Finance Sector and Biodiversity Conservation

Best Practice Benchmarking

Outcome of a workshop by the European Union Business and Biodiversity Platform

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Background The EU B@B Platform has been working with the selected sectors to benchmark best practices in each sector with regard to the conservation of biodiversity. This document is the outcome of the EU B@B Platform sectoral workshops which were held at the European Commission premises in Brussels on September 13 (Food Supply and Extractive industry), September 14 (Agriculture and Forestry) and September 15 (Finance and Tourism). These workshops aimed to present and discuss case studies linked to this Sectoral Guidance document, and to present and discuss benchmarking methodologies towards designing the European Business and Biodiversity Award. This Sectoral Guidance document includes examples of best-practice guidance concerning the main risks, responsibilities and opportunities for companies in relation to nature and biodiversity conservation. It has been built upon existing guidelines and handbooks previously produced with business organisations and private companies, as well as other relevant materials. It also takes account of the EU nature legislation, notably biodiversity-relevant EU agreements and directives. This Sectoral Guidance Document is meant to provide companies with tools and methods, guidance and best practices already implemented to help them introduce biodiversity conservation into their strategies and operations.

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Summary The current document aims at providing guidance to the finance sector in Europe with regard to pro-biodiversity business opportunities and strengthening the role that the finance sector can play with regard to biodiversity conservation. The document summarizes the key findings resulting from a literature search, a collection of best practices and stakeholder input during a sectoral stakeholder workshop held in September 2010. At the moment, biodiversity is too abstract for most stakeholders in the finance sector to incorporate it into their core business and develop products to invest in biodiversity or opportunities deriving from it. The main reason given for this is the lack of accessible knowledge in a language that is comprehensible for the sector and the lack of communication with the environmental sector. In essence both sectors do not speak each other’s language and as such are unable to cooperate in developing sound biodiversity investment opportunities. To develop a biodiversity business case for the finance sector, it is therefore important to develop sources of knowledge and information for the sector in relation to biodiversity and financial instruments and products. To facilitate this process it would be good to link biodiversity to financial risk mitigation and other financial topics to make it more visible and comprehensible for the sector. Furthermore, awareness about the importance of biodiversity and possibilities for biodiversity investments amongst senior management and clients needs to be increased in order to create a supply and demand of biodiversity investments and other related products. Leadership in this field from both key stakeholders and the regulatory sector is necessary to raise the issue and incorporate biodiversity into long-term business thinking.

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Table of Contents 1. Introduction ..............................................................................................................................5

1.1. Background to the document – why a guidance document?............................................5 1.2. Purpose, scope and target of the document ....................................................................5 1.3. Nature and structure of the document ..............................................................................5

2. The finance sector, related sectors and biodiversity ...............................................................6

2.1. Definition of the scope and interdependencies with other sectors ...................................6 2.2. How is the finance sector connected to biodiversity (impacts, dependency, benefits)? ..6

2.2.1. Impacts .....................................................................................................................7 2.2.2. Dependency ..............................................................................................................7 2.2.3. Benefits .....................................................................................................................8 2.2.4. Policy and legislative context relevant to the finance sector and biodiversity (global policy) ..................................................................................................................................9 2.2.5. EU Biodiversity policy ...............................................................................................9 2.2.6. Pan-European Biological and Landscape Diversity Strategy ................................ 12

2.3. Main stakeholders .......................................................................................................... 13 2.3.1. The policy sector .................................................................................................... 13 2.3.2. The finance sector ................................................................................................. 13 2.3.3. Private companies ................................................................................................. 14 2.3.4. NGOs and platforms .............................................................................................. 15

3. Classification and evaluation of available best practices ...................................................... 15

3.1. Common approach and key steps of biodiversity integration in business ..................... 15 3.1.1. The business case for biodiversity and ecosystems ............................................. 16 3.1.2. The key action points for business4 ....................................................................... 16 3.1.3. Biodiversity business risks and opportunities ........................................................ 17 3.1.4. Pro-Biodiversity Business – financial sector approach .......................................... 18 3.1.5. What are the benefits of pro-biodiversity business? .............................................. 18 3.1.6. Can markets work for biodiversity management? ................................................. 19

3.2. Sectoral specific approach to implement Business & Biodiversity actions .................... 19 3.2.1. How to integrate biodiversity into the financial sector? ......................................... 20 3.2.2. Biodiversity risks for the financial sector ................................................................ 20 3.2.3. Biodiversity opportunities for the financial sector .................................................. 21 3.2.4. Business and Biodiversity guidelines for the financial sector ................................ 21

3.3. Classification and analysis of existing best practices .................................................... 23 3.3.1. Introduction to analysis grid ................................................................................... 23 3.3.2. Selected best practices .......................................................................................... 23

4. Gaps and needs: Best practices analysis in the sector ........................................................ 29

4.1. Key needs ...................................................................................................................... 29 4.2. Key success factors ....................................................................................................... 30

5. Conclusions........................................................................................................................... 30 6. References ............................................................................................................................ 31

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1. Introduction

1.1. Background to the document – why a guidance document? The finance sector is one of the most influential business sectors. By the nature of their core business and products, financial institutions are able to influence the behaviour of other businesses, but also policy sectors and, up to some extent, even private parties. The sector therefore has the possibility to provide a positive contribution to biodiversity on a large scale. Very few sectors are able to not only take biodiversity into account in their own business activities, but also stimulate other sectors to do the same. In essence, the positive effects of a finance sector that takes up biodiversity and its conservation as one of their main issues is virtually unlimited. However, biodiversity is at the moment too abstract for most stakeholders to actively incorporate it into their investment policies and business practices. There is a clear need to provide easily available guidance based on existing knowledge, best practices and publications in a form that can easily be understood and implemented by finance sector stakeholders. This guidance document, developed in the framework of the EU Business @ Biodiversity Platform1

, is intended to respond to this need and guide the finance sector towards more biodiversity friendly business operations.

1.2. Purpose, scope and target of the document Business stakeholders play an important role in integrating biodiversity into different EU policy areas. The EU Business @ Biodiversity Platform aims to strengthen the link between the business sector and biodiversity conservation. The Facility works with the selected sectors (agriculture, food supply industry, forestry, extractive industries, financial sector and tourism) to benchmark best practice in each sector with regard to the conservation of biodiversity. The EU intends to develop means to establish pro-biodiversity business, help business to find solutions to change their activities and to ensure a fair income while considering biodiversity and creating new business opportunities. This includes the development of best-practice guidance concerning the main risks, responsibilities and opportunities for companies in relation to nature and biodiversity conservation. The guidance builds on existing guidelines and handbooks previously produced with business organizations and private companies, as well as other relevant materials. Insofar as relevant, the EU nature legislation, notably biodiversity-relevant EU agreements and directives are also taken into account.

1.3. Nature and structure of the document In order to carry out an analysis of sectoral best-practice guidance, a bibliographic research was carried out. This research aimed at gathering for the finance sector the main documents, reports and programmes giving details on best practices for biodiversity protection. A synthesis by sector of the overall best practices will allow having an overview of the lack of guidance and identifying key needs. The document is made up of 5 main sections:

• Section 1•

: provides an introduction and background to the document. Section 2

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: introduces the perimeter and interdependencies between the finance and other sectors. It explores the impacts, dependency and benefits between the finance sector and biodiversity, describes policy and legislative context, and gives information about the main stakeholders. Section 3

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: examines the common and sector-specific approach and key steps of biodiversity integration in business and focuses on selected best practices. Section 4: identifies gaps and needs based on best practices analysis in the sector.

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• Section 5

: concludes with the key issues of further research needs and cooperation between the relevant stakeholders.

2. The finance sector, related sectors and biodiversity

2.1. Definition of the scope and interdependencies with other sectors

The financial sector is involved in every other business sector in the world. Amongst other roles, the sector provides loans to start-up businesses or to businesses that want to develop; it has the role of shareholder in a wide variety of businesses and develops financial instruments for other business sectors to invest in. Through these instruments, the financial sector can influence other sectors and with that provide a positive contribution to biodiversity and biodiversity conservation. The financial sector is the set of institutions, instruments, and the regulatory framework that permit transactions to be made by incurring and settling debts, that is, by extending credit. The financial system makes possible the separation of the ownership of wealth from the control of physical capital2

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Because of its role as provider of loans and investments into other business sectors, the financial sector can steer the development of pro-biodiversity business and set strict requirements in relation to the biodiversity performance of a business in order for it to be eligible for funding. Nowadays, the development of ‘green funds’ and ethical investments is relatively common amongst investors and as such business sectors seeking funding need to respond to this development. Green funds and ethical investors screen companies not just on their financial performance, but also on their environmental and biodiversity performance, favouring those businesses that meet their ethical standards. This is known as Socially Responsible Investing (SRI). In order to be eligible for a loan from these investors, businesses need to rethink their practices and make sure they fit within these ethical standards. Due to social and legal pressure, more and more investors are taking ethical conduct, sustainability and biodiversity into account in relation to their investments, which increases the pressure on businesses to adhere to strict ethical and environmental standards in order to remain able to conduct their business practice. In this context, the finance sector is becoming more of a pressure instrument for businesses to review their business conduct. Social and legal pressures are two instruments already in use to stimulate businesses to conduct good biodiversity practice. This can be illustrated by the involvement of the finance sector in agribusiness initiatives. The sector is a major provider of funds and credit for the new developments and the functioning of agriculture. Next to that, the finance sector also provides insurance for crops and related assets and activities. The incentive coming from the financial sector has always been a strong one and the shift towards ethical investments is just as big a pressure. But as a business sector of its own, the financial sector is also subject to the different pressures regarding sustainability and biodiversity. Through social and legal pressure, the financial sector also needs to take biodiversity into account and to evaluate its own business conduct as well as that of the sectors and individual businesses it is investing in. The business sector can influence other sectors into adopting certain ethical standards, but it is also dependent on adhering to this conduct itself to keep its license to operate.

2.2. How is the finance sector connected to biodiversity (impacts, dependency, benefits)?

Despite the recent financial crisis, the financial sector remains one of the largest business sectors in the world. By the end of 2008 global financial assets had a total worth of US$ 178 Trillion3

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For a long time the financial sector remained absent from the environmental domain and did not take the environment or biodiversity into account in their core business activities4

. Nature and biodiversity were seen as common public goods that yielded no direct return on investment, which made them apparently uninteresting to the private financial sector. However, there is a strong case for the financial sector to get involved in the finance of biodiversity and ecosystem services and to explore opportunities for private investment in this domain.

