UN launches new biodiversity tool to help banks and investors assess their financial portfolio

New UN-backed biodiversity tool has been launched, enabling financial institutions to explore to what extent their financial portfolio indirectly drives species extinction risk and impacts ecological integrity.

The ENCORE biodiversity module tool is a free, online resource which helps global banks, investors and insurance firms assess the risks that environmental degradation, such as pollution or destruction of forests, causes for financial institutions.

The tool was developed by the Natural Capital Finance Alliance, a collaboration between the UN Environment Programme World Conservation Monitoring Centre, the UN Environment Programme Finance Initiative and Global Canopy.

Eric Usher, Head of the United Nations Environment Programme Finance Initiative said: “The ENCORE biodiversity module lies at the cutting edge of sustainable finance, allowing financial institutions to take material action to pivot the real economy towards a nature-positive future. Replenishing and rebuilding biodiversity is an urgent global priority and those financial institutions which show market leadership by being early movers may have a considerable competitive advantage.”

Analysis using the new module suggests that:

• Over 40% of mining activity globally occurs in ecoregions with strong declining trends in ecological integrity.
• 50% of the mining sector’s potential for reducing species extinction risk lies with just over 2% of mines globally. Ambitious biodiversity management within these locations is crucial for avoiding species extinctions.
• Over 60% of the global potential for reducing species extinction risk across all land area falls within cropland.

Over 30 financial institutions have taken a pioneering role in the development and testing of the module, including Barclays, BNP Paribas Asset Management, Citi, Credit Suisse, Natixis, NatWest Group, Scotiabank, and UBS.

The new module lies at the cutting-edge of sustainable finance, allowing financial institutions to take immediate action, activate stakeholder engagement, and transition their portfolios towards a nature-positive future.

Banks and investors can use the module to map their current exposure, and explore future scenarios, identifying potential pathways to increase positive impacts within agricultural and mining portfolios, as well as transition mining portfolios to a low energy future. The module provides guidance on company engagement, enabling financial institutions to work with stakeholders in high-priority areas to adapt production practices with the aim of making them nature-positive.

Niki Mardas, Executive Director of Global Canopy, said: “Data is key to unlocking finance sector action on biodiversity loss, and the missing link that financial institutions tell us they urgently need to shift their financing and investment away from nature-negative activities and towards nature-positive ones. The ENCORE tool has already been used by key finance sector players, like the Dutch Central Bank, to explore nature-related risks across entire markets. Now the new ENCORE biodiversity module enables individual financial institutions to take further targeted action in sectors like agriculture and mining which have high impacts and dependencies on nature.”

Find out more here.