Transcript by Kensho.

Lindsey Hall: I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a Senior Writer on the Sustainable1 Thought Leadership Team.

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy.

Esther Whieldon: If you've been listening to recent episodes of this podcast, you know we've been covering COP27, the big UN Climate Change Conference. One of the big themes that emerged in our conversations is the intersection of climate and nature. Global biodiversity is deteriorating and that is projected to continue under a business-as-usual scenario.

In this episode, we're looking ahead to another upcoming UN conference. This one is focused on biodiversity. I'm referring to the second part of the UN's convention on biological diversity, known as COP15, that kicks off in Montreal on December 7.

Lindsey Hall: COP15 brings together governments to set new goals for nature through the convention on biological diversity's post-2020 framework process. To learn more, we'll be talking today with Elizabeth Mrema. Elizabeth is COP15 Executive Secretary. She's also co-Chair of the Taskforce of Nature-related Financial Disclosures, or TNFD.

The TNFD launched in 2021 with the goal of creating a voluntary framework that companies can use to assess their nature-related risks and opportunities. And I sat down with Elizabeth earlier this year for a virtual interview about what to expect from COP15.

As we'll hear from today's guests, nature and biodiversity are also becoming an increasing focus for the private sector. To learn more about how financial institutions are addressing nature risks and opportunities, we'll speak to Lazaro Tiant, Investment Director on the sustainable investment team at U.K.-based asset manager, Schroders, which has about $939 billion in assets under management.

And for the energy sector perspective, we'll hear from Virginia Dundas. She's Head of Strategic Environment Programmes at big multinational power company, Ørsted, which is Denmark's largest energy company.

Okay. First, let's turn to my interview with Elizabeth. So can you tell us a little bit about what should we expect from this upcoming convention on biological diversity or COP15?

Elizabeth Mrema: We need to remember that the conference of the parties to the convention will meet in December for the second time. The first part of it was held last year, which was hybrid as it is due to the COVID situation. So this will be the last part, which will be a critical moment to actually be able to agree now on a new vision of a mankind relationship with biodiversity. Essentially, we expect that, that opportunity will also provide the road map for our future on this planet.

The convention has 196 parties, and all of them will have the responsibility to agree on and adopt an international policy framework, which currently we call it post-2020 global biodiversity framework, the framework which will form the basis for the transformation of our relationship or humankind relationship with nature. Once the global biodiversity framework is adopted by the parties to the convention, of course, the work begins. Now major part after that will be the implementation of that framework.

In other words, this framework will form the basis for a shift in international policy and in national policies and regulations related to nature. So we are looking at the biodiversity framework to actually be accretive or similar to the Paris Agreement on climate change. Others have called it Paris Agreement for biodiversity in terms of its global importance in the planet. And it will be -- or we expect it to become a platform for all actions to protect and restore biodiversity over the next decade under the long global vision that extends to 2050, whereby we hope the world will be living in harmony with nature. That's our expectation.

Lindsey Hall: And can we dig in a little bit more? Can you tell us what are some of the themes you expect are going to be discussed? What are some of the conversations that are going to be taking place at COP15?

Elizabeth Mrema: The primary theme or the principal theme will be the overall vision proposed by the draft -- current draft post-2020 global biodiversity framework for humankind to live in harmony with nature by 2050. The vision is supported by specific currently four goals broken down into interim targets to be achieved by 2030. And these targets are meant to bend the curve of biodiversity loss and literally to put nature on a path to recovery and set the entire global society on a path for sustainable use of nature for the future now to the next decade.

Some of the other key themes in addition to the global biodiversity framework or themes underlined under the framework will include restoring and protecting ecosystems, species and genetic diversity; will include meeting human needs through sustainable use of nature; will include ensuring that the benefits provided by nature are shared equitably among the people, particularly including the indigenous peoples and local communities; will also include securing appropriate means of implementation for achieving the vision of the post-2020 global biodiversity framework.

Lindsey Hall: And so what -- from your perspective, what would need to happen at COP15 at the second part of the convention for it to be considered a success? What are you really watching for?

Elizabeth Mrema: Big question. But looking at the current state of the planet, record -- and especially now we are seeing record-breaking heatwaves, major droughts have become a common occurrence, literally all continents in both hemispheres suffering. This situation has pushed many ecosystems and species to adapt or it has put actually species beyond the adaptation limits, not to mention the massive destruction caused, let's say, by wildfires.

Climate change, unfortunately, is adding on to other human pressures such as deforestation, land conversion, pollution, all of which amplify erosion on nature. But our natural environment plays a major role in regulating our climate. So we find ourselves in that vicious cycle of nature loss and climate change.

So I can tell you also that half of the global GDP we have been told is dependent on nature. So think, for instance, today, that pollination, fertile soil, water resources regulation, fisheries and so on are impacted that 50% global GDP. The economies of many countries will be impacted, and that's a major risk. So this knowledge has actually led to nature loss being recognized as a systemic risk both for our society and economy.

