the natural capital declaration and roadmap
TRANSCRIPT
The Natural Capital Declaration and Roadmap
Financial sector leadership
on natural capital
Liesel van Ast, NCD Programme Manager
Landscape Natural Capital InitiativesInitiative Focus
Finance Corporate Government
Banking Investment Insurance
Natural Capital Declaration - UNEP FI and GCP (integrating
ecosystem goods & services risks and opportunities into products
and services, accounting and reporting at banks, asset owners,
fund managers and insurers)
Natural Capital Coalition
–accounting and
valuation of ecosystem
goods & services in
business (focus on
apparel, food)
System of
Environmental
Economic Accounts (UN
SEEA)
Banking
Environment
Initiative, Cambridge
Institute for
Sustainable
Leadership (soft
commodities)
Principles for
Responsible
Investment
(integrating
environmental,
social, governance –
ESG – issues in
fund management)
Principles for
Sustainable
Insurance, UNEP FI
(Including ESG issues
in insurance)
World Business Council
for Sustainable
Development (WBCSD)
The Economics of
Ecosystems and
Biodiversity (TEEB –
UNEP)
Equator Principles
(environmental &
social issues in
mainly project
finance)
Natural Capital Leaders
Platform, CISL
WAVES Partnership
(Wealth Accounting and
the Valuation of
Ecosystem Services)
Global Reporting
Initiative (GRI)
Natural Capital
Committee (UK
Government)
Natural Capital Project, Universities of Stanford and
Minnesota, WWF, and The Nature Conservancy
40+ NCD signatories
– 40+ institutions have
endorsed the NCD at
CEO level.
– Most have contributed
financially (annual
contribution, project
contribution).
– A number of
institutions have
‘observer status’.
– Growing number
interested and
committed to actively
participate in one or
more pilot projects.
– 5 FI representatives
are part of the NCD
Steering Committee
30+ NCD supporters
– 30+ organisations
support the NCD:
crucial to create
broader
acknowledgement
and support
– A number are part or
(planned) pilot
projects.
– 2 representatives are
part of the NCD
Steering Committee
The NCD Commitments
Working Group NCD commitment
1. Understand Build an understanding of risks and opportunities
linked to the natural capital impacts and
dependencies of portfolio companies.
2. Embed Integrate natural capital factors into financial
products and services - including loans,
investments and insurance products.
3. Account Work towards a consensus on including natural
capital in accounting and decision-making.
4. Report Work towards consensus on Integrated
Reporting, including natural capital disclosures.
• Finance focused: Finance-led projects to develop and test open-
source methodologies for the financial sector.
• Quantative and evidence-based for information efficiency:
Bring science-based data and analytics to integrate natural capital
indicators into capital markets.
• Foster innovation: Work with core teams to manage risk and
catalyse new products to protect natural assets.
• Active participation: Credit analysts/portfolio managers provide
time and expertise to ensure practical outcomes that are beneficial
and can be implemented widely.
The NCD approach
Corporate environmental profile
Natural capital risks and opportunities across portfolio of companies
Geospatial information on natural resources and state of the environment
Economic value
of impacts and dependence
Linking financial, corporate and
natural capital data
Corporate
environmental
profiles in
context
Natural
capital
in finance
Pipeline of pilot projects
No. Title Institutions Asset Class Partner
1 Framework to
evaluate Bank and
Investor Risk Policies
for Soft Commodities
to address
deforestation risk
Rabobank, IFC,
FMO, Banorte,
Pax World,
Calvert, MN
Services, ASN
Bank, Standard
Chartered,
Sumitomo Mitsui
Various Sustainalytics,
UN-REDD
Programme
2 Advancing Natural
Capital Accounting in
externalities heavy
sectors for financial
institutions
National Australia
Bank, TBC
TBC/Sector
dependent
UNEP TEEB,
KPMG
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Pipeline of pilot projects
No. Title Institutions Asset Class Partner
3 Accounting for
natural value to assist
credit risk
assessment in the
agri sector
Agri-lending NAB
4 Tool to assess water-
related natural capital
risks of mining
companies for
investors
TBC Equities Bloomberg,
NCC
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Pipeline of partnership pilot projects
No. Title Institutions Asset Class Partner
5 Tool to include water risk
metrics in financial
analysis of corporate
bonds
Calvert, Pax World,
Sarasin, TBC
Corporate
bonds
VfU, GIZ
6 Understanding and
integrating natural capital
risks into credit risk
assessments
IFC, Banorte,
National Australia
Bank, Unicredit,
Caisse des Dépôts,
Pax World, Calvert
Corporate
finance;
equities,
corporate
bonds, project
finance
TBC (IFC
Feasibility
Study)
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Options to participate
(i) Join stakeholder group to be updated and consulted on
methodology developments
(ii) Provide input into needs analysis and methodology and tool
development
(iii) Participate in project research & development and test draft
methodologies/tools in relevant selected asset classes
GovernmentFinance(banks, investors, insurers)
Corporate sector
Ecosystem goods and services
Impacts on ecosystems (e.g.
deforestation, pollution)
Dependency on ecosystems
(e.g. water, fish, etc)
Risks
- Reputational
- Regulatory (e.g. license revoked)
- Operating risk (e.g. limited access)
- Litigation (damages /liabilities)
Methodological foundation to
mitigate financial risks and
develop sustainable finance
Financial regulation
To reduce systemic risk
Compliance with (new) laws and regulations
Controls on high-impact sectors
Incentives to reduce impacts
Integrating natural capital
into business decisions
Emerging initiatives
Measuring
economic
value of
ecosystems
Banking
• Brazil - Resolution No. 4.327 (2014)
• Kenya – Sustainable Finance Initiative (2014)
• China – Green Credit Guidelines (2012) Colombia - Green Protocol 2012
• Nigeria - Sustainable Banking Principles (2012)
• Bangladesh – ERM Guidelines (2011)
• Lebanon – Reduced reserve requirements for energy efficiency (2011)
• Indonesia – Green Protocol (2009)
• Peru & Mongolia –developing Guidelines
Securities
• Australia - Stock exchange reporting requirement (2014)
• EU - Directive on Disclosure of non-financial information (2013)
• France – Grenellereporting Law (2012)
• USA - SEC climate disclosure guidance (2009)
Growing examples of policy innovation
Insurance
• UK – Prudential Regulatory Authority exploring climate change & insurance supervision (2014-5)
• USA – NAIC climate reporting (2009)
Investment
• Malaysia – Investor Code (2014)
• Japan – Principles for Financial Action towards a Sustainable Society (2012)
• South Africa -Regulation 28 of the Pension Funds Act (2011)
• UK – Pensions Act Reporting (1999)
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Critical issue: improving transparency15
Mobilising global stock markets through the Sustainable Stock Exchanges Initiative including Colombia, Egypt, India, Mexico, Nigeria, Poland, South Africa, Thailand, Turkey, UK, USA,
Growing focus on investor disclosure First portfolio footprint in 2005 and now Portfolio DecarbonisationCoalition will convene a critical mass of investors committed to measuring, disclosing and reducing carbon impact
How can securities, investment & accounting rules strengthen voluntary leadership to drive both disclosure and use of sustainability information?
Long-standing focus on corporate disclosure Next generation reporting standards, with a greater focus on materiality and investment decision making.