2.2.1. Impacts ‘All companies, regardless of sector, both impact on biodiversity and ecosystems and depend on ecosystem services.’5

At first glance, the impact of the financial sector on the environment and biodiversity is less clear than for other business sectors, such as agriculture or the extractive industry. The financial sector generally does not have big production sites or products that take up a large amount of natural resources. Even so, the financial sector has both direct and indirect impacts on biodiversity and, depending on the size of the business and the geographical scope, these can be substantial and of global importance. Like every other business, financial sector businesses generate direct impacts on biodiversity by their own business activities. The location of an office building next to a rich nature area, the disposal of waste and the consumption of energy are just a few examples of these direct impacts. In recent years, awareness and recognition of these types of direct impacts have grown in society. Businesses in different sectors are aware of their direct impact and, due to social pressure and their own commitment to a healthy and sustainable environment, have started to take measures to mitigate their negative impact on biodiversity. Where mitigation measures have proven to be insufficient or impractical to implement, offsetting direct impacts (e.g. carbon offsetting in regard to business travel or funding the creation of a nature area in a different location to compensate for the impact of a new office building) has become an important tool for the financial sector to lower its direct impacts. Business sector impacts generally tend to be looked upon as negative to the environment and biodiversity, but this does not necessarily have to be the case. To take the mitigation of direct impacts by businesses a step further, some businesses have started to adapt activities in such a way that they generate positive direct impacts on the environment and biodiversity; fitting a new office building with a green roof or making the building fit for habitation by local fauna. Through such measures, the direct impacts of the financial sector can even be positive and not require mitigation or offsetting at all. In addition to the above mentioned direct impacts, financial sector businesses can have significant indirect impacts on biodiversity by conducting their core business of lending, investing and project financing. The provision of these financial services to other businesses, that impact biodiversity directly or even indirectly, can mean that the financial sector has a considerable indirect impact on biodiversity itself. While the direct impacts of a financial sector business are quite easy to point out, the indirect impacts can be far larger but also harder to identify since the financial sector is usually situated at the beginning of the production chain6

. The financial position towards businesses seeking investment gives the financial sector a significant instrument to influence impacts on the environment and biodiversity. Careful assessment of the possible investment and the utilization of the financial instrument towards the receiving party will significantly influence the indirect impact of the financial sector.

2.2.2. Dependency Until recent years, the main conception was that biodiversity conservation was the domain of public sector funding. Apart from a few cases where direct negative impacts by businesses were either fined or needed to be compensated, biodiversity was seen as a common public good to which no economic value could be assigned. The involvement of private sector businesses in

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biodiversity conservation was limited to charity or sponsorship of civil initiatives for good public relations. However, in recent years it has become apparent that public funding alone will not be sufficient to reach the goals set for biodiversity conservation. Increasingly, national and international policy is moving towards involving the private sector and private sector funding in the conservation effort. There is an important role for the financial sector in this regard, including:

• The management of biodiversity risks in lending and investment decisions. • The setting up of new innovative financial mechanisms for pro-biodiversity businesses and

biodiversity conservation areas.7

Stakeholders in the environmental field generally lack the expertise regarding financial instruments and how to create bankable conservation possibilities. On the other hand, the financial sector suffers from a lack of awareness regarding potentially fundable biodiversity projects and the means to incorporate biodiversity into assessment procedures for investments. Financial sector businesses can play an important role for biodiversity, but biodiversity also contributes to their license to operate. From a corporate social responsibility point of view, biodiversity needs to be taken into account in the current social climate even if a business is not involved in biodiversity financing at all. The financial sector is increasingly being held responsible by the public and (international) environmental activists for the business conduct of companies they finance. Thus many savings account owners have indicated that they would change banks if the bank in which they have an account turns out to be involved in financing companies that severely damage biodiversity8

. Financial sector businesses are no longer seen just as providers of loans and investors in sound business opportunities, but more and more as being responsible for what happens with that investment.

While financial institutions are generally not directly dependent on ecosystem services, they are exposed to biodiversity and ecosystem services (BES) risks through the loans, investments and insurance cover they provide to companies and projects4. In addition to pressure from the public and their peers, there are other reasons why businesses should take biodiversity into account. As a reaction to the worsening situation and the goals set for 2010, international legislation has been adopted to protect the environment and biodiversity. Businesses need to comply with these new (inter)national environmental regulations. These social and legal pressures only strengthen the ‘naturally’ existing dependence of the financial sector on BES.

2.2.3. Benefits The financial sector is known for seeking new investment opportunities and tapping into new markets. Biodiversity conservation is now slowly starting to be explored and presents numerous opportunities for the development of new instruments, financing schemes and sound investment opportunities. Biodiversity is a relatively new market which can yield benefits for the financial sector. Biodiversity investments should no longer be seen as charity or public relations activities, but as sound investment possibilities in products that can yield a real return for the investing body. Portfolio managers are increasingly looking for sustainable investments for their portfolios and investment opportunities into biodiversity and biodiversity projects provide a new set of products that can be presented to the customers and utilized for their own investments. Practical examples have shown that it is possible to develop instruments that provide sound biodiversity investment opportunities which yield a return on investment that conforms with other markets. For investors to invest in certain areas or biodiversity projects, it is important to assign a certain value to these elements and translate it into a sound financial product. Investing in biodiversity means long-term investments when it comes to direct asset value. Moreover, biodiversity

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investment opportunities exist which yield a return on investment, such as investing in eco-tourism or sustainable agriculture. Financial sector involvement can yield benefits for both biodiversity and the financial sector itself. Public funding will not be sufficient; finding ways to turn biodiversity into sound investment opportunities generates funding for biodiversity projects and conservation. Creating sound investment possibilities will ensure the interest and involvement of the financial sector and provide the right tools to further develop private biodiversity financing.

2.2.4. Policy and legislative context relevant to the finance sector and biodiversity

(global policy) The UN Convention on Biological Diversity (CBD) was adopted at the Rio de Janeiro Earth Summit in 1992. It committed governments to the development of national strategies for the conservation and sustainable use of biological diversity. The European Community is one of the 191 signatory parties to the CBD. In 2005, two multi-stakeholder meetings, organized by the CBD Secretariat and others, examined ways to strengthen business engagement in the implementation of the CBD. This emerging consensus to engage business in the conservation and sustainable use of biodiversity is reflected in the Decisions of the CBD9. Decision VIII/17 was the first decision by the Conference of the Parties focusing exclusively on business and was adopted at its eighth meeting in Curitiba, Brazil, in March 2006. It covers the engagement of Parties with the business community when developing and implementing national biodiversity strategies and action plans; the participation of business in Convention processes; the compilation, dissemination and strengthening of the ‘business case’ for biodiversity; and the compilation and development of good biodiversity practice10

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2.2.5. EU Biodiversity policy At the Gothenburg summit in 2001, EU leaders adopted the 6th Environmental Action Programme. This programme sets the objective to ‘halt the loss of biodiversity by 2010’. This very ambitious goal surpassed the goal set by world leaders in 2002 to ‘achieve a significant reduction in the current rate of biodiversity loss by 2010’. This 6th Environmental Action Programme was an addition to the Lisbon Strategy, an action and development plan for the European Union between 2000 and 2010. The Strategy’s aim is to make the EU ‘the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion’ by 2010. The main fields are economic, social, and environmental renewal and sustainability. EU leaders decided to add the environmental dimension, commenting that ‘failure to reverse trends that threaten future quality of life will steeply increase the costs of society or make those trends irreversible’. Within the first years after the adoption of the 6th Environmental Action Programme it became clear to policy makers and stakeholders within different sectors that reaching the goals set for 2010 would require a major shift in thinking on the role of business in biodiversity. In response to CBD Decision VIII/17 on private sector engagement, the European Initiative on Business and Biodiversity was developed. The initiative was developed in a multi-stakeholder consultation process which involved EU, governmental, business and NGO representatives. It stresses that business has a crucial role in biodiversity conservation and seeks strong commitment from the business sector. The initiative was concluded at the High-Level Conference on Business and Biodiversity which was held in Lisbon, Portugal, in November 2007. At this meeting the ‘Message from Lisbon’ was issued, stating that ‘…there is a strong business case for biodiversity, including the competitive advantage gained from conserving biodiversity and using biological resources in a sustainable way, and recognizing that competitive markets also have an enormous potential to mobilize private resources and stimulate innovation’.

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The Business @ Biodiversity Platform is one of the technical facilities being developed to facilitate the process following the Message from Lisbon to involve businesses into biodiversity conservation.

Natura 2000 is the centrepiece of EU nature and biodiversity policy. It sets an EU-wide network of protected areas established under the Habitats Directive aimed at assuring the long term survival of Europe’s most valuable and threatened species and habitats as designated under the 1992 Habitats Directive and the 1979 Birds Directive.

Natura 2000

Natura 2000 includes:

• The Special Areas of Conservation (SAC)11

• The Special Protection Areas (SPAs)2 designated by Member States under the Birds Directive.

designated by Member States under the Habitats Directive upon the Sites of Community Importance (SCI) status.

Over the last 25 years, a network of 26,000 sites has been set up in all the Member States. This network covers over than 850,000 km2, representing 18% of the EU-27 land area. Information on progress in the establishment of the Natura 2000 network is given by the Natura 2000 Barometer. The map of Natura 2000 can be found at: http://www.eea.europa.eu/data-and-maps/figures/distribution-of-natura-2000-sites-across-eu-member-states-1. The Birds Directive The Birds Directive12

, adopted in 1979, relates to the conservation of wild birds and ensures protection for all of Europe’s wild birds, including 194 species and sub-species identified among EU-27 Member States as particularly threatened and in need of special conservation measures. While aiming to ensure species survival over the long term, this should consider ecological, scientific and cultural requirements as well as economic and recreational requirements (Article 2).

This Directive requires:

• Member States to designate Special Protection Areas (SPAs)13

• Member States to ban activities that directly threaten birds, including the deliberate killing or capture of birds, the destruction of their nests and taking of their eggs, and associated activities such as trading in live or dead birds (with a few exceptions).

for 194 particularly threatened species and all migratory bird species.

• The establishment of rules that limit the number of bird species that can be hunted (82 species and sub-species) and the periods during which they can be hunted. It also defines hunting methods which are permitted (e.g. non-selective hunting is banned).