At COP15, therefore, consensus needs to emerge that will set on strong goals for 2050, but achievable targets by 2030. We need to see the world and the parties to the convention really understand that business as usual is no longer an option. We also need to see alignment of an ambitious plan for the protection and recovery of ecosystems and species, including tangible commitments to protect
terrestrial and marine ecosystems globally. We equally need to agree on sustainable use of natural resources, transforming our production and consumption habits to preserve the natural resources that our society relies on.

So one particular issue also to be resolved at COP15 is how to support this transformation. Action requires resources, and so therefore, appropriate mobilization of resources, both technical and financial, must be agreed on and not repurposing existing finances but new and additional resources for implementation. Parties need to agree on a plan for resource mobilization in support of the implementation of the post-2020 global biodiversity framework. And this includes agreeing on appropriate scaling and use of financial flows to developing countries as well as increasing domestic finance, including mainstreaming and scaling up green finance, specifically targeted at generating positive outcomes for nature.

It also includes realigning financial flows from activities that destroy nature towards activities that protect and restore nature. We need countries to rethink their subsidy system so that, for instance, agricultural subsidies cease to promote deforestation or intensive pesticide use. We need a regulatory landscape that needs to be transformed so that market is also incentivized to protect rather than to destroy it biodiversity.

We know today trillions of dollars of public money and private investments on capital markets are directly supporting destruction on biodiversity. So we hope this can change transformatively. Governments, policymakers, financial supervisors, businesses, all of us have responsibility to change this trend.

Lindsey Hall: I asked Elizabeth why those gaps still exist, and what more needs to happen to address them? You'll hear her mention the Aichi Targets. A quick explainer, 2011 to 2020 was known as the UN's Decade on Biodiversity, and that included a strategic plan for biodiversity, which is a 10-year framework for action by all countries and stakeholders to save biodiversity and enhance its benefits for people. That plan had 20 goals, collectively known as the Aichi Targets. Here's Elizabeth again.

Elizabeth Mrema: Learning from the last decade where we did not meet the Aichi biodiversity targets although international financial flows doubled for biodiversity, clearly that was not enough to deal with the complexity of the biodiversity challenges out there. It helped, but that was not enough, one. Two, what we have also learned is, again, to be able to deal with biodiversity challenges, we need to also look at whole-of-government, whole-of-society approach, all hands on deck. Biodiversity is no longer to be left in the hands of environmentalists or departments of environment alone. It is human amenities, food security, it is healthy security. And in the long term, it is social and economic security or development. And that's why we need to look at biodiversity issues. We need to look at climate change issues, land degradation, pollution in an integrated manner. And this is where whole-of-government, whole-of- society with the engagement of all stakeholders, not just governments, local communities, the youth, the business, the financial institutions and the like. Everybody is responsible to make the changes.

Lindsey Hall: From your perspective, do you think -- do you see financial institutions recognizing this need that you've just been talking about, this need to address biodiversity in a way that's not just leaving it to the scientists and the environmentalists?

Elizabeth Mrema: Indeed, delighted we have seen an increasing engagement of the business and financial institutions. That is really encouraging. We have also seen as the result of the increase -- is also an increase in the awareness of the impact of the business and financial institutions' operations on nature. If we say 50% of the global GDP is dependent on nature or $44 trillion to be specific, and that $10 trillion are accrued per year is the result of activities on nature, particularly on agriculture production, clearly there is a risk there for business and financial institution for not assessing and managing those risks and impacts because of their dependencies.

But also there is a huge opportunity for actually taking action so that then their operations and activities can continue to flourish. And this is why we are also saying it is important and delighted that we are seeing the private sector coming on board and making commitments.

Lindsey Hall: We just heard Elizabeth talking about the rising role of the private sector. She didn't talk about any company specifically, but I did want to get a sense of how some private institutions are engaging on the topic of nature. So I spoke to Lazaro from Schroders. First up, you'll hear me ask him about the asset managers' presence at COP15.

Lazaro Tiant: We are sending a cohort of folks there. As you know, we've put out our own plans on nature, and really, this is a top priority for us as a firm.

In addition to that, as part of the financial sector, we've signed on to a commitment letter to eliminating commodity-driven forestry, right? That's being endorsed by over 30 financial institutions, about over $8 trillion in assets. And that's really focusing on the fact that we have a fiduciary duty to act in the best long-term interest of investors with this in mind, right, commodity-driven deforestation.

When it comes to COP15, it's all on the table from an investment standpoint interacting with businesses, interacting with policymakers. I think right now there's a general consensus that COP15 won't be the new Paris, right? It took multiple years to get there on climate, and there's still a lot of negotiating that needs to be done between now and December.

And so I think what it comes down to are those different perspectives at play that I mentioned: investors, businesses and policymakers. And the question becomes how do we accomplish something for everyone and some. And so generally, what we are seeking are mandates on nature and alignment to the global biodiversity framework. And that's really calling on mandatory requirements for all large businesses and financial institutions to assess and disclose their impacts and dependencies on biodiversity by 2030. And I think that's an important outcome that we're going for, right?

