SOURCE / ECONOMY
Financial sector should respond to increasing threat from biodiversity degradation: experts
Published: Oct 12, 2021 07:00 PM
Aerial photo taken on June 5, 2021 shows an artificial beach resort at Dongjiang Port in the Binhai New Area of north China's Tianjin. Tianjin in north China boasts rich biodiversity along a 153-km coastline made up of muddy tidal flats. Over the years, the city has worked on pollution control and shoreline management of the Bohai Sea to restore its coastal wetlands, while stricter measures on land reclamation have been implemented.(Photo: Xinhua)

Aerial photo taken on June 5, 2021 shows an artificial beach resort at Dongjiang Port in the Binhai New Area of north China's Tianjin. Tianjin in north China boasts rich biodiversity along a 153-km coastline made up of muddy tidal flats. Over the years, the city has worked on pollution control and shoreline management of the Bohai Sea to restore its coastal wetlands, while stricter measures on land reclamation have been implemented.(Photo: Xinhua)



Chinese President Xi Jinping on Tuesday said China will take the lead by investing 1.5 billion yuan ($233 million) to establish the Kunming Biodiversity Fund, marking the latest effort by the world's second largest economy to address the increasing biodiversity degradation.

Xi made the remarks while addressing the leaders' summit of the 15th meeting of the Conference of the Parties (COP15) to the Convention on Biological Diversity via video link in Beijing. 

The fund will be used to support developing countries in biodiversity protection, and China calls on and welcomes all parties to make contributions to the fund, he said. 

Financial institutions should take the biodiversity loss issue seriously and increase their efforts to protect nature due to the high dependency of economies and financial systems on biodiversity, experts told the Global Times.

"Biodiversity is declining at an unprecedented rate, and the pressures driving this decline are intensifying," as the fifth edition of the Global Biodiversity Outlook published by the Secretariat of the Convention on Biological Diversity has warned. 

The landmark meeting, which kicked off on Monday in Kunming, capital of Southwest China's Yunnan Province, is expected to offer a good opportunity to reflect on past experiences and draw a blueprint for preserving global biodiversity in the coming years.

Among a slew of measures to support biodiversity, the role of financial sector could not be neglected.

Ma Jun, a member of the monetary policy committee of the People's Bank of China, the country's central bank, said in a speech amid the meeting on Tuesday that in terms of the products, Chinese financial institutions have developed green finance products to support biodiversity.

Ecological assets such as forestry, water use rights and carbon sinks have been used by companies and farmers as collateral to borrow from banks in order to invest in eco-friendly projects. Blue bonds have been issued to support a sustainable fishery. Digital technologies have also been used for origin tracing, and on that basis, low-cost financing is provided to producers of organic food products, according to Ma.

In 2016, seven Chinese ministries, with the country's central bank taking a leading role, together issued a set of green finance guidelines, which established the framework for mobilizing private capital to support green activities, including clean energy, green transportation, green building and protecting biodiversity.

"Human activities are destroying nature, ecosystems and biodiversity. Nature is the foundation for our survival and development. The loss of biodiversity will cause many irreversible risks to the sustainable economic and social development and the stability of the financial system," Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Tuesday, adding that businesses and supply chains have become more exposed to the fluctuating costs of raw materials from the nature.

Financial institutions should be encouraged to provide services to clean energy projects instead of the traditional ones that consume fuel largely and thus cause pollution to the environment, said Dong.

In an interim report on biodiversity and financial stability just published by the Network for Greening the Financial System (NGFS) ahead of the Kunming meeting, it pointed out that the financial sector faces physical risks arising from biodiversity loss as well as transition risks due to companies' inability to carry out activities that rely on "consuming" biodiversity. 

Central banks and financial supervisors should begin to build capacity to address biodiversity-related risks, to assess the dependency of their economies and financial systems on biodiversity, to quantify the risks, and to explore policy tools that help guide investors, according to the report.

Despite the progress made in financing biodiversity over past years, China and the rest of the world still need to spend more efforts and mobilize much larger amounts of private capital, experts said.

"We need more detailed operational guidelines to define biodiversity-friendly and conservation projects, to assess the impact of investment on nature, to disclose related information, and to provide incentives for eco-friendly projects," Ma said.

Studies have shown that half of the global GDP depends directly or indirectly on biodiversity. Based on certain assumptions, the loss of biodiversity may result in an annual economic loss of $10 trillion, he told the Global Times.

Ma forecast that biodiversity would be one of major concerns during the upcoming G20 sustainable finance roadmap that is expected to be unveiled at the end of this month. "Financial institutions will be promoted to strengthen investment in biodiversity protection and prevent excessive investment of financial resources in economic activities that damage biodiversity."


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