More information on the Birds Directive can be found at: http://ec.europa.eu/environment/nature/legislation/birdsdirective/index_en.htm. The Habitats Directive The Habitats Directive14

was adopted in 1992. This Directive aims to promote the maintenance of biodiversity including economic, social, cultural and regional requirements. The Directive includes about 450 species of animals and 500 species of plants considered as rare, threatened or endemic. 230 habitat types, which are considered as being in danger of disappearing, are also targeted for conservation in their own right.

The Directive provides rules banning the downgrading of breeding and resting places for certain strictly protected animal species, with some exceptions granted under very specific conditions.

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The Directive also establishes the Natura 2000 network of protected areas, providing a high level of safeguards against potentially damaging developments. More information on the Habitats Directive can be found at: http://ec.europa.eu/environment/nature/legislation/habitatsdirective/index_en.htm. What still needs to be done in Natura 2000 sites? Some of the main areas still in development are:

• Completion of the selection of sites, particularly in the offshore marine environment. • Ensuring appropriate legal protection and management of the sites, e.g. through the

establishment and implementation of management plans containing conservation objectives and measures.

• Improving financial sustainability for Natura 2000 site managers, e.g. through improved public, private and innovative funding mechanisms.

• Improving stakeholder participation and general communication and public awareness about the importance and benefits of Natura 2000.

What are the business opportunities and constraints within the Natura 2000 network? Human activities are not excluded from Natura 2000 areas. The Natura 2000 network includes nature reserves. However, most of its areas continue to be privately owned, with the insurance that these lands are sustainably managed both ecologically and economically. Increasing the focus on sustainable site management is recognized to ensure long-term conservation. Investment opportunities promoting sustainable use of sites and access for visitors are highly important in achieving the role of the Natura 2000 network to contribute to local economic development. Small and medium enterprises’ (SME) operating nature-based activities are well settled within the Natura 2000 network. Hence, the network provides obvious opportunities for “pro-biodiversity businesses”. Indeed, many of them directly depend on biodiversity. Moreover, many Natura 2000 sites, thanks to their Natura 2000 status, attract visitors and funding for specific types of activities. Natura 2000 has different implications depending on the sector. Some opportunities can be highlighted for each sector; however, the legislation also presents constraints. Article 6 (Managing and protecting Natura 2000 sites) of the Habitats Directive includes some general constraints, such as15

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“Paragraphs 6(1) and 6(2) require that, within Natura 2000, Member States:

• Take appropriate conservation measures to maintain and restore the habitats and species for which the site has been designated to a favourable conservation status.

• Avoid damaging activities that could significantly disturb these species or deteriorate the habitats of the protected species or habitat types.

Paragraphs 6(3) and 6(4) lay down the procedure to be followed when planning new developments that might affect a Natura 2000 site. Thus:

• Any plan or project likely to have a significant effect on a Natura 2000 site, either individually or in combination with other plans or projects, shall undergo an Appropriate Assessment to determine its implications for the site. The competent authorities can only agree to the plan or project after having ascertained that it will not adversely affect the integrity of the site concerned (Article 6.3).

• In exceptional circumstances, a plan or project may still be allowed to go ahead, in spite of a negative assessment, provided there are no alternative solutions and the plan or project is considered to be of overriding public interest. In such cases the Member State must take appropriate compensatory measures to ensure that the overall coherence of the N2000 Network is protected (Article 6.4).

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The goal of halting the loss of biodiversity by 2010 was not achieved, and new and improved policy steps therefore need to be taken to take forward the efforts in the coming years. Biodiversity conservation and the financial and business sector involvement must now be integrated into new long-term economic strategies for Europe. In September 2010, the Belgian presidency hosted the conference ‘Biodiversity after 2010 – biodiversity in a changing world’. A European policy message was developed for the 10th Conference of the Parties to the Convention on Biological Diversity in October 2010, Nagoya, Japan.

2.2.6. Pan-European Biological and Landscape Diversity Strategy The Pan-European Biological and Landscape Diversity Strategy (PEBLDS) was endorsed at the 3rd Ministerial Conference 'Environment for Europe' in 1995. It provides an innovative and proactive approach to stop and reverse the degradation of biological and landscape diversity values in Europe. The Strategy reinforces the implementation of existing measures to ensure conservation and sustainable use of biological and landscape diversity and identifies additional actions that need to be taken over the next two decades. The Strategy also provides a 20-year vision for Europe and a framework to promote a consistent approach and common objectives for national and regional action to implement the Convention on Biological Diversity16

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The overall objective, as agreed by the governments participating in the 'Environment for Europe' ministerial process – that includes all 56 UN/ECE countries and a number of international organizations participating in the Strategy – is to halt the loss of biodiversity at all levels by the year 2010. PEBLDS recognizes full involvement of the economic sectors in biodiversity conservation as a priority action. In light of that, it supports possibilities for funding and investment by sources not traditionally associated with conservation efforts. Following the request of the Fourth Ministerial Conference ‘Environment for Europe’ which took place in Aarhus, the European Biodiversity Resourcing Initiative (EBRI) was initiated in the PEBLDS framework in order to make financial resources available. It was also a European response to the growing interest in the CBD framework for additional financial resources. The initiative marked the start of a comprehensive dialogue between the financial and biodiversity sectors. The EBRI has been mandated with the implementation of the Kyiv Resolution. During the Fifth Ministerial Conference ‘Environment for Europe’ which took place in Kyiv, Ukraine, in May 2003, the specific objective of the Resolution on Financing Biodiversity was stated as follows: ‘By 2008, there will be substantially increased public and private financial investments in integrated biodiversity activities in Europe, via partnerships with the finance and business sectors, that have resulted in new investment opportunities and facilities as outlined by the European Biodiversity Resourcing Initiative, taking into account the special needs of the countries of Central and Eastern Europe, Caucasus and Central Asia.’ Early in 2004, the Financing Biodiversity Action Plan, proposed by the PEBLDS Council at the Kyiv Conference, was adopted to facilitate the implementation of the Kyiv Biodiversity Resourcing target while taking into account relevant CBD decisions, in particular via the establishment of the Biodiversity Technical Assistance Facility and the European Biodiversity Investment Partnership, and support the establishment of the Biodiversity Finance Facility by European financial institutions. In October 2007, the Sixth Ministerial Conference ‘Environment for Europe’ was held in Belgrade, Serbia. The European Environment Ministers adopted the declaration ‘Building Bridges to the Future’, which stated: ‘We recognize that adequate funding is necessary for environmental improvement. Insufficient institutional capacity hinders the exploitation of emerging opportunities. We welcome a strong commitment of all involved countries in the UNECE region to support effective use of financial resources from all sources, including domestic budgets and donor support, where available, to strengthen institutional capacities at national and local levels, and to promote the

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effective use of these resources for the preparation of feasible, cost-effective and action-oriented environment programmes, anchored in their general development plans, poverty reduction strategies and United Nations Development Assistance Frameworks, as appropriate. We welcome better cooperation of donors’ activities and, as appropriate, synergies amongst institutions and programmes.’

2.3. Main stakeholders

2.3.1. The policy sector European Union (EU) and its Commission (EC) The issue of business and biodiversity including the role of financial institutions is receiving more and more attention within the EU framework. During two high level conferences, the EU Conference “Business and Biodiversity”, November 2007, Lisbon, Portugal and the EU Conference “Biodiversity Protection – Beyond 2010”, April 2009, Athens, Greece, the main EU policy on business and biodiversity was formulated. United Nations Environment Programme Finance Initiative (UNEP FI) UNEP FI is a global partnership between the UN, the financial sector and other interested stakeholders. Its work stream on biodiversity and ecosystem services focuses on engaging the financial services sector in identifying and addressing the challenges arising from the loss of biodiversity and the degradation of ecosystem services. United Nations Development Programme – Global Environment Facility (UNDP – GEF) The GEF was established in 1991 to combine international cooperation and finance actions targeted at decreasing biodiversity loss, climate change, degradation of international waters, ozone depletion, land degradation and persistent organic pollutants. The GEF works mostly with grants targeted at developing countries and countries in transition. GEF members are governments, development and research institutions, the private sector and NGOs. Convention on Biological Diversity (CBD) The Convention on Biological Diversity (CBD) entered into force on 29 December 1993. Its objectives are: the conservation of biological diversity, the sustainable use of the components of biological diversity and the fair and equitable sharing of the benefits arising out of the utilization of genetic resources. The CBD has been working to engage business in the implementation of the Convention.

2.3.2. The finance sector European Bank for Reconstruction and Development (EBRD) The EBRD is paying attention to biodiversity issues in mainstream investments. EBRD has also been involved in the development of the EU Biodiversity Technical Assistance Units project, and is exploring other options of biodiversity investment (mainly though SMEs). European Investment Bank (EIB) EIB has incorporated biodiversity as a priority area in its updated Environmental Policy. The need to finance biodiversity is stressed by the EC. For example, there is a clear role for building up Public Private Partnerships (PPP) for biodiversity. These approaches can help mobilize the available resources and more effectively facilitate their use. Public money can support private activities and resources and private resources can be pooled into public objectives. Two possibilities for these kinds of partnerships are:

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• The introduction of loans/grants to support Payments for Ecosystem Services (PES) to be used by private or public partners.

• The mobilization of support for the creation and management of biodiversity offsets by private/public companies. Frequently, development has a negative impact to nature, so the developers need to compensate through offsets (habitat banking, restoration, etc)17

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There is also a need for micro-finance, i.e. small projects that can have significant impact and generate income to become self-sustainable. For these, however, there is a need for capacity building, and for access to credit that is available quickly and at a preferential rate. The World Bank The World Bank is the world’s largest financier of biodiversity. International Finance Corporation (World Bank Group) IFC’s work in biodiversity aims to enhance the achievement of the triple bottom line of financial profitability, environmental sustainability and social responsibility. ASN Bank (The Netherlands) The ASN Bank in the Netherlands has investment funds which have strict environmental and social criteria. The bank does not invest in companies that do not comply with these criteria and pro-actively invests in companies that improve social and environmental well-being. With regard to biodiversity, the bank has a specific investment policy based on international conventions and scientific research such as the Millennium Ecosystem Assessment or the Convention on Biological Diversity. Sustainability is the guiding principle in all of ASN Bank’s activities. Fundacio Caixa Catalunya (Spain) Caixa Catalunya is one of the leading savings banks in Spain and was the first one to provide funds for conservation in the country. Their geographical area of work is mainly Catalunya, but they do hold accounts and offices throughout the whole of Spain. In being a Savings Bank, they are legally obliged to do social works. Fundacio Caixa Catalunya is the legal entity for the bank to commence in these social works. It aims to give back to society part of the business profit through adequate response to social and environmental issues. The budget of the foundation is made up on the basis of the bank’s profit in the previous year. The management of the bank makes a proposal on how the funds are being divided and the assembly need to agree on this.

