resulting from implementing finance solutions, social and environmental safeguards should be in place. The concept of safeguards emerged in the 1990s, spearheaded by organizations like the World Bank, to prevent potential negative social and environmental impacts from major investments in infrastructure, agriculture and similar projects. The concept has evolved over time, from ‘do not harm’ and ‘compliance’ approaches, to identifying areas for co-benefits across SDGs. One area where safeguards have been more developed is REDD+.
Environmental safeguards generally follow the mitigation hierarchy, and its goals include:
Safeguards in biodiversity finance are thus measures for maximizing the protection of biodiversity and people’s livelihoods, while minimizing negative impacts or, preferably, producing co-benefits instead. Under the CBD framework, countries have committed to applying safeguards to all biodiversity finance mechanisms, as formally agreed at CBD COP 12 in Korea in 2014.
- aThe role of biodiversity and ecosystem functions for local livelihoods and resilience, as well as biodiversity’s intrinsic values, should be recognized in the selection, design and implementation of biodiversity finance solutions.
- bRights and responsibilities of actors and/or stakeholders in biodiversity finance solutions should be carefully defined in a fair and equitable manner, with effective participation of all actors concerned, including the prior informed consent or approval and involvement of indigenous and local communities, taking into account the Convention on Biological Diversity and its relevant decisions, guidance and principles and, as appropriate, the United Nations Declaration of the Rights of Indigenous Peoples.
- cSafeguards in biodiversity financing mechanisms should be grounded in local circumstances, be developed consistent with relevant country-driven/specific processes as well as national legislation and priorities, and take into account relevant international agreements declarations and guidance, developed under the Convention on Biological Diversity and as appropriate, the United Nations Framework Convention on Climate Change, international human rights treaties and the United Nations Declaration of the Rights of Indigenous Peoples, among others.
- dAppropriate and effective institutional frameworks are of utmost importance for safeguards to be operational and should be put in place, including enforcement and evaluation mechanisms that will ensure transparency and accountability, as well as compliance with relevant safeguards.
Which finance solutions require attention for safeguards? All. However, the degrees of application safeguards and due diligence on risks vary. Cost-benefit analysis and impact considerations are similarly differently measured across solutions. Some—e.g. a tax reform—would not require the compliance with safeguards but must be recommended only after their impact is assessed, e.g. on farmers’ income. Instead an impact investment in a certain area would require a projectspecific assessment in line with UNDP or other guidance material. Several organizations, public agencies in countries where BIOFIN is implemented, have frameworks that can be used as reference. Some are legislated, requiring the conducting of strategic or environmental impact assessments. UNDP has developed a system of screening and managing social and environmental impacts that can be applied to projects and initiatives above a certain value threshold.
Any finance solution with potential impact on areas where indigenous groups or vulnerable groups reside or may significantly impact nature and ecosystems requires attention, for example investments in sustainable tourism in remote locations. These finance solutions must be developed in consultation with local communities and adapted to relevant cultural aspects and language.
While the BFP should have screened all finance solutions to ensure there is a positive impact on biodiversity, it is useful to continue monitoring this impact. Several solutions, for example generic green lending facilities, may bring about some good, but not impact conservation. The ultimate aim is to improve the state of biodiversity, not to increase biodiversity finance for its own sake. This is important when teams look at opportunities for financing under climate change, renewable energy and extractive industries.
Safeguards as a Finance Solution
Applying biodiversity safeguards in the financial sector or other investment operations is a finance solution on its own. The application of biodiversity safeguards or the promotion of standards that include biodiversity standards (e.g. the Equator Principles) will ensure biodiversity is not negatively affected by investments and that opportunities for positive impacts are explored. Examples include the integration of biodiversity safeguards in green bonds, energy funds or carbon offset schemes. BIOFIN Indonesia is working to suggest biodiversity safeguards for investments under a sovereign Green Sukuk.