Considering biodiversity in investment decision making

Biodiversity is fundamental to the planet and people. It is the variety and variability of life at genetic, species and habitat levels — forests, oceans and every corner of life on Earth. Globally, biodiversity has been decreasing for decades, and immediate actions are required to reverse this.

The fall in biodiversity threatens both the environment and the global economy. According to the World Economic Forum, over half the world’s total GDP is moderately or highly dependent on nature and its benefits or services and therefore exposed to risks from biodiversity loss. In December 2022, the world came together in Montreal to reach a landmark agreement on biodiversity — the Kunming-Montreal Global Biodiversity Framework.  The plan includes concrete measures to halt and reverse nature loss, including putting 30 per cent of the planet and 30 per cent of degraded ecosystems under protection by 2030.

At NIB, we recognise that our investment decisions can have a negative or positive impact on biodiversity. Zanda Krukle, PhD, and NIB’s Sustainability Advisor with a speciality in environmental science, explains what the role of financial sector is, and what NIB is already doing.

Biodiversity needs to be considered in investment decision making, but what does this mean to NIB?

“NIB has biodiversity principles within its Sustainability Policy. The policy guides how we operate, and it applies to everything we do. It explicitly states that NIB will support its member countries’ efforts to achieve climate goals and enhance biodiversity in nature,” Zanda Krukle explains. “At a practical level, this means that we monitor our clients or potential clients to ensure they are compliant with the policy and the exclusion list it includes. In addition, we have ESG guidelines for our lending and treasury operations, taking biodiversity aspects into consideration at a counterparty level.” 

“Our exclusion list contains several aspects directly or indirectly related to nature protection and biodiversity loss. These include the prevention of direct soil, water and air pollution and the over-exploitation of natural resources to mention only a few. In addition, biodiversity-related questions are assessed as part of the project due diligence process whenever relevant, especially within certain sectors such as mining and forestry.”

“We require our clients to ensure that the respective legislation and environmental permit requirements are observed. This is particularly relevant at the project level, where we check that the project will not have a significant negative impact on the surrounding nature. Biodiversity decline concerns everyone on this planet, but unlike climate change, it is still a much more local issue and is always context-specific.”

“The impact of our own operations is small compared to our lending impact, but minimising this footprint is also important for us. We voluntarily contribute to environmental protection and climate change offsetting. Last year, we supported the Race for the Baltics, a non-profit organisation dedicated to improving the health of the Baltic Sea.”

Building a solid foundation for our biodiversity work

“Biodiversity is high on the global agenda — and rightly so. Climate crisis and biodiversity loss are the two global challenges of our time. They are not just connected but need to be addressed with the same urgency. This is also recognised in our operations. In 2023, we strengthened the Bank’s knowledge, and started to systematically analyse the impact on nature of our lending portfolio, considering the steps and recommendations of the Science Based Targets network (SBTN).”

“We made good progress with the biodiversity and nature impact assessment and the identification of the sectors, industries and companies associated with the largest positive or negative impacts in this regard. Yet there is more work to be done as we build a solid foundation for our future work.”

“Another tangible action is that in 2022, we started to assess the alignment of each new project with the EU Taxonomy, including the fulfilment of technical screening and do-no-significant harm criteria, which also include biodiversity.”

“When it comes to financing, direct nature- and biodiversity-based large-scale income-generating projects that will boost Earth’s biodiversity remain somewhat limited. But we have good experience and tangible examples from financing wastewater treatment plants and the use of nature-based solutions for water treatment, for example.”

What does the future hold, and is there still room for improvement?

“Tackling biodiversity loss and understanding that it isn’t enough to minimise negative impacts and that Earth’s biodiversity needs to be restored isn’t something one player can do alone. More actions are needed from businesses and financial sector — and from both public and private players. But through our close collaboration and engagement with customers, investors, civil society organisations and other networks, we continuously learn about and share insights into relevant challenges and priorities. These efforts often lead to tangible sustainability-themed business transactions, as well as action and engagement.”

“Banks can and should play a central role. Banks can advocate and call for ambitious and transformative global action, set targets, and align financial flows to nature-positive outcomes, or they can provide advice to their clients. Not all the indicators and tools are in place yet perhaps, but in 2023, we saw very promising initiatives and developments such as the launch of the Taskforce on Nature-related Financial Disclosures (TNFD) final recommendations.”

“Understanding our lending portfolio’s impact and dependencies on nature was the focus in 2023. The work continues, and we are committed at NIB to developing our nature and biodiversity strategy and targets, which will guide the progress of our actions and ambitions. This ambition is well aligned with the Kunming-Montreal Global Biodiversity Framework and the declaration of the Nordic Ministers of Environment and Climate on biodiversity, oceans and climate, conveying an important message to the Nordics, and we aim to play our part”, she concludes.