2.3.3. Private companies OFI Private Equity Capital OFI Private Equity Capital is an investment company making capital investments but also investing in "mezzanine" type instruments in order to provide its shareholders with an annual rate of return. Since 2005, OPEC has created a portfolio with 12 companies, all solidly established within their niche markets and led by very experienced management teams. In only a few years, OPEC has become a dynamic actor on the buyout market in France, serving as a long-term shareholder but without interfering in the development of each of its equity interests. Finally, OPEC's investment strategy includes extra-financial criteria in the area of Sustainable Development (environmental, social, societal and governance). This initiative allows the economic models of its equity interests to evolve, while increasing their valuation over the medium term. FMO FMO was founded in 1970 by the Dutch government, private sector, employers and employee organizations. Since its inception, FMO’s aim has been to empower entrepreneurship in emerging

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economies in order to further development. In investing in entrepreneurship, they have sought to apply best practices, adopted international performance standards and created their own benchmarks if they did not already exist.

2.3.4. NGOs and platforms European Sustainable Investment Forum (EUROSIF) EUROSIF is a pan-European not-for-profit group whose mission is to address sustainability through financial markets. It represents assets totalling over €1 trillion through its affiliate membership. The Principles of Responsible Investment (PRI) Secretariat The PRI reflects the core values of a group of large investors whose investment horizon is generally long, and whose portfolios are often highly diversified. In 2005, 20 Institutional investors accepted ownership of these principles, stimulated by the United Nations. The Principles are open for all institutional investors, investment managers and professional service partners to support. Following the launch of the Principles, the PRI Secretariat was created to help co-ordinate the adoption of the Principles by additional investors, provide comprehensive resources to assist investors in implementing the Principles, and facilitate collaboration among signatories. Green Development Mechanism (GDM) The GDM 2010 Initiative is working with a network of biodiversity finance specialists to establish a market-based Green Development Mechanism (GDM) under the Convention on Biological Diversity along the lines of the Clean Development Mechanism (CDM) for climate change. The GDM would support trade in certified biodiversity-protected landscapes. The Natural Value Initiative (NVI) The NVI has worked with the financial sector to develop a toolkit to evaluate the investment risks and opportunities posed by a company’s dependence and impact on biodiversity and ecosystem services. Its pilot research has focused on the food, beverage and tobacco sectors.

3. Classification and evaluation of available best practices

3.1. Common approach and key steps of biodiversity integration in business Economic activity is one of the major drivers of biodiversity loss, and Europe is still losing biodiversity at an alarming rate. Key direct drivers of biodiversity decline are habitat change, climate change, invasive species, over-exploitation and pollution. Business can help reduce these pressures by managing and mitigating their impacts on biodiversity and ecosystem services. They should systematically review their operations in relation to biodiversity and ecosystem services (BES) and assess how direct and indirect drivers of change in ecosystem services may affect their business. 4 Practically all businesses have an impact on biodiversity, either through their supply chains or through the investments they make. The EU Business and Biodiversity Platform therefore promotes the practical integration of biodiversity issues in the selected financial and economic sectors and addresses the market-based approach to conservation and viable use of biodiversity and its ecosystem services. The links between business, biodiversity and ecosystem services vary across sectors and even within sectors. These links depend on the location of the business, the source of its raw materials, in some cases the location of its customers, and/or the production technology employed. Broadly, these links can be grouped into business impacts on biodiversity, on the one hand, and business dependence on ecosystem services on the other. 4

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3.1.1. The business case for biodiversity and ecosystems Biodiversity business is defined as: “Commercial enterprise that generates profits through production processes which conserve biodiversity, use biological resources sustainably and share the benefits arising out of this use equitably.”18

This definition reflects the three overarching goals of the United Nations Convention on Biological Diversity (CBD), which also calls for increased efforts to enlist the private sector in biodiversity conservation, sustainable use and equitable benefit sharing. In both the environmental and business communities, there is growing recognition of the potential to conserve biodiversity on a commercial basis. The business case for biodiversity is easy to make when a firm depends directly on biodiversity to operate. Nature-based tourism is one example where the income stream to private enterprise depends very clearly on the health of the surrounding ecosystem. In such cases, business owners and managers need little persuasion to invest in biodiversity management. For businesses that are not directly and apparently dependent on ecosystem services, the emphasis needs to be on how BES indirectly impacts their core business. For the financial sector, this emphasis is usually placed on the risks of biodiversity and ecosystem degradation for the business through the loans or investments provided in companies and projects. For example:

• Loss of biodiversity can slow down economic growth which causes a reduction in the companies’ return on investments or causes a company to be less productive or even lose its core business (for example, the loss of pollinators for the fruit producing sector).

• Bad biodiversity conduct can steer public opinion and reduce the stock value of a business invested in (or the financial institution itself).

• Biodiversity has been proven to increase health and wellbeing, improving employee productivity.

• Loss of clients who choose the savings or investment products of financial sector businesses that take biodiversity and ecosystem services into account.

3.1.2. The key action points for business4

The business case for biodiversity and ecosystems is getting stronger. The companies that understand and manage the risks presented by biodiversity loss and ecosystem decline, and that move quickly to seize business opportunities, are more likely to thrive. Business can show leadership on biodiversity and ecosystems:

1. Identify the impacts and dependencies of your business on biodiversity and ecosystem services (BES). The first step is to assess business impacts and dependencies on biodiversity and ecosystems, including both direct and indirect linkages throughout the value chain, using existing tools while also helping to improve them.

2. Assess the business risks and opportunities associated with these impacts and dependencies. Based on this assessment, companies can identify the business risks and opportunities associated with their impacts and dependencies on BES, and educate their employees, owners, suppliers and customers. Economic valuation of BES impacts and dependencies can help to clarify risks and opportunities.

3. Develop BES information systems, set SMART targets, measure and value performance, and report your results. Biodiversity and ecosystem strategies for business are likely to include improved corporate information systems, development of quantitative BES targets and performance indicators, and their integration into wider business risk and opportunity management processes. A key step for building trust with external stakeholders, while creating peer pressure within industry, is for business to measure and report their BES impacts, actions and outcomes.

4. Take action to avoid, minimize and mitigate BES risks, including in-kind compensation (‘offsets’) where feasible. BES targets may build on the concepts of ‘No Net Loss’, ‘Ecological Neutrality’ or ‘Net Positive Impact’ and include support for

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biodiversity offsets where appropriate. Industry associations will continue to play a key role in developing and promoting robust and effective biodiversity performance standards and impact mitigation guidelines for their members.

5. Grasp emerging BES business opportunities, such as cost-efficiencies, new products and new markets. Business can support the growth of green markets and help design efficient enabling conditions for biodiversity and ecosystem service markets. Such opportunities may be facilitated by engaging with public agencies, accountancy and financial standard setting bodies, conservation organizations and communities.

6. Integrate business strategy and actions on BES with wider corporate social responsibility initiatives. There is potential to enhance both biodiversity status and human livelihoods, and help reduce global poverty, through the integration of BES in corporate sustainability and community engagement strategies.

7. Engage with business peers and stakeholders in government, NGOs and civil society to improve BES guidance and policy. Business can bring significant capacity to conservation efforts and has a key role to play in halting biodiversity loss. Business needs to participate more actively in public policy discussions to advocate appropriate regulatory reforms, as well as developing complementary voluntary guidelines.

Not all businesses may be capable of implementing measures and policies to facilitate these processes. SMEs might lack the resources or capacity to address these issues all by themselves but would still want to show leadership and be proactive in sustaining the environment and biodiversity. These businesses should be supported by NGOs in addressing biodiversity issues and perhaps join other organizations to create a case for biodiversity in their own organization as the market demand for biodiversity develops. To further support SMEs, it would be good to identify cases of businesses that are already supporting biodiversity without deriving benefits from it and try to apply these in other situations.

3.1.3. Biodiversity business risks and opportunities According to the TEEB Report for Business4, there are several categories of risk that businesses are facing. These are:

• Operational – disruptions to business operations caused by natural hazards and higher insurance costs for disasters such as flooding.

• Regulatory and legal – restricted access to new markets, emergence of new fines, new user fees, government regulations, or lawsuits by communities or groups that challenge business activities.

• Reputational – damage to corporate reputation from media and non-governmental organization (NGO) campaigns, shareholder resolutions and changing customer preferences.

• Market or product – customers switching to other suppliers that offer products with lower ecosystem impacts or governments implementing new sustainable procurement policies.

• Financial – higher costs of capital or difficulties acquiring debt or equity as banks and investors adopt more rigorous lending and investment policies.

Not all these risks are equally likely to affect the financial sector. Risks regarding markets or products are smaller for this sector than risks regarding reputation or finance. Even so, while the financial sector does not appear to be directly dependent on BES, for all of the above mentioned categories there are risks which should be managed. A variety of tools has been made available for companies to identify and manage biodiversity and ecosystem risks. For example4:

• Standards, frameworks and methodologies – multi-stakeholder efforts such as ISO14001 and the Forest Stewardship Council (FSC), or individual company standards.

• Data Collection Tools – access to appropriate data is required to make a responsible risk assessment. Tools for collection of the appropriate date have been developed, such as the Integrated Biodiversity Assessment Tool (IBAT).

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• Modelling and Scenario Building – tools for developing potential future scenarios regarding biodiversity.

Effective biodiversity and ecosystem risk management may be facilitated by appropriate enabling frameworks and partnerships, which often involve public-private partnerships and stakeholder engagement. In addition to the risks, biodiversity and ecosystem services also offer opportunities for all business sectors. These include:

• New technologies and products – that will serve as substitutes, reduce degradation, restore ecosystems or increase the efficiency of ecosystem service use and provide new investment opportunities.

• New markets – such as water-quality trading, certified sustainable products, wetland banking and threatened species banking.

• New businesses – such as ecosystem restoration and environmental asset finance or brokerage.

• New revenue streams – for assets currently unrealized, such as wetlands and forests, but for which new markets or payments for ecosystem services could emerge.

