Extinction Governance, Finance and Accounting

Implementing a Species Protection Action Plan for the Financial Markets

Jill Atkins, Martina Macpherson, Jill Atkins, Martina Macpherson

• Publisher: Routledge
• Year: 2022
• Print ISBN: 9780367492984
• eBook ISBN: 9781000570199
• Topic: Business
• Subtopic: Auditing
• Index: Business

The planet is currently experiencing a mass extinction event, with human and business activity being the root cause of species loss and habitat destruction. Industries, companies, banks, investors, accountants and auditors have all played their role. This book explores how they can also provide a solution.

The book presents plans, metrics, frameworks, mechanisms and financial innovations that can be, and are being, implemented through the financial markets in order to save and protect species, enhance biodiversity and, at the same time, preserve the financial markets and the business world.

This biodiversity handbook addresses the intersection between species extinction and the global capitalist system. With contributions from leading non-governmental organisations such as the Capitals Coalition, Business for Nature, the Ecojustice Foundation, ShareAction and the Endangered Wildlife Trust, plus senior researchers in the field, as well as industry experts from Moody's, EOS at Hermes Federated Investment Management, BlueBay Asset Management, ODDO BHF Asset Management and OSSIAM (to mention just a few), this book is at the forefront of addressing the crucially important topics of extinction accounting, finance and governance.

Drawing on leading research, the book is written in an accessible style and is relevant to researchers and students in the fields of sustainability, governance, accounting, finance, corporate social responsibility and corporate governance. It is essential reading for investors, responsible investors, bankers, business leaders and policy makers in the field of sustainable financial markets. Given the interdisciplinary nature of this book, it is useful to conservationists, ecologists and others involved in species and biodiversity protection.

Part I Defining Extinction Governance, Extinction Accounting and Extinction Finance

1 Extinction Accounting, Finance and Engagement Implementing a Species Protection Action Plan for the Financial Markets

Jill Atkins and Martina Macpherson

DOI: 10.4324/9781003045557-3

This book could be neither timelier, nor more necessary. We aim to present cutting-edge developments in the finance industry with contributions from market leaders and academics so as to enable the development of a toolkit, or framework, that incorporates current best practice. The World Economic Forum’s Annual Risk Report 2020 ranks biodiversity loss as the third most impactful risk facing the global economy, and the fourth most likely to occur.¹ At Abu Dhabi in the United Arab Emirates, an urgent call was launched in 2019 to massively scale up species conservation action in response to the escalating biodiversity crisis.² The Abu Dhabi Call for Global Species Conservation Action appeals to the world’s governments, international agencies and the private sector to halt species decline and prevent human-driven extinctions by 2030, and to improve the conservation status of threatened species, with a view to bringing about widespread recovery by 2050. The UK is taking a leading role in addressing biodiversity decline as well as climate change, being the host of the UN Climate Change Conference (COP26) in 2021 (see Box 1.1). The WWF states that the UK Government must now align financial sector regulation with climate and nature goals.³ Further, the UK’s Dasgupta Review, published in February 2021, leaves us in no doubt of the urgent need to address biodiversity loss and species extinction. Policymakers, regulators and financial institutions the world over have a key role to play in addressing the ongoing extinction crisis, as do businesses and other organisations worldwide. Indeed, the Dasgupta Review represents one of many calls from international bodies and organisations for the financial markets to act urgently to preserve nature. The 2019 IPBES Report also identified economic and financial systems as crucial to the fight against the degradation of ecosystems, equally calling for transformative action in the financial sector, stating,⁴

Box 1.1 The European Commission CoP, Biodiversity and Finance

What Is the Link between Finance and Biodiversity?

There is a section on the European Commission’s website specifically devoted to the link between biodiversity and finance, focusing on what the EU Community of Practice (CoP), a header platform with a number of subdivisions established in 2016, is doing to engage with, and educate, financial institutions on how they can integrate schemes centred around natural capital into their portfolios. The CoP aims to provide a ‘forum of dialogue between financial institutions to share experiences, raise awareness and promote best practices at EU level on how to integrate biodiversity and natural capital into mainstream financial activities and foster investments in natural capital as a new asset class’ by advocating the implementation of biodiversity-centric policies and investments at multiple levels, which will support ‘the transition towards a sustainable financial sector’.

See more at https://ec.europa.eu/environment/biodiversity/business/workstreams/finance/index_en.htm

Contributed by Zoe Solomon

Decision makers have a range of options and tools for improving the sustainability of economic and financial systems. Achieving a sustainable economy involves making fundamental reforms to economic and financial systems …. Trade agreements and derivatives markets could be reformed to promote equity and prevent deterioration of nature, although there are uncertainties associated with implementation. …… Structural changes to economies are also key to shifting action over long time scales, including technological and social innovation regimes and investment frameworks that internalize environmental impacts such as externalities of economic activities, including by addressing environmental impacts in socially just and appropriate ways.

The Dasgupta Review also calls for a Global Standard for the international financial system. It is our hope that the summary mapping contained in Table 1.1 in the final chapter, that consolidates the innovations and mechanisms showcased in chapters contributed by financial institutions, academics and other nature-related organisations, can assist in developing such a Global Standard. The Review ends with calls for action, and our book provides a full and detailed response to this call. In this chapter, we weave some of the commentary from the Dasgupta Review into our discussion in order to integrate some of the most recent developments, and to elucidate and highlight the discussion around the chapters in the rest of the text. A critically important initiative for the business community is the Business for Nature (BfN) coalition launched in July 2019, as they are mobilising companies to protect biodiversity, as outlined by Zabey and Thissen in Chapter 4.