Lindsey Hall: Lazaro said there's a chance to take what we've learned from the Task Force on Climate- related Financial Disclosures, or TCFD, and apply it to the new TNFD framework.

Lazaro Tiant: If we think about the past 5 years, it's really been about understanding how do we implement net zero and decarbonization type of strategies, how do we think about pricing and externalities and engaging with companies on these topics. I think the same thing is happening with nature right now, right, and so I think there will be similarities to how people educate themselves and implement thoughtful ways to consider this.

So on the climate side, we've had the task force of climate-related financial disclosure through TCFD. And on the nature side, we have TNFD, which focus on the nature-related financial disclosures. We want to be able to take what's existed in blueprints that have been set and learn from past experiences at previous COPs and bring it to full tier at COP15, right, and understand how we can move the needle to get a little closer to having these requirements in place because I think that's the first domino that really needs to fall, having assessments and disclosures in place for us to learn what we need to focus on and where everybody is at currently once we understand the disclosure aspect and where people see their risks and opportunities to be.

From then, it's really about further engaging companies and setting forth more standards on what sectors need to report on, et cetera. And so I think, really, we want to have those different perspectives and conversations at play as much as possible.

Lindsey Hall: So it sounds like you think COP15 will be an opportunity for some collaboration and potentially some achievements when it comes to nature. What, from your perspective, would make COP15 a success?

Lazaro Tiant: What will make COP15 a success would be mandatory requirements for all large businesses and financial institutions to assess and disclose their impacts and dependencies on biodiversity by 2030. I think any short of us gaining momentum on that front wouldn't, I think, scream success.
 
I think right now, that being the main domino that we need to fall as an industry just to provide everyone with some kind of blueprint on what they need to assess and disclose will work volumes on where we go from here. So foundationally, I think that's incredibly important.

And I think an extension of that is we need an agreement on the need of standardization and proper infrastructure to be put in place for carbon markets generally because there are a lot of poor quality projects out there and biodiversity credits are seen as the next frontier. So we also need to think about standardization on that front.

Lindsey Hall: Okay. So standardization on the carbon markets front will kind of lay the groundwork for standardization when we start seeing the same kind of thing for biodiversity. Am I hearing you correctly?

Lazaro Tiant: That's right.

Lindsey Hall: And that success measure that you just laid out for us, is that on the table? Is that potentially going to happen at COP15?

Lazaro Tiant: I believe it can be. I believe it will -- it can move in the right direction as we'll have everybody that needs to be in the room in the room, right? And so I do think that is possible.

Lindsey Hall: Okay. Is there going to be greater engagement from the private sector and more collaboration between private and public sector and sovereign entities.

Lazaro Tiant: Definitely. I think public equity markets lag private equity markets, but they're an important piece of the puzzle. Plenty of markets in which public markets have been a good destination for companies that have led the way in innovating private markets are exemplified. And I think nature is a way where those 2 sides can come together and then think about solutions, processes, supply chain- related standards because they do work with each other, right? You have public market companies that work with private market companies within their supply chain. And so I think coming together on these issues will be incredibly important.

Lindsey Hall: You heard Lazaro talk about connecting the dots between nature and climate. Well, our next guest talked about that, too. Here's my conversation with Virginia from Danish energy company, Ørsted. If you listened to our episode last week about decarbonizing supply chains, you'll recognize her voice.

Virginia Dundas: The climate crisis and the biodiversity crisis can be and must be addressed jointly. And for doing that, we need to look at the way that we build green energy out there. And what is our value proposition is that green energy and assets can be built in balance with nature and can even further enhance nature than where we are.

And of course, what we're trying to look at is that we have been launching different pilots across the world in different parts, in different -- in many different of the wind farms that we have to ensure to understand how we can create and enhance nature locally around there.

Lindsey Hall: I saw a fascinating story about a project to explore 3D-printed reefs and how that can benefit biodiversity. Are you familiar with this project that I'm talking about? I believe it's a collaboration between Ørsted and WWF
.
Virginia Dundas: Yes, yes, I'm familiar with it. That project has happened in one of the wind farms that we have here in Denmark called Anholt. And the intention, it is to try it out if these 3D-printed reefs that we have installed around the wind hub can help protect cod population in the North Sea, which is significantly under pressure. And the hypothesis is that with the 3D prints we can help in the growth throughout their lifetime.

Lindsey Hall: So Esther, I wanted to include that last little snippet from my conversation with Virginia because I think it speaks to the kind of creative projects and new technologies being deployed to address nature loss and the biodiversity crisis. This might be a future podcast episode for us to dig into.

Esther Whieldon: Oh, yes. That sounds like a really interesting topic. And also nature and biodiversity and its intersection with the energy transition will continue to be a major topic for us as we head into 2023. In the meantime, stay tuned for our upcoming coverage of COP15.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider. And a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time. Copyright © 2022 by S&P Global

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