Biodiversity, the urgent need to protect it

Eric, we talk about climate a lot but why is preserving biodiversity just as urgent?

While there is a strong collective awareness about climate issues, preserving biodiversity has not been given the same level of urgency so far. To be blunt, the planet is experiencing its sixth mass extinction – a 70% decline in species since 1970. What’s more, 20% of the world's crucial ecosystems are near tipping points with severe consequences for the economy (unforeseen supply chain disruptions, sharp increase in the price of raw materials, emerging regulatory risks, etc..). With half of the world’s GDP moderately or highly dependent on nature, it’s critical to act by investing in the protection of biodiversity through nature-based solutions (NBS). Moreover, climate and biodiversity are two sides of the same coin as NBS can mitigate 37% of global greenhouse gas emissions. 

One hundred and ninety countries explicitly expressed a sense of urgency on December 19th 2022, at the COP 15 for Biodiversity in Montreal, when they approved the Kunming-Montreal Global Biodiversity Framework (GBF) that sets out visionary goals for 2050 and 23 interim targets for 2030, including the “30x30” target to conserve at least 30% of the world’s land, inland waters, coastal areas and oceans, and to restore 30% of already degraded terrestrial and marine environments. Countries also agreed to end at least USD 500bn a year in environmentally damaging government subsidies to businesses, especially for agriculture and fishing, and the reduction by 2030 of at least 50% of the risks related to the use of pesticides. The GBF is biodiversity’s Paris Agreement. It should encourage public and private entities to actively preserve biodiversity at scale and allocate capital to innovative solutions such as NBS projects. 

How can businesses protect biodiversity and what does this mean for our clients?

COP 15 was a wake-up call for businesses and financial institutions. One of the key elements of the newly approved GBF is Target 15, which states that corporations have an increased responsibility to assess and disclose their nature-related risks, impacts and dependencies. Accurate data and reporting are essential for companies to transition to nature-positive, net-zero business models. 

In fact, the Corporate Sustainability Reporting Directive requires large, listed companies to report on environmental matters, including climate and biodiversity¹. Although biodiversity reporting standards are still at the phase of public consultation, it is important for corporations to align their biodiversity transition plans with COP 15’s GBF. Mandatory reporting will take effect in January 2024. 

Requirements for increased transparency also extend to financial markets. Article 9 of the Sustainable Finance Disclosure Regulation², and article 29 of the French legislation on climate and energy³, both aim to provide greater transparency on the sustainability objectives of financial products. This entails an accurate understanding of a financial product’s biodiversity, climate, and social risks, as well as its targeted positive impacts. 

However, the main challenge does not lie so much in reporting as in the required deep transformation of businesses’ value chains. Companies increasingly experience disruptions in their value chains: understanding their dependencies on nature and transforming their business practices will reduce risks and make them more resilient. The first movers will have a decisive advantage. 

For instance, productive and regenerative agriculture represents a market of at least USD 1.1 trillion by 2030⁴ to resolve the consistent decline of productivity over around 20% of the Earth’s vegetated surface during the past 20 years. To enable the transition, investments in improvements like smart irrigation, nutrient recycling systems and related new technologies are needed. All in all, there’s a need to close a biodiversity finance gap of about USD 700 billion per year⁵, and to align financial flows with the Global Biodiversity Framework.

While the opportunities are highly promising, the challenges are complex. For this reason, Societe Generale is actively contributing to a growing body of frameworks and guidance, such as the Science-Based Targets Network (SBTN) in order to help businesses assess and measure their biodiversity footprint using ecosystem-based methodologies and the latest available science.  

How is Societe Generale helping clients on their “nature-positive” journeys?

Among other things, COP 15 highlights the need to develop innovative financial mechanisms (Target 19). At Societe Generale, we help mobilising private capital for biodiversity by developing financial products tailored to our clients’ needs, which can foster new business opportunities and innovation in their value chains. We aim to accompany them in the creation of new scalable and bankable economic models with revenue streams rooted in impact.

Our Impact-Based Finance team has developed a new offer around NBS to help businesses implement their net-zero, nature-positive strategies by enabling them to reduce and remove residual carbon emissions, while transforming their value chains to improve their biodiversity footprint and resilience.
This new offer is comprised of three pillars: 

1.    Firstly, we’re helping companies to define a strategy and set measurable, time-bound objectives to align their businesses with a net-zero and nature-positive trajectory by leveraging our participation in the SBTN. We are doing so in partnership with a carefully selected panel of experts. 

2.    Secondly, we’re supporting our clients in the selection, origination, and sourcing of investments in NBS projects. To do so, we’ve built an ecosystem of developers for the structuring, enhancement, and implementation of these projects. In addition to developing strong relationships with well-established NBS developers active globally, Societe Generale has recently taken a minority position in EcoTree, a B-Corp start up active in preserving forests and ecosystems in Europe. We have also developed a proprietary screening methodology that helps us select high-quality projects that maximize impact outcomes. Since these projects must be economically and environmentally viable, and contribute to the socio-economic development of local communities, we ensure that they align with national policies and regulations on climate and biodiversity, as well as best practices and global standards. Additionally, we ensure that the key performance indicators used to measure impact are backed by science and local knowledge to focus on what is most important for local communities. 

3.    Thirdly, we mobilise the bank’s financial expertise to answer our clients’ needs for advice and/or financing of their investments in NBS projects. For instance, we can design blended finance mechanisms to de-risk investments in developing countries or advise our clients on the creation of dedicated funds adapted to their sustainability and commercial strategies. 

In summary, we believe that nature-based solutions form the foundation of a positive and virtuous investment cycle, allowing companies to become more resilient and contribute to the transition towards an economy that recognizes its dependency and impact on nature. Societe Generale intends to become an active player in this transformation and a major contributor to scaling up the global economy’s fight back against falling biodiversity.

^₁ European Financial Reporting Advisory Group, Draft European Sustainability Reporting Standard E4 Biodiversity and Ecosystems
² Mirova, SFDR
³ BL Evolution, Article 9 LEC - Biodersity
⁴ World Economic Forum
⁵ Bloomberg