To make COP27 a success, finance is key – POLITICO

Robin Millington is the CEO of Planet Tracker.

Simon Stiell, the new head of the United Nations Framework Convention on Climate Change, has his work cut out for him. Indeed, there is no magic wand to green the global economy, but it does have the convening power to help bring policymakers, investors and financial institutions together in a more aligned way.

Investors and policy makers must join forces to protect natural capital, the sum of the world’s stocks of natural assets from which we derive services such as forestry, fishing, materials to build our homes and minerals to power our phones and electric vehicles.

Whether deploying mitigation and adaptation measures, mitigating the impact of environmental loss and damage, or ensuring that the green transition is fair for developing countries, good policy and good funding must go hand in hand.

Take aquaculture, for example, an industry that provides 49% of the world’s demand for fish, according to the Food and Agriculture Organization of the United Nations. About 3 billion people depend on seafood as their main protein. Meanwhile, aquaculture feed for the industry is increasingly dependent on soy, which in turn drives deforestation. But innovative green bonds, issued by leading companies such as Mowi and Grieg Seafood, are providing the capital needed to expand the use of more sustainable foods with new ingredients, such as black fly larvae and seaweed.

Such debt financing is clearly both feasible and desirable, and connecting the dots between industries and implementing supportive policies can have a positive impact.

In recent months, the world has become acutely aware of the value of nature. Food prices have risen dramatically, in part due to the conflict in Ukraine, but food shortages were already increasing due to the impact of climate change. However, Russia’s war exacerbated the problem exponentially, creating a focal point for an issue that, unfortunately, had too often been dismissed.

Today, food security and issues related to our food supply chains are at the top of the national agenda.

This year alone, around 30 countries have imposed restrictions on food exports, fearing that food insecurity could lead to civil unrest. And while bodies such as the UN demand that these protectionist measures be scaled back to keep trade open and free, nature-dependent nations continue to erect trade barriers through bans, export licensing and/or export taxes, disrupting supply chains. .

Between 2010 and 2019, these nature-dependent exports accounted for 40% of total annual global trade, more than a third of which came from undemocratic regimes. In fact, 25% of renewable commodities – agricultural exports such as grains, meat, dairy and seafood – came from 90 non-democratic countries with an average annual export value of $602 billion. .

It also raises the specter of our support, as a global community, for regimes that continue to drive deforestation, pollution and human rights abuses, and which could easily cut off vital supplies at any moment – as we have seen with Russia. Supply chain vulnerabilities are now clear to all.

So what should financial institutions and policymakers do when a quarter or more of renewable raw materials are at risk?

First, a move towards shorter supply chains and “friendly” or “friend-shoring” jurisdictions should be viewed with caution. While these policies encourage secure local sourcing and can enhance national food security, supply chains are far too complex to be fully mastered. feeling.

To reset the food system for a more sustainable, healthy and equitable food future, investors and policymakers should instead focus on supporting the transition to more sustainable global food, while working on ways to help mitigate the impact of climate shocks on supply chain, disease or geopolitics.

However, financial markets also play an important role in supporting industries that have a detrimental impact on our natural capital. For example, Planet Tracker’s « Gran Chaco » research, which focuses on the risk of deforestation in South America’s largest dry forest, as well as the 12 soybean traders who control 89% of the country’s soybean exports. Paraguayan and Argentinian Gran Chaco – revealed that in the policies of the 20 largest capital investors financing the « deforestation dozen », only one of them explicitly recognizes the region as a high-risk biome.

Going forward, the rise of environmental, social and governance data means that investors can now begin to understand the impact of their investments. Collecting structured data on natural capital issues and disclosure legislation can help investors identify risks and opportunities, and it also lays the groundwork for better regulation to address specific issues.

This kind of increased accountability is what can accelerate the transition not only to a net zero future, but also to a just and positive future for nature at the pace required.

« We can do better, we must » – these were the parting words of outgoing UN climate chief Patricia Espinosa. And that means better examining and acting on the interplay of problems, as we use what is left of the Earth’s natural capital. It also means strengthening the way financial markets support policy – ​​we need funding channeled into our solutions.

There was a lot of positive momentum for this at COP 26 in Glasgow last year. Now, as we approach COP 27, we must accelerate this momentum.