Perspectives on nature-related finance: Diana Baron, Banco de Bogotá

A growing number of financial institutions throughout the world are starting to adopt the Taskforce on Nature-related Financial Disclosures’ (TNFD) recommendations. Global Canopy recently ran a TNFD implementation support programme with South American banks to help them get started with nature-related assessments, covering all phases of TNFD’s voluntary assessment approach, LEAP (Locate, Evaluate, Assess and Prepare).

Banco de Bogotá was among participants in the programme. We chatted with its Head of Sustainable Finance, Diana Baron, about the importance of nature in banking, key takeaways from the programme, her top tips for peers starting to explore the TNFD’s recommendations, and more.

This interview is also available in Spanish and Portuguese.

Name: Diana Baron Title: Head of Sustainable Finance Organisation: Banco de Bogotá Location: Bogotá, Colombia

In what ways does your bank interface with nature?

In three broad areas. Firstly, risk – we assess risks and opportunities in sectors with impacts and dependencies on biodiversity, such as agriculture. We monitor current and prospective clients’ transactions in areas of ecological importance, especially deforestation hotspots. Deforestation and illegal trafficking are excluded from our credit financing.

Secondly, opportunities and innovation – we are proud to have the first ‘green’ debit card in Colombia. It gives our retail customers a financial instrument to support the preservation and restoration of forests in the Colombian Amazon and mangroves in the Colombian Caribbean. 1% of each customer’s spending goes to planting trees. For every two trees financed by customers, Banco de Bogotá plants one. Our partner is Saving the Amazon, which conserves the Amazon by planting trees with local indigenous communities. We have several more key alliances like this, which we see as critical collaborations to develop financial opportunities and innovation.

Thirdly, through our commitments. We’re the first Colombian bank to sign the Mansion House Declaration to tackle illegal wildlife trade, and the Finance For Diversity Pledge, and to join the Amazon Finance Network, which promotes sustainable growth throughout the Amazon.

Why is it important to integrate nature into your business strategy and operations?

We’re a Colombian bank and Colombia is the world’s second most biodiverse country. As biodiversity is decreasing so are our natural resources – there’s a fine link that isn’t well understood. Identifying opportunities is a way of increasing our sustainable portfolio, while identifying risks helps us know how nature risks will affect our clients, and therefore our loan portfolio. Nature offers an important way of understanding non-financial risks and it provides market opportunities.

How has your organisation’s perspective on nature evolved, and how has your role at the bank changed alongside this?

Biodiversity and its relationship with banking is a new concept and the bank has invested in resources and knowledge in this field. Generally, banks used to focus on financial risks and didn’t understand non-financial risks well.

“There’s now recognition that the long term must be taken into consideration over short term profitability. Society is asking banks to be more conscious about what they are financing. At Banco de Bogotá we have a strong sustainable portfolio, which has grown 15-fold in the past three years and is now one of the bank’s main growth sources.”

In my current role, I’m responsible for coordinating the bank’s ESG (Environmental, Social and Governance) strategy, and this work spans risk analysis, governance, reporting, and integrating the ‘sustainable finance view’ throughout the bank. Our ESG team has specialists that support the bank’s relationship managers and clients to identify nature and climate-related financing opportunities and risks. Three years ago we were an ESG team of three and now, 17. Initially, we focused on integrating climate change into social action. Our work used to heavily focus on risk, but now we have the knowledge to link risks to long term value propositions and market opportunities, which has enhanced the relevance and visibility of ESG within the bank.

At what stage is your bank with integrating nature into its operational processes, decision-making and business strategy?

We have a broad sustainability portfolio, finance exclusion activities – including deforestation – and we’ve shifted away from a singular focus on risk to additionally considering nature-related opportunities. For companies in sectors that we consider critical for biodiversity, we conduct specialised due diligence as part of our finance decision-making. We’ve been using ENCORE since 2020 to understand which sectors are critical, the natural capital for each sector, and the relationship between biodiversity and sectors’ industry processes.

What are some of the challenges that you’ve encountered when integrating nature into operations?

We lack good data. We often don’t have timely information, the real locations that clients are operating in, or detailed historical records. We’re doing our best in our due diligence, asking for more detailed information, such as location coordinates, but it’s still difficult. The second challenge is knowledge – suddenly in banking we now need to be educated across such a broad field, spanning biology, animal trafficking, climate change and much more, which we are only just beginning to understand. We have to learn by doing.

What were Banco de Bogotá’s top takeaways from Global Canopy’s TNFD implementation support programme?

We initially thought TNFD was going to be very similar to the Task Force on Climate-Related Financial Disclosures, with a focus on impacts and governance, but we’ve learned the TNFD is more advanced, and requires specific understanding of nature. Through Global Canopy’s programme, we learned how to get a better understanding of nature-related risks and opportunities, and correctly assess our clients’ nature-related risks. This will enhance our understanding of our risk, our clients’ risks, and our approach to risk analysis. It will also support our value proposition as we fine tune products and services to protect and restore nature. One of our upcoming actions is to issue our first TNFD-aligned report next year, and we will take what we learned on the programme into this work.

What are the best tools for screening dependencies and impacts on nature?

ENCORE can help banks to screen dependencies and impacts on nature, and identify those with the highest impact. Every sector is impacted by many risks, but you have to first focus on those that are most relevant, and ENCORE helps you do that. We also use data that’s available from Colombia’s climate agency on geographical hotspots for deforestation and biodiversity. The TNFD’s LEAP approach has given us a strong framework and made us more conscious of nature-related risks and opportunities. Through Global Canopy’s programme, we’ve learned how to assess them properly so we can prioritise sectors and clients.

What are your top tips for your counterparts in other banks who are starting to explore the TNFD recommendations?

Get the best data you can on the location of your clients – location is key. You might have the address of your client’s HQ but it’s irrelevant if their production takes place elsewhere. Take advantage of ENCORE, and resources on the TNFD website. And adjust your processes to obtain more information from your clients so you can robustly analyse nature-related impacts and dependencies.

How do you think the TNFD is going to shape the way banks in your country will operate?

Integrating nature into financial and non-financial operations is key – it’s crucial to have comprehensive risk management. The TNFD supports this, as it does with identifying financing opportunities for biodiversity protection and restoration.

What recommendations would you have for policy-makers to support banks to shift toward more nature-positive outcomes?

I’m obsessed with the lack of data! In Colombia we need a robust national data system to allow banks to get better information and perform more thorough nature-related analyses. It’s a shame that banks have to individually, and in isolation, try to access and assess data, probably duplicating each other’s work. There has to be a more efficient way.

The 16th meeting of the Conference of the Parties to the Convention on Biological Diversity (COP16) convenes in Cali, Colombia on 21 October – 1 November 2024. What do you think hosting COP16 will do for nature-related finance in Colombia?

It should raise awareness of how Colombia’s biodiversity is in danger and how it affects our daily lives. I see it as a great opportunity to learn best practices in financing and conserving nature from around the world.

Global Canopy is a founding partner of the TNFD, and was an official piloting partner for the TNFD prior to the launch of the TNFD Final Recommendations in September 2023. We continue to provide technical expertise to the TNFD, and to build capacity among companies and financial institutions, preparing them to get started with adopting the TNFD recommendations. Global Canopy’s TNFD implementation support programme for South American banks was funded by Norad.