Banks, investors seen as key to biodiversity

The Global Joint Initiative on the Partnership of Biodiversity and Finance, which was jointly launched by 13 institutions including the International Finance Forum and the World Resources Institute on Monday, underlines that a fresh mindset can help fine-tune the financial industry's regulatory framework, so that banks and investors can help better protect biodiversity and promote greener growth, an expert said.

The joint initiative will support close collaboration between biodiversity conservation and financing, particularly in addressing urgent biodiversity challenges, and help close the considerable action and financing gaps, said Tang Dingding, member of the Academic Committee of the IFF and former chair of the Compliance Review Panel of the Asian Development Bank.

Funding for biodiversity protection needs to increase in both China and the rest of the world, Tang said, adding that more social and private capital in biodiversity protection can help China to formulate an enabling financing environment.

"For many financial institutions in China, protection of ecology and biodiversity has not yet been sufficiently mapped onto their evaluation framework," Tang said, adding that when the globally reckoned Equator Principles, a risk management framework for financial institutions in determining, assessing and managing environmental and social risk in projects, were first launched in 2003, only seven banks in China agreed to join in. All of them were regional banks.

He stressed information disclosure regarding environmental and biodiversity protection in the context of a bank's project-based lending. More details need to be made public about projects' sustainability and their potential damage to the environment.

"Such efforts will surely pose challenges for banks and may baffle the traditional incentive framework of financial institutions for the time being, but it will be a critical step advancing China with stable economic transition and into healthier, high-quality development in the long run," he said.

One of the reasons why the financial institutions are so critical in biodiversity protection is that the funding gap on this front is huge.

Quoting a report by Cornell University and the Paulson Institute, Tang said that in the next decade, investment demand in biodiversity protection will be close to $1 trillion, while the current volume of investment can satisfy only about 15 percent of that.

China has taken steps to encourage both public and social stakeholders to invest in biodiversity protection. On Oct 19, the nation issued a guideline underpinning the importance of further biodiversity protection work.