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Banking and Financial Services

About this sector

The finance industry constitutes the largest group of companies in the world. Banking is the largest financial services sector (24% of total assets in 2005), followed by securities (21%), insurance (18%), pensions (17%) and government related services (13%)168. The role of the sector in biodiversity loss and, indeed, in its conservation is increasingly being recognised. By providing financing to projects and companies, the sector has an indirect reliance and impact on biodiversity and ecosystem services.

Impacts

  • Indirect impacts through investment/ provision of financial services to company’s which mismanage biodiversity.
  • Potential for positive impact through incentivising development of biodiversity related products e.g. biodiversity offsets, offsets, REDD, payments for ecosystem services.

Opportunities/Risks

  • Development of new financial products e.g. carbon credits or biodiversity offsets.
  • Differentiation and branding e.g. HSBC’s Climate Partnership.
  • New investment opportunities e.g. biodiversity banking.

Case Studies


Handling of the Yamato River water quality improvement support time deposit “Yamato River Time Deposit”

Handling of the Yamato River water quality improvement support time deposit “Yamato River Time Deposit”

This project is based on the “Yamato River time deposit”, a product marketed by Yamato Shinkin Bank and designed to improve the water quality of the Yamato River, which flows through the basin of Nara. Additional interest is paid to deposits when prescribed improvements are seen in water quality, specifically the BOD (biological oxygen demand) levels.

Testing the first habitat banking project in Europe

Testing the first habitat banking project in Europe

New market mechanisms targeting biodiversity conservation are emerging worldwide, and among others, the biodiversity offset market size is expected to increase in the coming years. The French company CDC Biodiversité has seized this opportunity and is testing the first habitat banking project in Europe.

Utilizing financing mechanisms to protect Japanese satoyama biodiversity

Utilizing financing mechanisms to protect Japanese satoyama biodiversity

Aware of the role finance has to play in the field of biodiversity projects funding, Sompo Japan has developed a loan mechanism that fosters investments in ecological housing and finances a charity fund dedicated to Japanese specific landscape protection.

Yogyakarta Special Province Wildlife Reserve Restoration and Recovery

Yogyakarta Special Province Wildlife Reserve Restoration and Recovery

This project is designed to restore a natural reserve that has been ravaged by illegal logging and, over the long term to contribute to the local economy through the planting of trees. This has resulted in the planting of some 300,000 trees across nearly 350 hectares of highland area.


Tools and Mechanisms


Demystifying Materiality: Hardwiring biodiversity and ecosystem services (BES) into finance

Demystifying Materiality: Hardwiring biodiversity and ecosystem services (BES) into finance

http://www.unepfi.org/fileadmin/documents/CEO_Demy...

The links between financial services, risk, and BES have, to date, been weak. Resource scarcity, loss of biodiversity, and degradation of ecosystem services such as freshwater availability have, however, started to present financially material risks and opportunities for bankers, investors, and insurers. Hardwiring BES into the heart of business models and core strategies is vital for long-term growth and success. This briefing is intended for forward-looking financial institutions to operationalise BES in the financial sector.
The Round Table on Responsible Soy Association (RTRS)

The Round Table on Responsible Soy Association (RTRS)

http://www.responsiblesoy.org/

The (RTRS) is a multi-stakeholder initiative which aims to facilitate a global dialogue on soy production that is economically viable, socially equitable and environmentally sound. It provides stakeholders and interested parties – producers, social organizations, business, and industry - with the opportunity to jointly develop global solutions leading to responsible soy production.

As a result of consensus between producers, industry, trade & finance, and civil society actors involved in the soy value chain, the RTRS standard for responsible soy production was developed. It includes requirements to:
  • Halt conversion of areas with high conservation value
  • Promote best management practices
  • Ensure fair working conditions
  • Respect land tenure claims
Principles for Responsible Investment

Principles for Responsible Investment

http://www.unpri.org/principles/

The Principles for Responsible Investment were developed by an international group of institutional investors reflecting the increasing relevance of environmental, social, and corporate governance issues to investment practices. The process was convened by the United Nations Secretary-General. In signing the Principles, and where consistent with fiduciary responsibilities, investors publicly commit to adopt and implement them.
Equator Principles

Equator Principles

http://www.equator-principles.com/

The Equator Principles (EPs) is a credit risk management framework for determining, assessing and managing environmental and social risk in Project Finance transactions. While the Principles apply to all new project financings globally with total project capital costs of US$10 million or more, and across all industry sectors, project Finance is often used to fund the development and construction of major infrastructure and industrial projects. Additionally, the EPs are primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making.
Environmental due diligence (EDD) for renewable technologies

Environmental due diligence (EDD) for renewable technologies

http://www.unep.fr/energy/activities/ddg/

Guidelines on EDD for Renewable Energy Technologies, developed by UNEP and its Collaborating Center BASE, provide a practical tool for financiers and investors to check and mitigate their risk of investments in this sector. The EDD guidelines are intended to provide practical, standardized procedures for identifying and managing environmental impacts associated with investments; in particular, renewable energy technologies.

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Banking and Financial Services

Case studies
Tools and Mechanisms