3.1.4. Pro-Biodiversity Business – financial sector approach

“A pro-biodiversity SME is dependent on biodiversity for its core business and contributes to biodiversity conservation through that core business,”19

Based on the results of the Biodiversity Technical Assistance Unit (BTAU) project20 funded by the European Commission, it can be stated that a Pro-Biodiversity Business (PBB) generates both positive financial and biodiversity returns. Companies active in the sectors that have the largest impact on biodiversity in the EU are mostly Micro, Small and Medium Enterprises. SMEs are an integral part of the European economy and it is therefore vital that they play their part in making the European economy more sustainable. There are an estimated 23 million SMEs in the EU, representing approximately 99% of all businesses and nearly 60 percent of the total value of the economy. Pro-Biodiversity Businesses (PBB) pursue four objectives: (1) Conservation of biodiversity; (2) Sustainable use of biological resources; (3) Positive financial returns; (4) Equitable sharing of the benefits arising from the use of biological resources. However, there are also many businesses that are not considered as PBB and do not follow the four above objectives. Nevertheless, these businesses can make a positive contribution to biodiversity. Stimulation of and cooperation with businesses towards biodiversity conservation should not be limited to those that adhere to the above-stated criteria. Since financial sector businesses generally do not depend on biodiversity for their core business activities, they cannot be qualified as pro-biodiversity businesses. An investment company that only invests in businesses or projects that positively contribute to biodiversity, for example, is not considered a pro-biodiversity business. Its core activity remains the investment of funds and benefiting from the return on that investment. Indirectly, such an investment business does benefit from the positive impact on biodiversity by the businesses and projects it invests in. It can be argued that without the positive impact by the businesses and projects invested in, the company would not get clients or funds for their investment portfolio, which makes that this is indeed a form of pro-biodiversity business. According to the current definition, however, a financial sector business is not a pro-biodiversity business.

3.1.5. What are the benefits of pro-biodiversity business? Pro-biodiversity business refers to business that generates profits through production processes that conserve biodiversity, use biological resources sustainably and share the benefits of this use equitably.20

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There may be different reasons for a company and its stakeholders to be interested in pro-biodiversity business concepts, for example:

• A businessman developing an ecotourism resort might say that the profitability of his enterprise depends on the health of the ecosystems.

• A hotel owner based in a rural area, near a lake or in a mountainous area might say his business is more profitable if landscapes and biodiversity are kept well and ecosystems are healthy.

• A farmer might say that the richness of the ecosystem increases the resilience and productivity of his farmland.

• A fisherman might say that without sustainable fishing practices fish stock would be depleted and there would be no future for his business.

• A honey producer needs healthy ecosystems and biodiversity in order to produce his core product.

• A businessman setting up a pellet transformation plant may need sustainable forestry practices in nearby areas so as to ensure future biomass income.

• A supermarket-owner might be looking for something pro-biodiversity due to the eco-friendly tendencies of his customers.

• Large corporations might want to invest in biodiversity to underscore their Corporate Social Responsibility.

• A conservationist would say that biodiversity business generates new and additional investment in conservation activities.

• An investor might want to invest in pro-biodiversity business because he manages a green investment fund of which the clients expect the investments to be sustainable and positive to biodiversity.

• On a macroeconomic level, pro-biodiversity business may contribute to a new direction of the flow of funds, knowledge and employment from the cities to the countryside and from wealthy to poor countries. In other words, it might help reduce rural poverty.

As illustrated above there are three main benefits from pro-biodiversity business: long-term sustainable use of biological resources; positive commercial returns on investments. A third important benefit are the social, employment benefits arising from the use of biological resources. Basically, a pro-biodiversity business strives to generate positive financial, biodiversity and social returns.12

3.1.6. Can markets work for biodiversity management? Despite increasing evidence of the commercial benefits of conservation, for many SMEs, the case for investing in biodiversity remains unclear. Entrepreneurs are beginning to discover that biodiversity conservation can form the basis of profitable new business models (for example, nature-based tourism where the income stream to private enterprise depends on the health of the surrounding ecosystem). These include the supply of commodities and services according to emerging standards of biodiversity-friendly production, supported by independent certification or assurance mechanisms, as well as the supply of ecosystem restoration and management services to both public and private customers.10 With the development of these new business models and the new products and businesses that belong with them, new investment markets and opportunities for the financial sector will emerge which use biodiversity and still generate a decent return on investment taking biodiversity funding out of the realm of charity and into mainstream business.

3.2. Sectoral specific approach to implement Business & Biodiversity actions

Even though the financial sector is not directly dependent on biodiversity and ecosystem services for its core business, biodiversity has a considerable impact on business practices within the sector, given its nature and the social and professional field it is operating in.

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The financial sector faces the biodiversity issue from two perspectives: 1) as a possible risk to business practices that needs to be addressed and 2) as new business opportunities which need to be taken up. The market for ecologically sustainable investments grows consistently. Through financial engagement of sustainability-oriented investors it is possible to raise additional funds for conservation financing21

. By integrating biodiversity into business decision-making, companies can enhance their performance by reducing risk, increasing revenue streams, reducing costs or improving their products4.

3.2.1. How to integrate biodiversity into the financial sector22

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Financial institutions are encouraged to join existing initiatives, such as UNEP FI Biodiversity and Ecosystem Services Work Stream, Principles of Responsible Investment, and Equator Principles, and to address biodiversity in their investment strategies. Information on how to join these initiatives can be found on their respective websites. The following recommendations were elaborated by UNEP FI for financial institutions to address biodiversity and ecosystem services in their investment strategies: Actions for the financial sector as a whole:

• Clarify and make consistent lending and investment requirements. • Clearly define and articulate the financial risks and opportunities associated with

biodiversity and ecosystem services. Actions for individual institutions:

• Review portfolio and business lines for current and future exposure to biodiversity/ecosystem services risks.

• Consider needs for policy/guidance to inform the institution’s investment and lending practices.

• Consider the need for specific guidance, decision-making tools, and training for relationship managers and transactors.

• Consider benefits of partnerships with civil society. • Consider how best to maintain leverage in transactions. • Report on biodiversity initiatives and impacts in sustainability and related reports.

There are also possibilities for the development of new innovative financial instruments for financing biodiversity/ecosystem services (such as regional accounts, specially designed funds, etc.).

3.2.2. Biodiversity risks for the financial sector Biodiversity business risks (BBR) are one of the major reasons for financial sector businesses to take biodiversity into account. Since biodiversity mainly has an indirect impact on the financial sector, the exact financial figures of these risks are very hard to quantify. However, there are four major categories of biodiversity-related risk for the financial sector3:

• Liability risks – Due to a growing number of initiatives where companies are held directly responsible for environmental damage. Investors can be indirectly at risk when a business or a loan becomes subject to this (which results in a reduced return on investment), or directly when an investor itself is held accountable for conduct by the business it invested in. Moreover, biodiversity characteristics are complex and make it difficult to meet conditions for insurability.4

• Legal and social license to operate – Governments are putting stricter regulations on the use and trade of biodiversity. Financial institutions can be indirectly at risk from this if a company they hold shares in runs into higher costs or directly if the company is forced to screen and report on biodiversity-related issues.

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• Reduced shareholder value – Over the past few years a shift has taken place and nowadays the shareholder value of a company is not only determined by its financial performance, but also by extra-financial issues; amongst them are biodiversity and environmental issues.

• Reputational risk – Recent examples have shown that the loss of reputation due to perceived bad practice towards biodiversity and environmental issues will cause a loss of shareholder and stock value and can even lead to consumers choosing products from other companies.

To manage the biodiversity-related risks, the banking sector uses at least four strategies4:

• ‘Red-lining’ investments in areas of high biodiversity. • Developing sector guidelines for environmentally sensitive sectors. • Refraining from financing sectors in which a bank lacks specialist knowledge. • Working together with borrowers to improve their environmental performance and mitigate

harm through an engagement policy. Through the development of strategies and tools to manage and mitigate biodiversity risks, financial sector businesses can pro-actively have a positive contribution on biodiversity and biodiversity conservation. For instance, by limiting their involvement in investments that tend to have a negative influence on biodiversity, there is less funding for such activities and more room for funding positive biodiversity activities.

3.2.3. Biodiversity opportunities for the financial sector A recent study by PricewaterhouseCoopers showed that biodiversity issues do affect financial decisions, but that drivers for banks are currently risk-based and primarily reputational4. Besides such risks, the financial sector should also look at the business opportunities provided by biodiversity and ecosystem services, show their awareness and commitments towards their corporate social responsibility (CSR) or both. A financial institution that invests in businesses with a good biodiversity profile is more likely to attract the ever growing group of ethical investors that want to have a good return on investment, but care as much (or even more) for the way this interest is achieved. Furthermore, being involved in pro-biodiversity investments can also display the companies’ own commitment towards the issue, which might not always come from a monetary motivation. A few examples of how a biodiversity business case can provide opportunities for financial sector businesses3, 4:

• Improved stakeholder perception. • Enhanced ability to attract talent. • Increased income from pro-biodiversity investments. • Growing markets for certified sustainably produced commodities. • Advisory services for clients concerned with biodiversity-sensitive projects. • Biodiversity-related insurance cover. • Development of new markets such as habitat banking17. • Government-induced opportunities.

This is not an exhaustive list of opportunities; in the current market and social conditions, the attention for the environment and sustainability keeps increasing and new opportunities for biodiversity-related financial sector business keep developing almost on a daily basis. Financial sector businesses need to be at the forefront of this development, both as a driver and to benefit from the new investment opportunities.

