Letter to Finance Ministers and Heads of State of G20 Nations
Subject: Urgent Need for Financial Sector Regulation to Support Global Biodiversity Goals
Dear Finance Ministers and Heads of State,
As we approach the 2024 G20 Summit, we write to express our deep concern about the role of the financial sector in accelerating global biodiversity loss. The Global Biodiversity Framework (GBF), adopted at the United Nations Convention on Biological Diversity, set clear goals to reverse biodiversity loss by 2030. However, without strong financial sector regulations, achieving these targets will be impossible.
Public and private financial flows that directly contribute to nature loss were estimated at US$ 7 trillion in 2023, while only US$ 200 billion was directed towards conserving or restoring biodiversity. Introducing meaningful regulations that eliminate financial flows driving deforestation, environmental degradation, and associated human rights violations must be a precondition for successful conservation interventions.
We urge you to take the necessary steps to ensure that biodiversity and human rights criteria are integrated into your country’s financial sector regulations and to align these efforts with the GBF targets. Our research, conducted by the Forests & Finance Coalition, highlights critical gaps in financial regulations across key G20 jurisdictions. Based on this analysis, we recommend the following actions:
Key Recommendations:
Risk management and financial stability: Financial institutions should be required to integrate biodiversity and human rights risks and impacts into their risk management processes at the corporate group level of their clients. They must develop transition plans with specific targets and hold board members accountable for risk management. Regulators should mandate higher capital reserves for high-risk activities. System-wide stress tests should also include biodiversity considerations.
Financial market functioning: Regulations should mandate regular disclosure of investment and loan portfolios, including exposure to biodiversity risks and impacts, with verifiable proof required for biodiversity-related claims. Financial products should be labelled based on their genuine sustainability impacts, and investment funds with harmful biodiversity impacts should be phased out.
Monetary policy: Central banks should prioritize bonds from issuers making concrete and verifiable positive contributions to biodiversity and human rights in any quantitative easing programs and collateral frameworks. They should assess and address the contribution of their own investment portfolios to biodiversity and human rights impacts. They should also offer reduced interest rates to financial institutions investing in genuinely sustainable and socially just activities.
Money laundering and financial crime: Biodiversity risks should be incorporated into due diligence and Know Your Customer processes. The financing of companies should be prohibited if they and their suppliers are not able to demonstrate clear adherence to all legal requirements in the areas where they operate. Financial institutions should be held accountable for crimes connected to the corporate groups that they finance, including those impacting biodiversity and human rights, and should be liable for remedy.
Corporate disclosure: Annual public reporting on biodiversity and human rights risks and impacts should be required for companies under the common control of all medium and large corporations. This should include detailed, verifiable data on biodiversity and rights impacts, including geolocation data of its operations. All companies should be required to publish annual profit and loss statements and provide details on their funding sources and (legality of) their assets.
Stimulating sustainable activities: Expand taxonomies to include biodiversity, social and human rights criteria and include categories for inherently harmful sectors. Financial institutions should be required to align their portfolios accordingly. Create robust, transparent and verifiable criteria for finance that incentivises community-led sustainable land use and restoration.
Human rights and environmental protection: Develop due diligence obligations for the financial sector to prevent the financing of embedded deforestation, forest degradation and human rights violations. Establish independent grievance and accountability mechanisms for affected communities and third parties to bring complaints against financial institutions.
Strengthening institutions: Financial regulators to develop in-house expertise on biodiversity and human rights and establish inclusive stakeholder platforms to consult with Indigenous Peoples, civil society and other experts. Outcome-focused financial regulations that align with the objectives of the GBF and shift the economy away from harmful activities must be supported by a robust sanctions regime. These should include stringent penalties for non-compliance and mandatory obligations to fund mitigation and remedy efforts for affected communities and ecosystems.
Call to Action:
We strongly urge you to update your National Biodiversity Strategy and Action Plans (NBSAPs) to include the strengthening of financial sector regulations. This will support central banks, financial regulators, and supervisors in making biodiversity and human rights criteria core to their mandates, thus aligning with the objectives of the Global Biodiversity Framework.
Your leadership at the 2024 G20 Summit is critical to creating a financial system that prioritizes the health of our planet and the rights of its people. We count on your commitment to these urgent reforms.
Thank you for your attention to this matter. We look forward to your action on these vital issues.