New IPBES reports will provide further impetus to efforts by policymakers and investors to account for nature and address biodiversity risks.
At the close of its Bonn Biodiversity Conference last week, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), issued a long-awaited report highlighting the extent of humanity’s reliance on wild species of plants and animals. It also provided evidence of the growing extinction risks to many species and offered solutions and options aimed at sustainable use.
The meeting also saw IPBES approve a separate report on the valuation of nature, aimed at helping policymakers to understand and incorporate into their actions the diversity of values ascribed to nature by different people and communities. The report said market-based approaches “do not adequately reflect how changes in nature affect people’s quality of life” and called for these to be supplemented in order for policymaking to adequately address risks to biodiversity.
Sir Patrick Vallance, Chief Scientific Adviser to the UK government, said the wild species use report provided “compelling evidence” of human over-exploitation of wild species and habitats. “Harmful activities, including habitat destruction, poor farming practices and pollution, have altered ecosystems significantly, driving many species past the point of recovery,” he said.
The wild species use report builds on previous 2019 IPBES research to identify just how reliant we are on nature, in the knowledge that a million are under threat of extinction, in no small part due to over-exploitation. The values report says humans, at least those that have built and benefitted from industrial economies, have under-valued nature and begins to suggest how we can better put a price on it.
This explainer looks at how IPBES is adding to our understanding of risks to nature and how policy decisions and investment actions might evolve in response.
What does the new IPBES report tell us about the pressures on wild species and the implications of these?
The report warns of multiple risks and impacts for the billions of people in developing and developed countries currently dependent on wild species – for food, energy, materials, medicine, recreation and other purposes – due to their over-exploitation and potential extinction.
Around 50,000 wild species are currently in use by humans, with 10,000 harvested for human food, meaning rural communities in developing countries are most at risk from unsustainable use. At least 34% of species are being sustainably used, meaning up to two-thirds may not be.
Wild species refers to populations that have not been domesticated by humans through multi-generational selection “and which can survive independently of human intervention that may occur in any environment”. The definition does not imply a complete absence of human management and the assessment excludes feral and introduced populations.
The report says 70% of the world’s poor are directly dependent, with one in five of the global population relying on wild plants, algae and fungi for their food and income. Dependence on wild species is wide-ranging, covering cooking fuel and small-scale fishing in developing countries, as well as medicine, cosmetics and tourism, largely consumed by people from developed countries.
IPBES identifies over-exploitation as the main threat to wild species in marine ecosystems and the second greatest threat to those in terrestrial and freshwater ecosystems.
“If we don’t respond, not only will a massive array of the rural and vulnerable poor not have access to key resources, but nor will the rest of the global economy,” says Wendy Elliott, Deputy Practice Leader and Innovation Lead for Wildlife at WWF Kenya.
Categorising usage of wild species under five headings – fishing, gathering logging, terrestrial animal harvesting (including hunting), and non-extractive practices – the report finds varying levels of sustainability. While 34% of marine wild fish stocks are overfished, for example, IPBES notes successes due to changes in stock management techniques.
Atlantic bluefin tuna is cited as one of several abundant species, due to “robust fisheries management”, but many small-scale fisheries are described as “unsustainable or only partially sustainable”, although status of stocks is often unclear in some regions.
As well as drivers such as land and seascape changes, climate change, pollution and invasive alien species, the report also points to substantial expansion in the global trade in wild species in recent decades. It says “effective regulation” is needed across supply chains to ensure trade is sustainable and beneficial for exporting countries, noting that illegal trade of wild species – worth an estimated US$199 billion annually – often leads to unsustainable use.
Speaking in Bonn, Dr Anne Larigauderie, Executive Secretary of IPBES, said: “The single message of the report is that sustainable use of wild species matters for all people and all communities.”
Pointing indirectly to the second IPBES report, she added: “That use is vastly under-estimated and under-appreciated, but that is about to change.”
What influence does IPBES have?
IPBES was established in 2012 by 94 governments to strengthen the “science-policy interface” on biodiversity and ecosystem services to support the conservation and sustainable use of nature. Funded by member governments, it is not a United Nations body, but its secretariat is provided by the United Nations Environment Programme (UNEP). Almost 140 governments attended the Bonn conference.
