sign in sign up
<<
Home , Natural capital

Financial sector leadership on natural The Natural Capital Declaration A commitment by financial institutions to mainstream natural capital in financial products and in accounting, disclosure and reporting frameworks www.naturalcapitaldeclaration.org [email protected] @NCDeclaration

Secretariat:

1 The Natural Capital Declaration (NCD) About the Natural is a finance-led initiative to integrate natural capital considerations into Capital Declaration loans, public and private equity, and fixed income and insurance products. During the first Rio Earth Summit in 1992, The NCD Roadmap, which lays out an governments set a ground-breaking agenda approach for developing natural capital To achieve this the NCD will develop for tackling environmental problems, setting methodologies for the sector, can be up new conventions on (CBD), downloaded from our website. new metrics and tools, and support climate change (UNFCCC) and desertification the development of accounting, (UNCCD). More than 40 CEOs of banks, investors and insurers worldwide have signed disclosure and reporting frameworks But at the recent Rio+20 Summit two decades the Declaration. later, it was private sector leaders that came that incorporate natural capital factors. to the fore, responding to the material impacts We invite other financial institutions to that widespread ecosystem degradation endorse the NCD and help lead on developing creates for their businesses and the economy the roadmap to a . Signed by CEOs, it is the cumulative as a whole. To sign the Declaration, see a full list of result of in-depth consultations with Among them were a growing number of signatories or learn more, please visit: the finance community and other financial institutions who recognised that the www.naturalcapitaldeclaration.org increasing pressures of population growth or contact us at: stakeholders to understand the and climate change on our limited natural [email protected] base and rising commodity prices and materiality of natural capital for banks, require a radically new approach. investors and insurance firms. Their response is the Natural Capital Declaration (NCD), a commitment from banks, investors and insurance firms to change their business models to reflect the materiality of natural capital for the financial sector.

Phase I of the NCD focused on building momentum around this topic, and was successfully concluded with the official launch of the Declaration at ‘Rio+20’. Now, in Phase II (called the ‘NCD Roadmap’), signatory financial institutions are setting about implementing its commitments.

To help achieve this, a secretariat has been formed by UNEP FI and the Global Canopy Programme, a Steering Committee of signatories and supporters is being convened, and four working groups have been established. Each working group will tackle one of the critical challenges to incorporating natural capital considerations in the finance industry.

