As COP26 stumbles, nature fights back

For the first time nature was placed centre stage at a climate change conference. That is, at least, a welcome step forward.

By Andrew Mitchell

Founder and Senior Advisor to Global Canopy

Lord Goldsmith said that this was the first COP to have nature at its heart, and he is right. As Minister for the Pacific and the Environment, he led the effort to corral 141 governments and 30 financial institutions to sign a bold pledge to halt deforestation by 2030.  Positive, yes. But the bald truth remains, that unless all the emission reduction commitments are met, the world is on track to be releasing almost 40% more carbon in 2030, than is needed to stay below 1.5 degrees.

For me the biggest leap forward at COP26 was to put nature on a par with renewable energy, as a solution to climate change. This transformation in mindset should not be underestimated. Back in 2007, negotiations were dominated by men from industry, energy and transport. They failed to comprehend that the climate battle could not be won, unless emissions from agriculture and burning forests were transformed into a giant carbon capture opportunity. How different things are now.

The Glasgow Leaders Declaration on Forests and Land Use

Signatories to the Glasgow Leaders Declaration on Forests and Land Use have pledged over US $19.2bn to implement it. US $12bn is from donor governments and the rest is from private sources. With Russia and China signed up, 90% of the world’s forests are covered under the agreement. Crucially, US $1.7bn is directly allocated for indigenous and other forest communities to regularise their property rights, acknowledging that they have proved the most successful at protecting forests, rather than cutting them down.

Cynics say that in 2014 the New York Declaration on Forests called for similar action, and since then deforestation has sharply increased. There is little detail on how this new pledge will translate into action on the ground. Without a herculean effort, signatories to the Glasgow Agreement will almost certainly fail to achieve its aims inside the decade. But whether they do or don’t, it creates an imperative for action on other fronts. President Bolsonaro is presently being taken to court in a test case at the International Court of the Hague – on a charge of Ecocide. Acting on the Declaration he has signed might be his best defence.

What’s significant about Glasgow is a growing realisation that staying below 1.5 degrees cannot be achieved without help from Mother Nature. There was even a Nature and Land Use Day. Nature-based solutions to climate change came of age at COP26, as a practical means of mitigating and adapting to climate change. As with renewables, investment in this sector is set to sharply increase.

The problem is that the ecological infrastructure that has kept the earth remarkably stable since the last glaciation, is being rapidly destroyed by our economy.  Business and finance has no dashboard delivering data to measure the natural capital they are depleting or to understand the impact this could have on their portfolios. And GDP, the fundamental yardstick of economic success, measures everything that we spend and nothing that we protect. 

Consider these numbers. The total sum of funds deployed to protect nature, mostly from governments, equates to about US$150 billion a year. The value of subsidies that harm nature, also from governments, is five times that. If nature negative private sector money is taken into account, the ratio could be as high as 1:100. There were constant calls at COP26 to significantly increase spending to halt climate change or reverse nature’s demise. In nature’s case, even if it were doubled, it would simply be washed over by negative finance in commodity supply chains alone.  As one Amazon Indigenous leader, Juma Xipaia, said, “You must take responsibility for our own consumerism, and not destroy our lands because you don’t.”

GDP, the fundamental yardstick of economic success, measures everything that we spend and nothing that we protect.

After 40 years at the conservation frontline, my conclusion is that unless we fundamentally change the movement of money, we will finance ourselves into extinction. More representatives of major banks, investors, and insurers were at COP26 than ever before. The dilemma for these titans of finance, is dialling down cherished cash cows, like fossil fuel holdings, whilst ratcheting up risky renewables and other green investments. 

What we can do differently

I offer three initiatives aired at COP26 that I believe can help meet this challenge – on managing risk, scaling opportunity, and delivering transparency.

As with climate, business and finance needs a framework through which to navigate the risks towards a nature-positive world. At COP26 the Taskforce on Nature-related Financial Disclosures (TNFD), a cousin to TCFD on climate, was on many people’s lips. Launched in June 2021, with David Craig former CEO of Refinitiv and Elizabeth Mrema, Executive Secretary of the CBD at the helm, the TNFD will deliver its reporting and disclosure framework in mid 2023. This could help to make sense of the burgeoning maze of data, metrics, and standards emerging in the nature space and help direct finance to be less impactful on forests, landscapes and oceans, whilst helping the climate crisis too.

Secondly, whilst better understanding of nature related risk could drive trillions away from businesses destroying biodiversity, asset managers and bankers need to find alternative safe havens for redirected capital. The rise of ESG investing means that capital markets are hungry for upside opportunities that are scalable and with big ticket sizes.

My final tool is radical transparency. Imagine the amazement on the face of the head of ESG of a major Scottish Bank when Global Canopy’s Trase Finance app revealed the bank’s exposure to deforestation through holdings he barely knew they had, all on a mobile phone whilst enjoying a “wee dram” beside Loch Lomond. The app, developed by Neural Alpha, has unearthed the complex and sometimes murky chain of multiple companies through which the deforestation supply chain is financed worldwide. As anti-money laundering legislation and new import regulations tighten on deforestation linked imports, the liability risk of inaction is rising sharply for the players who finance it.

So will we look back at COP26 and see it as a turning point for recognition of nature’s crucial role in keeping our planet safe? I think yes. There is more change in attitudes, among central banks, asset managers, and the public (whose money it is they steward), than I have seen in the previous 40 years, and this time it is worldwide. Covid-19 has demonstrated emphatically that a speck of nature can bite our economy fast, and across all sectors costing US $27trn and counting, according to the IMF. At the 11^th hour, we are realising that we need to keep nature on our side.

This insight was originally published on Equilibrium Futures.