TABLE 1.1 Targets, tools, methods and measures for biodiversity

Tool/Measurement	Acronym	Organisation	Comments
Tools for the Finance Industry
Exploring Natural Capital Opportunities, Risks and Exposure	ENCORE	Natural Capital Finance Alliance	Helps users understand how businesses across all sectors depend on nature and how these dependencies may represent business risk
Biodiversity Footprint for Financial Institutions	BFFI	ASN Bank	Not based on exposure of financial institutions to biodiversity-related risks (except for reputational and litigation) rather attribution of financial activity to negative biodiversity impacts
Species Threat Abatement and Recovery Metric	STAR	IUCN	Metric to understand whether investments achieve conservation outcome
Tools for Companies and the Finance Industry
Global Biodiversity Score	GBS	CDC Biodiversité Club for Positive Biodiversity Businesses Club B4B+	Focuses on financial portfolio and corporate assessments for internal uses and external reporting Uses the MSA^a
Tools for Companies
Corporate Ecosystem Valuation	CEV	World Business Council for Sustainable Development (WBCSD)	Process for business to value natural ecosystems, including biodiversity A process to make better-informed business decisions by explicitly valuing both ecosystem degradation and the benefits provided by ecosystem services
Biodiversity Footprints for Companies and Products
Biodiversity Footprint Calculator		Plansup	A free calculation tool that assesses current and future biodiversity footprint of a company or a product
Product Biodiversity Footprint	PBF	icare&consult	Assesses impact of products on biodiversity
Sector-Specific Tools
Agrobiodiversity Index		Biodiversity International
Biodiversity and Ecosystem Services Fundamentals	IPIECA	IPIECA	Biodiversity impacts/risks for the oil and gas sector
Biodiversity Indicator and Reporting System	BIRS	IUCN	Biodiversity monitoring for the cement and aggregates sector
Biodiversity Indicators for Monitoring Impacts and Conservation Actions		The Energy and Biodiversity Initiative	Method for assessing biodiversity impacts
Business Impact on Biodiversity
Environmental Profit and Loss	EP&L	Kering	Sharing with companies in the luxury sector – and others
ICMA harmonised Framework for Impact Reporting	ICMA (2019)
IFC Operating Principles for Impact	IFC
Healthy Ecosystem Framework/ Biodiversity Impact Metric		CISL – Cambridge Institute for Sustainability Leadership	Metric to calculate business impact on biodiversity
Human Impact on Biodiversity
Biodiversity Intactness Index	BII	Biodiversity Indicators Partnership
Reporting Methods and Reporting Frameworks
GRI Standards 304	GRI	Global Reporting Initiative (GRI)	Method for disclosing biodiversity information
SASB	Sustainability Accounting Standards Board (SASB) (Conceptual Framework) (2017)
SASB Materiality Map 2018	SASB
CDP (Climate)	CDP (Climate Disclosure Project) (Climate Change) 2002
CDP (Forests)	CDP (Forests) 2011
CDP (Water)	CDP (Water Security) 2009
Biological Diversity Protocol	BD Protocol	Output from Biodiversity Disclosure Project (BDP), managed by National Biodiversity and Business Network (NBBN) South Africa, hosted by Endangered Wildlife Trust (EWT)	Developed through online consultation with a wide range of stakeholders
Extinction accounting framework	Atkins and Maroun (2018), Atkins and Atkins (2019)	Accounting Academia
Universal Biodiversity Data Providers
Integrated Biodiversity Assessment Tool	IBAT	IBAT Alliance	Planning tool, providing data on existing biodiversity
Nature Map Explorer		Nature Map Initiative. Developed jointly by the International Institute for Applied Systems Analysis (IIASA), the Instituto Internacional para Sustentabilidade (IIS), the UN Sustainable Development Solutions Network (SDSN) and the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC). Royal Botanic Gardens Kew is supporting the analysis of plant taxa. The project is funded by Norway’s International Climate and Forest Initiative (NICFI).	Global map of terrestrial biodiversity and ecosystem carbon stocks. Freely accessible by the UN Biodiversity Lab.
GLOBIO		https://www.globio.info/what-is-globio	Modelling framework to calculate the impact of environmental drivers on biodiversity for past, present and future

^a MSA for Mean Species Abundance = Observed Biodiversity (Species)/Undistributed Biodiversity (Species) as a percentage. The unit of the GBS: km²MSA = MSA% × Surface. 1 km² MSA loss is equivalent to the destruction of 1 km² of undisturbed natural areas. The MSA assesses the increase/decrease in species and expresses the fraction of naturally present biodiversity remaining.

This chapter seeks to provide an overview of all the areas of the financial markets where initiatives can be, or are being, implemented to prevent extinctions and biodiversity loss, as well as setting out our Species Protection Action Plan for the Financial Markets. We now turn to providing an overview of some of the most significant initiatives implemented across the financial markets, although many of these – and others – will be the focus of later chapters. Our aim here is to give a flavour of the veritable explosion of activity that is currently underway.

We begin by considering the burgeoning financial market for ratings, indexes, tools, method...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Notes on Contributors
• Foreword
• Preamble
• Introduction: Why Are Species Extinction and Biodiversity Collapse Relevant to the Financial Markets, Accounting and Governance?
• Part I Defining Extinction Governance, Extinction Accounting and Extinction Finance
• Part II The Urgent State of Nature: Addressing Extinction and Biodiversity Decline
• Part III Extinction Finance: How Financial Market Mechanisms Can Save Species
• Part IV Extinction Engagement: How Investors Can Save Species
• Part V Extinction Accounting: How Accounting Can Save Species
• Part VI Reflections and Conclusion: Establishing a Framework for Action
• Index