The new wild species use report was commissioned by governments, written by scientists and subject to lengthy negotiation between the two before approval. The process is painful but potent, suggests Elliott.
“That level of government endorsement is really relevant for the financial sector because it is a signal of potential future regulation,” she says.
IPBES is often described as the biodiversity equivalent of the Intergovernmental Panel on Climate Change (IPCC), the UN-backed scientific body established to monitor and propose responses to climate change, which recently published its sixth assessment report.
Policymakers and investors are likely to hear from IPBES more frequently in future, as their efforts to understand and address biodiversity risks become more urgent. At the start of the recent Bonn conference, Inger Andersen, Executive Director of UNEP Finance Initiative, said IPBES “has a growing role to play in delivering robust underpinnings for businesses to prosper in harmony with nature”.
What has IPBES already told us?
In 2019, at its last previous physical meeting before Bonn, IPBES published its ‘Global Assessment Report on Biodiversity and Ecosystems’, which warned of extinction risks to a million species of plants and animals within decades.
Presenting the evidence of accelerating rates of species extinction and deteriorating ecosystem heath, IPBES Chair Sir Robert Watson warned: “We are eroding the very foundations of our economies, livelihoods, food security, health and quality of life worldwide.”
Headline findings included a 20% decline on the abundance of native species in most major land-based habitats since 1900, with more than 40% of amphibian species, almost 33% of reef forming corals and more than a third of all marine mammals at risk. It identified the five major direct drivers of change in nature as evolving land and sea use, direct exploitation of organisms, climate change, pollution and invasive species.
Three-quarters of the land-based environment and two-thirds of the marine environment have been “significantly altered” by human actions, the report found, noting also that more than a third of land and nearly 75% of freshwater resources are utilised by crop or livestock production.
The new sustainable use report builds on the 2019 document, which identified the direct use of species as the second most significant driver of their decline. It was requested by member governments, including parties to the Convention on Biological Diversity (CBD) and parties to Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), meaning both will consider its findings at their respective ‘COPs’ later this year.
The 2019 report called for “transformative change” to conserve, restore and use nature sustainably, meaning “fundamental, system-wide organisation” with far-reaching consequences for economy, society and technology. It is a key driver behind the UN’s development of the post-2020 Global Biodiversity Framework, the collective policy agreement expected to be concluded at COP15 in Montreal in December.
What solutions does the new species use report propose?
The new report says pressures on wild species are set to rise, primarily down to climate change, increasing demand and technological advances. But it says sustainable use is possible, through policies, schemes and initiatives that rest on “integration of plural value systems; equitable distribution of costs and benefits; changes in social values, cultural norms and preferences; and effective institutions and governance systems”.
IPBES notes that the practices of indigenous peoples in fishing, gathering, and terrestrial animal harvesting typically result in more sustainable outcomes due to factors including respect for nature, waste avoidance and equitable distribution of benefits. The report recommends a closer future relationship between scientists and indigenous peoples and suggests policy solutions need to strike a better balance. Policy options should be science-led, but also inclusive, equitable and context-specific, taking account of international obligations as well as local norms. They must be pragmatic, using local knowledge where scientific evidence is limited, combined with effective ongoing monitoring of outcomes.
In practice, this often means reducing over-exploitation by targeting illegal practices and improving oversight across supply chains, typically through increased certification and reporting. It also means replacing harmful subsidies with support for sustainable practices and land tenure rights. IPBES emphasises the dynamic nature of sustainability of wild species, saying solutions require “constant negotiation and adaptive management”.
How will the IPBES report influence policymakers?
The most likely immediate impact of the wild species report will be to galvanise those involved in final stage negotiations for the GBF, following what was widely acknowledged to have been incremental progress during recent talks in Nairobi.
IPBES’ Larigauderie said the assessment had “immediate relevance” to the CBD’s work on the GBF, “not least because of the findings about the untapped potential of the sustainable use of wild species to contribute even more to many of the UN Sustainable Development Goals”.