3.2.4. Business and Biodiversity guidelines for the financial sector

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Equator Principles23

The Equator Principles (EPs) are a voluntary set of standards for determining, assessing and managing social and environmental risk in project financing. The EPs are considered the financial industry ‘gold standard’ for sustainable project finance. The EPs, based on the International Finance Corporation (IFC) performance standards on social and environmental sustainability and on the World Bank Group’s Environmental, Health and Safety general guidelines, are intended to serve as a common baseline and framework for the implementation by each adopting institution of its own internal social and environmental policies, procedures and standards related to its project financing activities. Equator Principles Financial Institutions (EPFIs) commit to not providing loans to projects where the borrower will not or is unable to comply with the respective social and environmental policies and procedures that implement the EPs. The EPs apply to all new project financings globally with total project capital costs of US$10 million or more, and across all industry sectors. In addition, while the EPs are not intended to be applied retroactively, EPFIs will apply them to all project financings covering expansion or upgrade of an existing facility where changes in scale or scope may create significant environmental and/or social impacts, or significantly change the nature or degree of an existing impact. The EPs also extend to project finance advisory activities. In these cases, EPFIs commit to make the client aware of the content, application and benefits of applying the Principles to the anticipated project, and request that the client communicate to the EPFI its intention to adhere to the requirements of the EPs when subsequently seeking financing. The adopting EPFIs view the EPs as a financial industry benchmark for developing individual, internal social and environmental policies, procedures and practices. As with all internal policies, these Principles do not create any rights in, or liability to, any person, public or private. Institutions are adopting and implementing the EPs voluntarily and independently, without reliance on or recourse to International Finance Corporation or the World Bank. Principles for Responsible Investment24

There is a growing view among investment professionals that environmental, social and corporate governance (ESG) issues can affect the performance of investment portfolios. Investors fulfilling their fiduciary (or equivalent) duty therefore need to give appropriate consideration to these issues, but to date have lacked a framework for doing so. The Principles for Responsible Investment provide this framework. In early 2005 the United Nations Secretary-General invited a group of the world’s largest institutional investors to join a process to develop the Principles for Responsible Investment (PRI). Individuals representing 20 institutional investors from 12 countries agreed to participate in the Investor Group. The Group accepted ownership of the Principles, and had the freedom to develop them as they saw fit. The Group was supported by a 70-person multi-stakeholder group of experts from the investment industry, intergovernmental and governmental organizations, civil society and academia. The process, conducted between April 2005 and January 2006 involved a total of five days of face-to-face deliberations by the investors and four days by the experts, with hundreds of hours of follow-up activity. The Principles for Responsible Investment emerged as a result of these meetings. The process was coordinated by UNEP FI and the UN Global Compact. The PRI reflects the core values of the group of large investors whose investment horizon is generally long, and whose portfolios are often highly diversified. However, the Principles are open to all institutional investors, investment managers and professional service partners to support.

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Following the launch of the Principles, the PRI Secretariat was created to help co-ordinate the adoption of the Principles by additional investors, provide comprehensive resources to assist investors in implementing the Principles, and to facilitate collaboration among signatories.

3.3. Classification and analysis of existing best practices

3.3.1. Introduction to analysis grid

There are many ways to classify or categorise biodiversity business. One common distinction focuses on whether biodiversity is treated as a risk or as a business opportunity. Other classifications include distinctions between:

• Biodiversity as an input to production, as a competing use of resources, as an output for sale, or as the basis of liability and compensation claims.

• The relative emphasis on biodiversity conservation, sustainable use of biological resources, and/or equitable benefit sharing.

• The extent to which different business models focus on conserving the diversity of genes, species or ecosystems or capitalize on different values, i.e. direct use, indirect use, option and existence values.

• Biodiversity conservation as a by-product of other goods and services, versus conservation as a commercial service in its own right.18

The case studies below were selected because they represent best practice examples of finance related activities that take into account biodiversity conservation or enhancement. The summary examples presented below concern the following issues: tools to support markets for biodiversity – certification schemes, assessment and reporting, voluntary incentives; and case studies – best practices implemented by large companies and SMEs, and other initiatives.

3.3.2. Selected best practices

Business and Biodiversity support tools

Corporate Ecosystem Services Review4 The Corporate Ecosystem Services Review (ESR) is a structured methodology for corporate managers to proactively develop strategies for managing business risks and opportunities arising from their company’s dependence and impact on ecosystems. It assists companies in identifying impacts and dependence on healthy ecosystems such as freshwater, timber, genetic resources, pollination, climate regulation, and natural hazard protection and connecting these to their bottom line. The ESR builds on existing environmental management systems and due diligence tools by:

• Looking beyond issues of pollution and natural resource consumption. • Addressing dependencies and impacts companies have on the natural environment. • Considering both business opportunities and risks. • Coupling economic and environmental issues. • Providing a framework for stakeholder engagement. • Enabling use of environmental risks and opportunities for more innovative corporate

strategy. The ESR has been applied by over 100 companies and has resulted in a number of recognized benefits by:

• Enabling companies to identify new business opportunities arising from the company’s dependence and impact on ecosystems and the services they provide and to anticipate new markets as they are developing. In this way, the tool has also provided companies with information necessary to influence government policies on ecosystem conservation.

• Strengthening existing approaches to environmental impact assessment by addressing ecosystem issues not usually considered during that process. For instance, in the case of

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Mondi, Europe’s largest producer of office paper, application of the ESR led to the development of initiatives to improve water efficiency through control of invasive species and selection of water efficient tree strains.

• Providing a framework in which stakeholder engagement processes and relationships have improved. Syngenta, a large agribusiness company, applied the tool to identify opportunities to further engage a growing customer segment in India and identified multiple opportunities to provide additional services to these farmers.

• Allowing companies to demonstrate leadership in this area by proactively addressing the degradation of ecosystem services.

Ecosystem Services Benchmark4 Several tools have been developed within the asset management community to evaluate the BES risks and opportunities of investments. One example is the Ecosystem Services Benchmarking (ESB) tool, developed by the Natural Value Initiative in collaboration with investors from Europe, Brazil, the USA and Australia (Aviva Investors, F&C Investments, Insight Investment, Pax World, Grupo Santander Brazil and the Australian pension fund VicSuper). Designed to assess investment risk and opportunity associated with BES impacts and dependence in the food, beverage and tobacco sector, the Ecosystem Services Benchmark is aimed primarily at asset managers, but can also inform the banking and insurance sectors more generally. It has a secondary application for companies within the food, beverage and tobacco sectors, for which it provides a framework within which to consider the issue. The ESB focuses on impacts and dependencies on biodiversity and ecosystem services associated with the production and harvesting of raw materials in companies with agricultural supply chains (including agricultural commodities, livestock and fish). It evaluates companies against five broad categories of performance: competitive advantage, governance, policy and strategy, management, and implementation and reporting. Each evaluated company receives a summary of their results. By incorporating discussion of the recommendations and outcomes of the analysis into investor dialogues with poorly performing companies, improved performance can be encouraged and ultimately risk is more effectively managed. Natural Value Initiative25

The Natural Value Initiative (NVI) is multi-stakeholder collaboration which aims to develop and test a tool to provide a rigorous evaluation of biodiversity-related risks and opportunities for investment decision making. The key institutions involved are UNEP Finance Initiative, international NGO Fauna & Flora International, and Brazilian business school FGV. The tool is aimed at identifying BES risk within the food, beverage and tobacco sectors, which can then be fed into financial organizations’ investment decision-making processes, thereby reducing investment risk and increasing returns. For the agricultural sector, this will provide a strategic framework against which issues-based or commodities-based initiatives can be placed to facilitate prioritization and enable more effective communication with an increasingly engaged finance sector, thereby rewarding good practice in a way that is not currently achieved. The benchmark is based on established risk management processes and asks a series of questions regarding the presence within a company of appropriate governance procedures, policy and strategy, management tools and monitoring and assurance procedures to allow understanding and management of biodiversity impacts. 26

Biodiversity Quick Scan27

The Biodiversity Quick Scan has been developed by CREM for the Dutch Association of Investors for Sustainable Development (VBDO). It uses publicly available information of companies (annual reports, websites) to quickly assess their most important (potential) biodiversity impacts. VBDO uses this information as a basis for talks with these companies. The Biodiversity Quick Scans focus on the food and financial sectors.

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Global Environment Facility10 The Global Environment Facility is one of the main sources of funding for biodiversity conservation in developing countries. Financed by grants from rich-country governments, the GEF channels its resources through the World Bank, UNDP and UNEP. Over the period 1991–2001, the GEF provided about US$1.1 billion in grants and leveraged an additional US$2.5 billion in co-financing for biodiversity-related projects. Most of these were grants to developing country governments and NGOs, used to support more than 1,000 protected sites covering 226 million hectares in 86 countries. Funding for biodiversity projects involving the private sector has been more limited and focused on “capacity building and technical assistance in eco-tourism, agro-forestry, certification of commodities, payments for environmental services, and conservation of medicinal and herbal plants”. Much of the latter work was overseen by the IFC. In 2006, the GEF Secretariat developed a revised strategy to enhance engagement with the private sector. Key elements include: (i) a new US$50 million ‘public / private partnership fund’ intended to attract more private sector involvement and resources; (ii) increased use of ‘non-grant/risk mitigation instruments’ (such as loan guarantees, concessional credit, insurance, debt-for-nature swaps); and (iii) various communication activities to promote private sector engagement. Particular emphasis is placed on finding a role for the GEF that is “clearly additional to what the private sector is carrying out on its own” and ensuring that the GEF does not ‘subsidize’ business as usual or ‘standard mitigation activities’. With respect to biodiversity, the strategy sets out an ambitious agenda “to internalize the goals of biodiversity conservation and its sustainable use into production systems, supply chains, markets, sectors, development models, policies and programmes”. Target sectors include “agriculture, banking and insurance, fisheries, forestry, infrastructure, mining and gas, oil, tourism, and transport”. If the strategy is successful, it could lead to significant new investment by the private sector in biodiversity conservation in developing countries. Artificial Intelligence for Ecosystem Services4 ARIES (ARtificial Intelligence for Ecosystem Services) is a web-based decision-support tool that can be used to assess ecosystem services and model potential future scenarios. ARIES calculates the extent to which an area provides or uses a service, and how the benefits of ecosystem services flow across the landscape to reach beneficiaries. ARIES offers various entry points for decision makers and planners, including spatial assessments and economic valuations of ecosystem services, optimization of payment schemes for ecosystem services, and spatial policy planning. Different ecosystem services can be assessed at once, identifying areas that provide multiple “bundled” services and tradeoffs between them. An optional biodiversity layer integrates assessments of biodiversity and ecosystems services, allowing users to assess the value of biodiversity-rich areas and policy options that will ensure provision of ecosystem services. Specific ARIES case studies can be developed based on customization of existing Bayesian models. Current applications include designing payments for ecosystem services in biodiversity-rich areas of Madagascar, assessing the benefits and beneficiaries of clean water in the cloud forest ecosystems of Mexico and of flood mitigation in Washington State, USA. Modelling the dynamic flow of benefits between terrestrial, coastal, and marine ecosystems is also another core activity in the ARIES project. In ARIES, the economic value of ecosystem services is a function of the biophysical flow of a given benefit that is provided to beneficiaries. Such flow information is used to mediate known values expressing demand from the users and market or non-market values derived from established literature sources made available through an internal economic database. Economic values are therefore a direct function of provision and usage, honestly reflecting the ecological dynamics that determine supply on the one hand and the socio-economic drivers that determine demand on the other. In cases where ecosystem services are scarce or threatened, ARIES users can select non-linear functions to correctly address economic values in the vicinity of ecological thresholds. The value transfer engine in ARIES then uses the quantitative assessment of flows

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and estimates of critical thresholds to apply values from existing studies to an area under investigation.

