The paper of Convention on Biological Diversity was officially adopted at the United Nations Conference on Environment and Development (UNCED) on the 22nd May 1992. Later, the 22nd of May was established as International Biodiversity Day to raise awareness of the issue. Thirty years later, the issue of biodiversity receives increasing attention in the public debate. Looking at the current facts and figures, this is urgently needed: the World Biodiversity Council IPBES warns that species extinction is ten to one hundred times higher today than it has been in the past ten million years. In just a few decades around one million animal and plant species could become extinct, that accounts for twelve percent of the species living on Earth today.
This development is not only threatening for the affected species but also for us humans. Through the destruction of biodiversity basic needs, which are vital for our survival such as clean air, fresh water or good soil quality can no longer be ensured. Also, the vast majority of all food and crop plants are depended on pollination by animals. Furthermore, climate change and biodiversity are inextricably linked to one another. Increasing global warming favors the extinction of species, which in turn accelerates climate change. The progressive destruction of natural ecosystems and the animal species within them, is therefore also affecting the achievement of the climate target of 1.5 degrees.
Besides the ecological consequences, the loss of biodiversity also has a direct economic and financial component. For instance, it is estimated that worldwide economic output of around 44 trillion US dollars depends on an intact nature - that is more than half of the world's gross domestic product.
How politics react
The issue has increasingly moved into the focus of political action in recent years. In future, business in particular will no longer be able to avoid dealing with the impacts of its business activities on biodiversity and developing risk strategies: Especially the economy has to consider the environmental and biodiversity effects of their business models. Therefore, risk strategies must be developed. The UN is currently internationally negotiating a new agreement on biodiversity, which is supposed to have similar significance as the Paris climate agreement. After some postponements, due to the Corona pandemic, the agreement is still expected to be finalized in December 2022 in a UN World Nature Summit in Montreal. The so-called "Taskforce on Nature-related Financial Disclosures" (TNFD) was founded in 2020 to work out a voluntarily based financial reporting structure specialised on biodiversity develop voluntary financial reporting standards specifically for biodiversity. The task force presented a draft for a new framework for disclosure requirements and risk management in relation to nature-related risks in April 2022. The framework is currently being tested by various market participants in a pilot project in which ING is also participating. Climate related frameworks are already in place and are being adopted by national and European legislators. Such standards already exist for the climate sector and are increasingly being taken up by national and European legislators.
At the level of the European Union (EU), the final negotiations on the "Corporate Sustainability Reporting Directive" (CSRD) are currently underway. The new directive will greatly expand the disclosure requirements for information - also for indicators related to biodiversity. Thus, companies are to provide precise information on their goals, plans, key performance indicators and strategies in the future, with regard to their impact on nature. The EU taxonomy is also addressing the issue. So far, the focus has been on climate protection, the technical definitions for the climate targets biodiversity and circular economy are to be prepared this year and then implemented in delegated acts.
What does the ING do?
As a bank, we have an important influence on biodiversity through our business model for example by deciding which companies and projects we want to finance means that as a financial institution we have a special responsibility in the transformation towards a sustainable society. Therefore, as a financial institution we have a special responsibility when it comes to the transformation towards a more sustainable society. The economic existence of our customers is directly affected by the loss of biodiversity, and we are indirectly we are exposed to this risk through our loan portfolio as well. For these reasons, we made it our goal to support our clients in switching to business models that do not harm nature but rather have a positive impact. To this end, we have a range of sustainability products and services in our offering such as green loans and bonds. In addition to that, we have included the topic of biodiversity in our risk management system for environmental and social risks (ESR).
As one of our initiatives we apply strict ethical and environmental criteria in our financing decisions. We do not finance projects that have a direct impact on high-value ecosystems, such as UNESCO heritage sites (like the Great Barrier Reef) or endangered wetlands. For sectors that have particularly high impacts on nature, the framework includes additional due diligence requirements: For example, we conduct increased due diligence before financing projects that require significant changes in land use. Most recently, in 2022, we expanded the existing requirements for "key biodiversity areas" that are home to populations of globally threatened species.
As a financial institution, we see ourselves having a dual responsibility to protect the earth and the life on it: Firstly, as committed members of society to preserve a future worth living for ourselves and our children, and secondly as a business that can only be successful if its customers prosper sustainably in the long term. For both, healthy ecosystems are necessary. We therefore want to do our part in fighting the risks of losing biodiversity and help our clients to align their business models in a sustainable way. The new regulatory requirements on biodiversity, that are currently on the horizon, should rather be seen as an opportunity to shape this central topic of all our future together.