According to Vallance, the IPBES report will help governments develop effective policy, based on evidence-based, integrated and collaborative planning to deliver solutions which address climate change and biodiversity loss simultaneously.
“Credible delivery plans will be required, and we need a robust mechanism for monitoring progress and holding ourselves to account,” he said, adding that countries must come to COP15 “prepared to make and support ambitious commitments”.
The wild species use report is not going to radically alter the GBF, some experts say, with many of the issues raised already recognised in its targets. Among half a dozen others, Target 10 calls for signatories to “ensure all areas under agriculture, aquaculture and forestry are managed sustainably, in particular through the conservation and sustainable use of biodiversity, increasing the productivity and resilience of these production systems”.
But it will increase pressure for these to be maintained and strengthened in the final draft and reflected in regional and national legislation. At the same time, experts predict that the report will further inform the shape of rules aimed at increasing due diligence along corporate supply chains.
IPBES also highlights the increased risk from intensification or new use of wild species of zoonotic disease outbreaks, noting the importance of governance structures to address these risks in light of the Covid-19 pandemic.
“The priority must be avoiding either epidemics or another global pandemic. ‘One Health’ approaches that create landscape immunity and manage wild species use in a way that limits disease spill over is fundamental to that,” says Elliott.
To that end, the World Health Organisation is holding talks this month on the creation of a treaty or similar international framework agreement. Elliott says it will cover multiple aspects of preparedness and response but says it needs to have “prevention at its core”.
Where are institutional investors in their understanding of dependencies, risks and impacts relating to wild species?
Most investors are at the start of their journey in understanding their dependencies and impacts on wild species and more broadly biodiversity, but there are encouraging signs of progress with signatories to the Finance for Biodiversity pledge growing to 98 financial institutions, representing over €13.9 trillion in assets under management. Membership of the Partnership for Biodiversity Accounting Financials has also grown as more investors seek to work collaboratively to develop frameworks for biodiversity risk assessments.
According to Sophie Lawrence, Stewardship and Engagement Lead at Rathbone Greenbank Investments, the techniques used to understand impacts and dependencies on nature, including wild species, currently rely heavily on financial and carbon data which risks oversimplifying assessments of complex ecosystems.
“We are beginning to see the development of bottom-up research approaches that relate directly to local impact and the function and condition of indigenous species and natural systems. These approaches currently rely on a significant amount of modelled data due to a lack of disclosure and the inherent complexity involved in understanding how a company and its supply chain is impacting on each of the five drivers of biodiversity loss,” she adds.
Lawrence says a full impact assessment, covering all investments in a portfolio, is unrealistic for many investors today due to a lack of available data or capacity. But they can begin to map the exposure of their investment portfolio to high-risk sectors using scientific research on the linkages between economic activities and impacts and dependencies on biodiversity. “This allows investors to understand the hotspots of risk in their portfolio and they can then focus in on these companies, through engagement or further impact assessment,” she says.
What are the implications of the wild species use IPBES report for investors?
Many investors are already working to factor natural capital and biodiversity risks into their decision-making frameworks, ahead of the launch of its disclosure framework by the Taskforce on Nature-related Financial Disclosures (TNFD), which aims to provide a comprehensive approach to managing risks, impacts and dependencies.
According to Rebecca Drury, Manager of Biodiversity and Nature at Chronos Sustainability, there is a growing “need for investors and corporates to include data on trade of wild species in their biodiversity values and natural capital accounting, and when aligning financial flows for nature-positive outcomes”.
Core sectors will include timber, fisheries, and businesses using wild plant ingredients, as well as sectors having indirect impacts, such as infrastructure development, and enabling sectors such as finance, transport, online commerce, and tourism.
A key takeaway for investors is the need to ensure investee firms exercise greater control across their supply chains to ascertain they are not contributing to overuse of wild species. Companies are likely to face legal, financial and reputational risks if they do not anticipate regulatory changes and the technologies to enforce them.
IPBES makes it clear that wild species often travel a long and tangled path from origin to end use. That journey may well start outside any legal framework, with land tenure rights questionable at best. Companies and their financial backers have long turned a blind eye to this inconvenient truth, for example in terms of the sourcing of beef grown on land seized illegally in Brazil.