Financial sector best practice examples

HSBC: Scaling up opportunities through learning and awareness4 In 2002, HSBC launched Investing in Nature, a $50-million, five-year partnership with several conservation organizations. As part of this initiative, HSBC sent 2,000 of its employees on Earthwatch Institute field research projects around the world and supported the training of 230 developing-country scientists. Participating HSBC employees also had a responsibility to undertake an environmental project in their workplace or local community, supported by a small grant from the company. This initiative not only supported conservation on the ground but did so in a way that strengthened biodiversity and ecosystem services awareness and commitment across the HSBC workforce. Employees who participated in Investing in Nature, as well as those who take part in the more recent HSBC Climate Partnership, bring their new knowledge of biodiversity and ecosystems back to the company, acting as ‘environmental champions’ within the business and developing projects that further HSBC’s commitment to sustainability. Such projects can help increase the company’s ability to attract young talent (Connor 2010). A recent independent evaluation undertaken by the Ashridge Business School concluded that 80% of senior HSBC managers agreed that the programme contributes to embedding sustainability into the ‘DNA’ of the business, while 83% agreed it is worth the investment because the programme gives HSBC a competitive advantage. The Netherlands’ fiscal green funds3 In order to stimulate environmentally friendly investments in the Netherlands, the Dutch ministries of VROM (Housing, Spatial Planning and the Environment), LNV (Agriculture, Nature and Food Quality) and Finance, in collaboration with the Dutch banking sector, initiated a green fiscal policy in 1995 to make investment in green funds attractive for private investors. Banks and specialized green funds provide low interest loans to entrepreneurs who engage in activities such as biological agriculture, nature development, sustainable/green housing and renewable energy technologies. Some of these investments have a positive contribution on local biodiversity. While the return on investment is generally lower with green funds, the government has provided a fiscal advantage for those who invest in these green funds (such as the Rabo Groenbank – by Rabobank) to make it financially attractive. The initiative has been a success in the Netherlands and various major banks, such as ABN AMRO, ING bank, Fortis, ASN Bank and the Triodos bank, are now offering green bonds or other green products. As of December 2005, the total invested capital amounted to € 1.5 billion, of which € 282 million has been allocated to the project category “nature, forests and landscapes”. The difference between the Dutch green funds and SRI is that investors in SRI funds invest in regular companies and therefore do not receive a fiscal advantage. Fundació Caixa Catalunya: Obra Social – Area Territori I Medi Ambient The aim of this project is to protect valuable lands by acquisition and stewardship, and to support nature conservation projects and environmental education in Catalonia and Spain. It is part of the business of savings banks in Spain to do social works and Caixa Catalunya wanted to use an innovative approach on the basis of models by The National Trust, Natuurmonumenten and others to conserve natural lands on a long term basis. It is the first case of an organization set up in Spain to buy natural land to protect it. It is a multi-stakeholder project with more than 350 NGOs, local authorities and the regional government of Catalonia involved. This project provides the bank with increased visibility for its social works, while providing support for biodiversity conservation and increasing public awareness and education regarding biodiversity.

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A number of successful outputs have been achieved since the start of the project:

• About 5% of the total surface of Catalonia is now under stewardship agreements or is purchased land; Fundació Caixa Catalunya is now the largest private landowner in Catalonia.

• Restoration of the biggest freshwater lake in Catalonia. • The reintroduction of the otter in Northeast Catalonia, the black vulture in the Pyrenees and

white stork populations in Catalonia. • Between 1998 and 2000, about EUR 55 million has been spent on nature conservation. • Support for local farmers and shepherds.

ASN Bank: Issue Paper on Biodiversity The aim of this project was to formulate an investment policy on biodiversity for the ASN Bank and the ASN Investment Funds. The rationale behind this was that biodiversity is an important part of sustainable banking. There are financial risks and opportunities related to investment in biodiversity. Being a bank with a strong focus on sustainable and social business practice, ASN Bank places at the forefront the risks and opportunities for biodiversity. With this investment policy, ASN Bank will lead more money to projects and companies with positive impacts on biodiversity. Indirectly, this can lead to improvements for biodiversity, such as more sustainable forestry and less emissions to water. ASN Bank is using strict sustainability criteria, which is reportedly what their clients expect. Benefits for ASN Bank are primarily delivered through fulfilling clients’ expectations; benefits for biodiversity are indirect through positive stimulus towards companies with active biodiversity policy. Most important are the benefits for the poor. The poor are directly dependent on biodiversity (food, fish, clean water). Protecting their natural resources for food and water can have an important impact on their well-being. This can be achieved by stopping (which means not investing) in industrial fishing in their traditional fishing grounds or not polluting rivers by industries that supply fresh water. The formulation of a comprehensive biodiversity investment policy was innovative. It was also the first time (at least in the Netherlands) that stakeholders were publicly invited to comment on a draft investment policy by a bank on the subject of sustainability. Over 4,500 visits were registered on the draft biodiversity policy through the internet platform that is facilitated by the Bank: www.voordewereldvanmorgen.nl. ASN Bank’s issue paper on biodiversity could be an example or inspiration for other financial institutions. This initiative will be followed up on a number of different levels. One is engagement with companies, for instance on illegal timber use in paper production through publishers. Another level could be the possible development of a tool to measure biodiversity performance comparable to ASN Bank’s carbon footprint performance measurement. UNEP FI: CEO Briefing The aim of this initiative is to convince financial institutions that BES is material and offer an avenue to build BES in banking, investment and insurance business operations. FIs are at the top of the ‘private sector’ food chain and should take biodiversity into account. FIs need to better understand BES risks and opportunities in order to gear up for the 21st century. Regional account: Involving people by creating landscape investments28

The Regional Account is an ingenious financial concept to acquire funds for investments in the sustainable development of the landscape near Boxtel. It also connects people to the landscape they invest in. The concept of the Regional Account is simple. People save and receive interest whilst at the same time a small percentage of their interest from their savings provides income for the National Landscape Het Groene Woud. It begins when people and organizations open a

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special savings account at the ASN Bank, an Isis Account, and deposit a certain amount of money. They receive the market rate of interest and the usual facilities for withdrawal of the deposit. The initiators of the Innovatieplatform Duurzame Meijerij act as a local stakeholder group. They have great potential for persuading local governments, agencies and companies to open an Isis Account. For the ASN Bank getting these new customers is an attractive business proposal, which is why it agreed to contribute 0.15 % over the total amount of all the Isis Accounts into the Hortus Fund. Besides that account holders are encouraged to donate a part of their interest to the fund. The Regional Account is not only about creating an additional and independent source of income to work on strengthening the key qualities of this area, its green character, the small scale open landscape and the relationship between heath, woods, brooks and fields; it is also a way of linking people to the regional landscape. By inviting people and organizations to ‘give’ their money, they get involved into the landscape they invest in. Crédit Agricole CIB: Microcredit programme with a biodiversity touch29

Crédit Agricole CIB is participating in financing a three-year programme to fight poverty in China, in partnership with Heifer International. This programme will provide help to disadvantaged agricultural populations, while preserving the environment. This initiative reflects Crédit Agricole Group's values and its sustainable development policy. This project is designed to extend interest-free loans of USD 626 (RMB 5,000) to each of 200 poor households in Tengchong County to buy pigs, goats, sheep, dairy buffalo, Asiatic buffalo and cattle. Of Tengchong’s agricultural population of 480,000, 21.5% have annual per capita income of USD 115 (about RMB 920). Most beneficiaries of the project belong to the Lisu ethnic group. Tengchong County is in China’s Yunnan Province, and borders Myanmar (formerly Burma). It is a part of the Gao Li Gong National Nature Reserve, which the World Wildlife Fund has designated as an internationally important reserve. The reserve is 52% forest, which is home to more than 14,000 plant species. Most families in the region covered by the project own a parcel of forest, and have replanted trees. However, because of their lack of ecological knowledge, the species that were planted were not sufficiently varied, so that the forest’s rate of regeneration was rather low. The Conservation Office of the local Gao Li Gong community has joined in on the project to supply families with a variety of endangered native plant species. The trees that are re-planted constitute a varied forest that will re-establish biodiversity while conferring economic advantages on the families involved in the project. Farmers will gain awareness and training in conservation of biodiversity and basics of managing natural resources. Heifer International will undertake similar awareness and prevention actions with local populations concerning drugs and HIV/AIDS. Finally, the families commit to lend the same amount of money in two to three years, to help other families under the programme. The knowledge and know-how will be passed on to these families too. Crédit Agricole: Technical biodiversity guide for farmers30

Credit Agricole works with Ligue pour la Protection des Oiseaux (BirdLife Partner), and has supported the production of a technical guide for farmers seeking to protect biodiversity. More than 130 farmers committed to responsible, organic and sustainable agriculture are taking part in this initiative.

Biodiversity venture capital4

Verde Ventures provides support to small and medium-sized businesses that contribute to healthy ecosystems and human well-being. It applies a pre-investment biodiversity review process as well as a post-investment biodiversity monitoring. Since its creation in 2003, it has

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helped partners restore and conserve more than 300,000 hectares of important lands and generate sales of nearly US$32 million. As of 31 March 2010, it had invested US$14.8 million in agro-forestry, alternative energy, ecotourism, sustainable harvest of wild products and marine initiatives. For over a decade, the EcoEnterprises31

Fund has invested in sustainable businesses, particularly small and growing businesses in Latin America and the Caribbean. The Fund also complements targeted financing with technical assistance to foster success. The first Fund, launched jointly by The Nature Conservancy and the Inter-American Development Bank’s Multilateral Investment Fund in 2000, deployed US$6.3 million to 23 sustainable companies, with products ranging from organic shrimp to organic spices, from FSC-certified furniture to pesticide-free biodynamic flowers and acai palm berry smoothies. The businesses created over 3,500 jobs, generated US$281 million in sales, leveraged US$138 million in additional capital and conserved 860,773 hectares of land. A new investment fund, EcoE II, is to be launched by the end of 2010 and will target companies at the next stage of business growth, providing expansion capital and advisory support to help develop operations and bring results to scale.

