‘Integrated’ transition framework aims to help boost financial institutions’ financial and environmental performance, according to its authors

A new framework that aims to help financial institutions develop consistent climate and nature scenarios and transition plans has been published this morning by the Finance for Biodiversity Initiative.

Finance for Biodiversity said the “integrated” transition framework was the first of its kind and would enable financial institutions of varying sizes, complexities, and maturity to better manage climate and nature-related risks and opportunities, and structure their approach to transition to a net zero and nature positive world.

The group has argued that an integrated approach that combines nature and climate considerations is needed to ensure that financial institutions correctly value assets, avoid the risk of mispricing assets, and ultimately drive a better financial performance. Few institutions within the sector have to date adopted such an approach, it noted, despite the “clear scientific evidence of the critical importance of the climate-nature nexus” provided by the world’s leading climate and nature scientists through the Intergovernmental Panel on Climate Change (IPCC) and the Convention of Biological Diversity (CBD).

“Put simply, financial institutions that successfully integrate climate- and nature-related risks and opportunities into their decision making now will be better able to manage their investments, and ensure they are ahead of the inevitable policy changes that will mandate such behaviour in the future,” said Finance for Biodiversity chair Simon Zadek. “Our integrated transition framework offers an off-the-shelf solution that FIs can use – from today – to develop quantitative, nature-inclusive strategies that will potentially help to drive investment success.”

Finance for Biodiversity said its new framework would “complement and strengthen” existing efforts to embed climate and nature considerations into financial decision making, highlighting how it was consistent with the work of the Taskforce on Nature-related Financial Disclosures (TNFD) and would be able to be used alongside the latter group’s ‘beta’ framework, which is expected to be published this month.

Jan Erik Saugestad, CEO of Storebrand Asset Management, said biodiversity was “increasingly on the agenda” of financial institutions, thanks in part to the formation of the TNFD.

“Beyond its contribution to climate change mitigation and adaption, biodiversity underpins all economic activities and human well-being,” he said. “While financial sector action on climate change continues to mature and expand rapidly, we urgently need to approach transition to both a net zero and nature positive in an integrated way.  By recognising the interactions between climate change and nature, the financial sector can avoid mispricing risks and opportunities, and can correctly value assets.”

Finance for Biodiversity said it hoped its framework would encourage other organisations in the financial sector to move more rapidly towards an integrated approach to nature and climate, including the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), the International Sustainability Standards Board (ISSB), and the Science-based Targets Network (SBTN).  It added that it would expand the framework over time as best practice evolves.

Want to find out more about how the net zero transition will impact your business? You can now sign up to attend the virtual Net Zero Finance Summit, which will take place live and interactive on Tuesday 29 March and will be available on demand for delegates after the event.


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