“Even though they’re direct beneficiaries of nature crimes, there is no liability that sits on the financial institutions’ balance sheet,” says Simon Zadek, Chair of the Finance for Biodiversity initiative.
The IPBES report notes that the illegal trade in wild species – the third largest class of illegal trade – is a significant contributing factor in their over-exploitation, but the lines can be blurred with goods of unverified origin finding themselves in the supply chains of multinationals and, ultimately, the portfolios of financial institutions.
“Community collection of wild plants is overlooked as a commodity in the supply chain,” says Elliott. “But they will be there in your bathroom in shea butter or in your kitchen as Brazil nuts, often collected by very marginal communities,” she says, noting that equitable certification schemes can bring benefits to all along the supply chain, while helping to protect habitats.
Certification and labelling schemes have a place, says IPBES, but their record is mixed, partly because most do not follow its recommended principles. These voluntary schemes are being supplemented by regional and national rules legally requiring firms to prove the origin of certain commodities, including beef and timber, as well as blanket due diligence requirements on management to disclose any environmental or human rights harms along their supply chains.
With more governments likely to impose similar requirements in light of the IPBES report, investors are more frequently pressing investee firms to demonstrate good sourcing practice. And as data and technology improves our ability to shine a light on shady practices, there will be fewer excuses for failing to do so.
Elliott says finance sector initiatives to assess impact on nature, such as TNFD, need to be close to the ground to “move the needle”.
“We’re in a time where there’s so much opportunity to create that transparency. Whether it’s remote electronic monitoring devices on fishing vessels or blockchain-based approaches, there’s so much technology that makes this possible. But there also needs to be the will from businesses to understand their supply chains and implement sourcing guidelines.”
According to Drury, improved information sources and frameworks will be crucial to due diligence efforts. “The current scale of harvesting, use and trade of wild species is enormous, and many species harvested for trade have not been assessed. Although an index exists for sustainable harvesting of fish, no similar index exists for terrestrial species of fauna, flora or fungi,” she says.
What other developments are shaping the finance sector’s relationship with nature?
Zadek says a further incentive for investors and other financial institutions to exercise supply chain due diligence could arise from regulatory changes in train elsewhere in the finance sector.
Following a number of reports by the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, financial regulators are increasingly viewing the proceeds of environmental crime through the same lens as any other form of financial crime and imposing increasingly steep sanctions on the financial institutions that facilitate it, knowingly or not.
Major financial institutions have already established extensive capabilities to ensure they do not allow payments from terrorists and other criminals to pass through their transaction value chains, with close links to financial regulators and law enforcement agencies. Zadek predicts a new set of due diligence mechanisms that will require financial institutions to attest to the fact that there are no nature crimes in their investment value chain, which are likely to have sharper teeth than existing measures.
“It’s actually legal risk that is likely to trigger interest more than regulatory risk in developing countries, particularly when it is being enforced by the regulator of the global institution,” he says.
If the wild species report reiterates IPBES’s 2019 message on the risks of nature exploitation, Zadek argues that the values report breaks more new ground for investors and other financial institutions, by contributing to the widening conversation about how to place value on nature and integrate that into financial decision-making frameworks to achieve nature-positive outcomes.
The values report highlights the historic under-valuation of nature resulting from approaches focused on profit and economic growth caused by short-term materialism, adding that changes to how nature is valued in political and economic decision-making are essential in order to prevent further biodiversity loss.
It reviews existing valuation methods and offers guidance on understanding values held by individuals and communities about nature, as well as the design of valuation assessment processes to help decision-makers understand impacts on nature.
Zadek sees the report in the context of innovations in the finance sector aimed at driving capital toward nature-positive solutions and investments. These include biodiversity credit markets alongside the longer-established voluntary carbon markets, which are increasingly improving the quality and transparency of carbon offsets and credits to attract a wider range of participants.
“The question is: is this wealth of new initiatives likely to deliver markets that value nature in a way that delivers equitable nature positive outcomes?”
