UBS believes that the financial sector can help to scale up the use of existing technologies quickly and comprehensively to stem the loss of biodiversity by 2030. It has produced a white paper together with experts.
Biodiversity is important for both the climate and the economy, as around 60% of global gross domestic product (GDP) is moderately or heavily dependent on nature. It is imperative that governments, business, science and the global community work together to advance the technological solutions needed to halt biodiversity loss by 2030.
Where does the world stand in terms of biodiversity loss?
In the white paper «Bloom or bust» (see PDF), which was prepared together with experts and will be discussed at the annual meeting of the World Economic Forum (WEF) 2024, UBS takes stock of where the world currently stands about the loss of biodiversity. The white paper also examines existing solutions to mitigate this problem and the role that the financial sector, government action and collaboration can play.
Biodiversity is equally important for the climate and the economy
Biodiversity and climate are closely linked. Around 37% of the cost-effective emissions reduction needed to be on track with the Paris Agreement requirements by 2030 can be achieved with natural climate solutions. In 2022, the international community also agreed the Global Biodiversity Framework (GBF) to reverse biodiversity loss by 2030 and become nature-positive by 2050. Achieving these goals is a race against time.
Biodiversity is also important from an economic perspective: according to an analysis by UBS, around 60% of global GDP is moderately or heavily dependent on nature. As a result, investors, companies and governments are increasingly interested in mobilizing capital for nature-focused solutions.
The investment gap in biodiversity must be closed
The investment gap in biodiversity that needs to be bridged to achieve the 2030 target is around 700 billion US dollars per year. To close this gap, private capital must be channeled into innovative and nature-focused financial approaches. Governments need to take action and help mobilize capital for solutions that benefit nature.
Data and measurements in the field of biodiversity are crucial
A clear understanding of the drivers of biodiversity decline and how fast this decline is occurring is crucial. This can be achieved through technologies such as remote sensing with satellites, on-site monitoring tools - such as eDNA - and data processing using artificial intelligence and machine learning. However, the expansion of these technologies requires considerable investment.
Innovative and nature-focused financing approaches are needed
Public, private and blended finance are needed, including:
Nature-focused transitional financing: Transitional finance offers the greatest potential to unlock private capital and can also be done on a large scale. Loans and bonds, for example, are widely available on the financial markets and are linked to criteria that promote better environmental outcomes. These include credible transition plans or reporting in line with frameworks (e.g. TNFD). This increases the use of this financing and, as a result, biodiversity measurement technologies are increasingly established. This in turn improves the business case of the actual technologies.
Blended finance and philanthropic capital: Blended finance can help attract private funding for previously hard-to-finance projects. This approach has proven valuable in addressing local hurdles that transitional finance alone may not be able to overcome. Today, 80% of the world's remaining biodiversity is on land managed by indigenous peoples. The successful deployment of measurement technologies in these areas relies on the effective involvement of indigenous peoples and local communities.
Government measures are necessary
The scale of the investment gap requires accompanying government action to encourage the mobilization of capital for nature-positive solutions. The white paper identifies four key ways in which governments can help:
Offer suitable economic incentives: For example, agricultural subsidies could be linked to positive environmental outcomes.
Send clear signals: Clear biodiversity strategies that prioritize measurement and report their progress to the GBF in 2024 serve this purpose.
Provide public capital to attract private capital and promote innovative financing initiatives: Concessional finance is likely to be needed for projects that do not offer clear revenue streams in the short term.
Make data and methods generally accessible: Promote acceptance of TNFD in the private sector and create a public TNFD data center.
Together with the 2024 Annual Report, UBS is also publishing information that is aligned with the framework of the Taskforce on Nature-related Financial Disclosures (TNFD) for the first time.