Root Capital, a non-profit social investment fund, focuses on sustainable grassroots businesses in the rural areas of developing countries, specifically targeting those businesses that are caught in the ‘missing middle’, too small and risky to access capital from mainstream banks and too large for microfinance. It complements its provision of capital with financial education and training and provides connections to emerging ethical supply chains. Since its launch in 2000, it has provided over US$175 million in credit to 265 small and growing businesses in 30 countries, maintaining a 99% repayment rate from borrowers. For many of its loans, the fund uses future sales contracts from companies like Green Mountain Coffee Roasters, Marks & Spencer, Starbucks, and Whole Foods as collateral. 4. Gaps and needs: Best practices analysis in the sector

4.1. Key needs Communication with finance sector stakeholders and the analysis of the above mentioned case studies has provided a preliminary list of key needs from the sector in relation to biodiversity and business and the EU B@B Platform itself. During the EU Business @ Biodiversity Platform – Finance Workshop (15 September 2010, European Commission, DG Environment) these needs were discussed with the participants and the list was elaborated. The key needs and recommendations identified by the participants were:

• Increased dialogue and cooperation between the stakeholders is needed in order to develop large scale private investments into biodiversity.

• Nature conservation and in particular land management need long term vision and commitment. This is not commonly available amongst financial sector institutions.

• Information needs (what should businesses do and not do regarding biodiversity). • Knowledge base. • Harmonized access to knowledge. • Leadership from regulators and from banks/financial institutions. • Public awareness in relation to investment possibilities. There has to be a demand

amongst clients for biodiversity friendly products. • Regulation for risk reduction in relation to biodiversity investments. • Biodiversity needs to be included into education (e.g. MBA) to make the business

managers of tomorrow aware of the concept and of its importance. This will stimulate future biodiversity-aware business conduct.

• Methods of convincing the senior management in banks/financial institutions. • Information on the sustainability of financial products.

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• Tools and instruments for the financial sector to calculate biodiversity and ecosystem services risks.

4.2. Key success factors

Based on the above case studies and the analysis of Bishop et al (2008)18, several critical success factors can be identified, which underpin and stimulate private investment in biodiversity conservation. Perhaps the most important is the presence of adequate policy frameworks, but many other factors also matter for increased private investment in biodiversity business:

• Multi-stakeholder participation and ‘ownership’ of biodiversity business initiatives, involving the full gamut of private stakeholders (e.g. investors, entrepreneurs, brokers, auditors, customers), but also public agencies and NGOs. A prerequisite for moving forward in this area is to clarify the respective roles and commitments of different stakeholders in developing biodiversity business.

• Demand-led developments; opportunities should be generated based on market needs and on consumer demand.

• The importance of public policy for stimulating biodiversity business. Voluntary action is clearly a valuable tool for raising awareness and testing alternative business approaches to biodiversity conservation. Voluntary initiatives such as eco-labeling and certification can also drive major market changes, where consumer preferences for ‘sustainable’ goods and services are strong. In that respect, implementation of effective marketing activities is a key issue.

• Distribution chains should be designed and implemented efficiently. • Biodiversity business plans and performance indicators. Integrated biodiversity business

plans and project-level biodiversity management plans need to include both commercial and biodiversity performance indicators. Both process and output indicators can be used to assess the extent to which biodiversity is reflected in business management decisions, products and services.

During the EU Business @ Biodiversity Platform – Finance Workshop (15 September 2010, European Commission, DG Environment) this list was elaborated with a number of other key success factors:

• Biodiversity investments should be profitable. In essence, people still reach for investments to get a better return than on a savings account. Profitability of a biodiversity investment which is comparable to the market interest will strengthen the position for biodiversity investments.

• Demonstrating the case for biodiversity by practice. Analysis of sound biodiversity investment possibilities is not sufficient. The products should be put out into the market and be able to prove their value.

• Leadership. Businesses should dare to take risks and show leadership in setting up products and putting them on the market. Not waiting for demand but creating supply to attract the interest of the public to biodiversity investments.

5. Conclusions At the moment, biodiversity is too abstract for most stakeholders in the finance sector to incorporate it into their core business and develop products to invest in biodiversity or opportunities deriving from it. The main reason given for this is the lack of accessible knowledge in a language that is comprehensible for the sector and the lack of communication with the environmental sector. In essence, both sectors do not speak each other’s language and as such are unable to cooperate in developing sound biodiversity investment opportunities. To develop a biodiversity business case for the finance sector, it is therefore important to develop sources of knowledge and information for the sector in relation to biodiversity and financial

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instruments and products. To facilitate this process, it would be good to link biodiversity to financial risk mitigation and other financial topics to make it more visible and comprehensible for the sector. Furthermore, awareness about the importance of biodiversity and possibilities for biodiversity investments amongst senior management and clients needs to be enhanced in order to create a supply and demand of biodiversity investments and other related products. Leadership in this field from both key stakeholders and the regulatory sector is necessary to raise the issue and incorporate biodiversity into long term business thinking. 6. References 1 DG ENV.B.2/SER/2009/0018 2 Alexander, P., Baden, S. (2000), Glossary on macroeconomics from a gender perspective, Institute of Development Studies, University of Sussex 3 McKinsey & Company (2009), Global capital markets: Entering a new era, September 2009 4 Mulder, I. (2007). Biodiversity, the Next Challenge for Financial Institutions? Gland, Switzerland: IUCN. Xiv + 60pp 5 TEEB – The Economics of Ecosystems and Biodiversity Report for Business, 2010 6 Schaick, J. van, W. Broer & G.A. Dijkstra (2005). Quick Scan Biodiversiteit: voor de voedingssector en financiële sector, CREM, VDBO, December 2005 7http://ec.europa.eu/environment/biodiversity/business/sectors/financial-sector/challenges_en.html 8 http://biodiversiteit.blogspot.com/2010/06/biodiversiteit-en-de-ideale-bank.html 9 Goba, V., Y. Waarts (2008), European Biodiversity Finance Compendium - Final Report, Tilburg, 2008 10 During the CBD COP10 (Nagoya, October 2010) the Decision on Business Engagement was adopted: http://www.cbd.int/nagoya/outcomes/ 11 SAC aim to maintain and restore the habitats and species at a favorable conservation status. 12 Directive 2009/147/EC 13 SPAs are scientifically identified areas critical for the survival of the targeted species, such as wetlands. They are part of the Natura 2000 ecological network set up under the Habitats Directive 92/43/EEC. 14 Directive 92/43/EEC 15 Source : http://ec.europa.eu/environment/nature/natura2000/management/guidance_en.htm 16 http://www.peblds.org/ 17 The French body CDC Biodiversité is entirely dedicated to biodiversity issues, working with businesses, local authorities, public bodies in their actions for biodiversity: restoration,, management, valuation and compensation. Read more at http://www.cdc-biodiversite.fr/ 18 Bishop, J., Kapila, S., Hicks, F., Mitchell, P. and Vorhies, F. (2008). Building Biodiversity Business. Shell International Limited and the International Union for Conservation of Nature: London, UK, and Gland, Switzerland 19 Dickson et al. (2007), Final Probioprise Report – The Working Partnership: SMEs and biodiversity 20 pro-biodiversity business: LET’S GET IT GOING!, Avalon, the Netherlands in collaboration with CREM, the Netherlands, Wommels, December 2009 21 RSPB (2009) Handbook for Developing and Implementing Pro-Biodiversity Projects- an output from the EC Biodiversity Technical Assistance Unit project, Sandy, UK 22 http://ec.europa.eu/environment/biodiversity/business/sectors/financial-sector/how-to-integrate-into-your-business_en.html 23 http://www.equator-principles.com/ 24 http://www.unpri.org/ 25 UNEP Finance Initiative (2008), Biodiversity and Ecosystem Services – Bloom or Bust?, March 2008

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26 http://www.naturalvalueinitiative.org/ 27 http://www.crem.nl/main.php?page=124&lang=en 28 http://www.lifescapeyourlandscape.org/index.php?pagina_id=202 29 http://www.ca-cib.com/group-overview/credit-agricole-cib-commits-to-a-microcredit-program-in-china.htm 30 http://www.unglobalcompact.org/system/attachments/4874/original/CA-Business-review-2009.pdf?1271409180 31 www.ecoenterprisesfund.com

The European Union Business and Biodiversity Platform

The EU Business and Biodiversity Platform is a unique facility within the European Commission's Initiative where businesses can come together to share their experiences and best practices, learn from their peers, and voice their needs and concerns to the European Commission. The Platform aims to strengthen the link between the business sector and biodiversity conservation. The IUCN Regional Office for Pan-Europe, in partnership with PriceWaterhouseCoopers, ECNC, ELO and Blue4You, implements the B@B Platform which is funded by the European Commission. More information at http://ec.europa.eu/environment/biodiversity/business.

IUCN IUCN, International Union for Conservation of Nature, helps the world find pragmatic solutions to our most pressing environment and development challenges. IUCN supports scientific research, manages field projects, and brings governments, NGOs, the UN and companies together to develop policy, laws and best practice. www.iucn.org

PriceWaterhouseCoopers The French SBS practice (www.pwc.fr/dd), member of PricewaterhouseCoopers Advisory France and a part of PricewaterhouseCoopers Sustainable Business Solutions (SBS) network (www.pwc.com/sustainability) is dedicated to providing clients with environmental/sustainability advisory services.

ECNC The ECNC-European Centre for Nature Conservation working for the conservation and sustainable use of Europe’s nature, biodiversity and landscapes, developing partnerships with organizations, institutes and businesses. www.ecnc.org

ELO ELO, European landowners’ organization is committed to promoting a sustainable and prosperous countryside and to increasing awareness relating to environmental and agricultural issues. www.europeanlandowners.org

Blue4You Blue4You is an agency specialising in online communication and development of dynamic applications. Blue4You gathers the strategic, technical and graphic expertise to create powerful institutional interactive campaigns. www.blue4you.com

Contact

Shulamit Alony Regional Business and Biodiversity Officer

IUCN - Regional Office for Pan-Europe 64 Boulevard Louis Schmidt

1040 Brussels, Belgium Telephone: +32-2-739 0319

Fax: +32-2-732 9499 ecbb@iucn.org

This project is carried out with financial support from the European Commission. The points of view expressed in this document are those of the consultants. They do not represent the official point of view of the Commission.