Keynote speech by Ingrid van Wees, ADB Vice-President for Finance and Risk Management, at Thematic Forum 7: Banking and Biodiversity, Ecological Civilization Forum of the 15th Conference of the Parties of the Convention on Biological Diversity, 15 October 2021, Kunming, People’s Republic of China

Introduction 

Distinguished Participants, Colleagues and Friends, Good day to all of you.  It is my great pleasure to participate on behalf of the Asian Development Bank.

I would first like to express my appreciation to the Ministry of Ecology and Environment of the People’s Republic of China, the Secretariat of the Convention on Biological Diversity, and the Yunnan Provincial Government for hosting the 15th Conference of Parties of the Convention on Biological Diversity.  In addition, I like to extend my thanks to the China Banking Association, the National Academy of “Development and Strategy” at the Renmin University of China, and the United Nations Development Program (UNDP) as organizers of this session.

This COP15, which will conclude in April 2022, is vital to reverse not ONLY the alarming and unprecedented decline of biodiversity and address climate change but also to deliver on a green, inclusive, and resilient recovery to secure long-term prosperity.

Climate Finance commitments were critical for the success of concluding the Paris Climate Agreement. Similarly, the post-2020 Global Biodiversity Framework will only be successful if Parties commit to mobilise the financial sector for this endeavor.

The role of financial institutions – managing risk 

Biodiversity loss is, just like climate change, an external driver of financial risk. It poses physical, reputational, and transition risks to the financial sector.

The Central Bank of Netherlands, in a first of its kind study, quantified the exposure of Dutch financial institutions to the risk of biodiversity loss. Potential loss equated to 36% of their total assets.

A similar study on the exposure of development financial institutions to the risks of biodiversity loss and ecosystem degradation (Jessop, 2020), estimated that at least 28% of their US$11.2 trillion investments in 2019 were highly exposed.

Given the significance of the exposure, financial institutions should have a duty to carry out risk assessments on their portfolios and request disclosure from the clients they invest in.

It is time to take stock, measure, monitor and quantify changes in biodiversity and include these in our financial risk analysis. We need a range of approaches to quantify this risk and we need to build consensus around key principles and universal frameworks.

I encourage all financial institutions, especially those with us today, to engage in initiatives supporting inclusion of biodiversity in both the risk and impact assessment of their portfolios. 

As an example, ADB is pleased

- to be a member of the Biodiversity Study Group of the (Network of Central Banks and Supervisors for Greening the Financial System) and 
- an observer to the Taskforce on Nature Related Financial Disclosures. 

In cooperation with other MDBs, we are developing metrics for tracking nature positive investments. These metrics will be based on the scoping report of the MDB - Climate Finance Tracking Methodology.

Our role as financial institutions – catalyzing green markets

It is not all doom and gloom. The Future of Nature and Business - Report estimated that a nature-based transition could generate US$10 trillion in business opportunities and create 395 million jobs by 2030. This is an opportunity for financial sector institutions to catalyze green market development.

I am pleased to share that last month we issued ADB’s first blue bonds, worth US$300 million. It is a bond where the well-being of a single natural ecosystem, in this case the Ocean, is in focus. The proceeds will be used to expand our investments in sustainable fisheries, implement circular economy, and boost marine renewable energy, green ports, and shipping projects.

With additional support, ocean investments can be equally successful as our green bond program, where ADB has issued $9.6 billion since 2010.  We intend to partner closely with countries to issue national blue bonds and develop a local project pipeline.

Since ADB launched our Action Plan for Healthy Oceans and Sustainable Blue Economies in 2019, we became acutely aware that multi-stakeholder and cross-sectoral approaches are essential to capture and create value for ecosystems and livelihoods.

Governments play a key role in creating a conductive ecosystem for business and the financial sectors, by setting conditions and incentives that encourage private investment in nature-positive projects. Financial institutions need to work in partnership, advocate and call together for ambitious and transformative regulation.

The 2021, the Dasgupta Report pointed out that between 1992 and 2014, the produced capital per capita doubled while natural capital declined 40% per capita, indicating an unsustainable drawdown and use of natural capital. These natural capital-driven economic gains and losses are not reflected in official budgets and accounting systems.

The adoption of the UN-System of Environmental-Economic Accounting (SEEA-EA) is a positive step in the development of a common framework for accounting principles to integrate physical and monetary measures related to the environment.

In parallel to this session, my colleagues, in partnership with the Chinese Academy of Science and Stanford University, are sharing the progress being made on the development of ADB’s new Natural Capital Lab. This is a digital platform to share methods for valuing biodiversity and ecosystems, and for building knowledge, capacity, and alliances across the region.

Mainstreaming the use of these shared methods will ensure that natural capital is given a weight, equal to that of GDP, exports, government revenues, and other measures of national wealth.

Closing

To conclude, there is a need to consolidate and communicate relevant data on regional market opportunities, encourage innovation and aggregation. We want to see Asia leading in environmental technology development and patents.

As we are hosted by the Chinese government, I would just like to mention ADB’s Anhui (GUEE) Huangshan Xin’an River Ecological Protection and Green Development Project which created a structured green investment fund.

This fund supports SMEs involved in green business such as ecological agriculture, eco-tourism, and pollution control. This project offers an example of how we can blend ADB finance with eco-compensation mechanisms to incentivize new value chains. 

I look forward to continuing this dialogue through ADBs Forums on Rural Development and Food Security and Ocean Technology and Finance in the coming months.
Thank you very much for your attention. 

Speaker

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