2 3 The Natural Capital Declaration

The Roadmap to a Green Economy Leadership from the Financial Sector Why Government Action is Essential Now Our Commitment at the Rio+20 Earth Summit* We the undersigned financial institutions wish Financial institutions are an integral part Because natural capital is a part of the to acknowledge and re-affirm the importance of the economy and society. As the engine ‘global ’ and is treated largely as a Anticipating that such a framework will of natural capital in maintaining a sustainable of global economic growth, the financial free ‘good’, governments must act to create emerge, and noting that no methodology yet global economy. This declaration calls upon the sector can provide some of the tools required a framework regulating and incentivizing exists to adequately report or account for private and public sectors to work together to to support a transition to sustainable the private sector – including the financial natural capital in the global financial system, create the conditions necessary to maintain and development and eradicating poverty by sector – to operate responsibly regarding we the endorsing financial institutions wish enhance natural capital as a critical economic, providing loans, equity, insurance and other its sustainable use. We therefore call upon to demonstrate leadership by undertaking to ecological and social asset. We present this financial products and services needed by governments to develop clear, credible, and collaborate globally through working groups declaration to the world community at Rio+20*, companies, governments, organizations long-term policy frameworks that support and and engagement with our customers, investee as a private sector finance response to the and individuals that consider social and incentivise organizations – including financial companies, suppliers, civil society, and other conference theme of working towards a green environmental . Since virtually institutions – to value and report on their use stakeholders as appropriate to: economy. This declaration has been developed every economic activity can have an impact of natural capital and thereby work towards based on an extensive consultation process on natural capital either directly or indirectly, internalizing environmental costs. This can 1. Build an understanding of the impacts and with the financial community over the course of through a supply chain, financial institutions be done by: dependencies of natural capital relevant to our 2010 and 2011, including meetings in London, have considerable indirect ecological footprints operations, risk profiles, customer portfolios, Nagoya, Hong Kong, Munich, Washington D.C. through their customers and directly through 1. Requiring companies to disclose the supply chains and business opportunities; and São Paulo. their purchasing decisions. These impacts can nature of their dependence and impact lead to material financial risks, but also to on natural capital through transparent 2. Support the development of methodologies The Importance of Natural Capital relevant business opportunities. qualitative and quantitative reporting; that can integrate natural capital considerations into the decision making Natural capital comprises Earth’s natural At present many financial institutions do 2. Using enforceable fiscal measures to process of all financial products and assets (, air, , flora and fauna), and not sufficiently understand, account for and discourage business from eroding natural services - including in loans, investments the ecosystem services resulting from them, therefore value, the risks and opportunities capital, while at the same time offering and insurance policies. We recognise that which make human possible. Ecosystem related to natural capital in their financial incentives to companies that integrate, given the diversity of the financial sector, goods and services from natural capital products and services (loans, investments and value and account for natural capital in embedding natural capital considerations underpin productivity and the global economy. insurance products) and in their supply chains. their business model; will differ across asset classes and types They provide services worth trillions of US Building this knowledge, as well as appropriate of financial institutions. We therefore dollars per year in equivalent terms and valuation and risk management tools, to take 3. Endorsing and implementing international aim to build on work undertaken through constitute , fibre, water, health, , natural capital into account within financial agreements, including but not limited to, other initiatives, such as the UN-backed climate security and other essential services decision-making, are important early steps to those agreed through the Convention on Principles for Responsible Investment, the for everyone. Neither these services, nor the be undertaken by the financial sector. Biological Diversity; Equator Principles, the United Nations stock of natural capital that provides them, Environment Programme Finance are adequately valued in terms comparable to As members of the financial sector, we 4. Setting an example through requiring Initiative (UNEP FI) Principles for manufactured and . Despite consider ourselves key stakeholders in future public spending and procurement to report Sustainable Insurance, and The Economics being fundamental to our wellbeing, their discussions about valuing and protecting and eventually account for its use of of Ecosystems and Biodiversity (TEEB), so daily use remains almost undetected within natural capital and we recognise that we have natural capital; that we can develop methodologies to: our economic system. Using natural capital a key role to play in the reforms needed to this way is not sustainable. The private sector, create a financial system that reports on and We welcome the World Bank’s a. Apply a holistic approach to evaluating governments, all of us, must understand ultimately accounts for the use, maintenance, Accounting and Valuation of Ecosystem bonds and equities through the integration and account for our use of natural capital and restoration of natural capital in the Services (WAVES) initiative and encourage of natural capital considerations in and recognise its true value in maintaining global economy. However, we must do this in governments to participate. environmental, social and governance (ESG) economic growth and sustaining human consultation with government and supported risk analysis in short, medium and long- wellbeing today and into the future. by appropriate legislation and regulation. term growth forecasts of investee companies; 4 5 Benefits for Signatory Financial Institutions

b. Systematically consider and value * The Natural Capital Declaration was Strengthen credit risk management Receive support and guidance natural capital in the credit policies of launched at the United Nations ‘Rio+20’ specific sectors, including commodities, Earth Summit in 2012. Financial Increasing pressure on natural over Support and guidance on implementing the that may have a major impact on natural institutions continue to endorse it, and can the past decade alone has reversed a 100 year NCD commitments is available to signatory capital either directly or through the also now engage in the Phase II process of downward trend in resource prices. Declining institutions. This includes access to UNEP FI supply chain; implementing the Declaration’s commitments water quantity and quality, loss of species, and UN system expertise and resources on through the “NCD Roadmap”. and degradation of ecosystems are not only ESG, policymaking and science. c. Systematically consider and value material to project finance, but also to other natural capital in core insurance business asset classes such as fixed income, equities, A business plan for the NCD, highlighting strategies and operations including different types of insurance and corporate how the project will embark on a three year risk management, risk underwriting, finance. The Natural Capital Declaration programme, is available exclusively to product and service development, claims builds understanding of natural capital risks NCD signatories. management, sales and marketing, and inherent in all relevant asset classes, enabling investment management; financial institutions to inform and strengthen No new disclosure required their credit risk models. 3. Work towards building a global consensus The Natural Capital Declaration complements for the integration of natural capital into Lead in this strategic area existing initiatives such as the Principles for private sector accounting and decision- Responsible Investment and the Principles for making; supporting, when appropriate, the Signatories of the Natural Capital Declaration Sustainable Insurance by contextualising how related work of the TEEB for Business are demonstrating their strategic leadership ESG factors can be systematically embedded in Coalition, and other stakeholders. by working to understand and manage this business principles, strategies and operations major emergent form of risk. The work of in the context of the growing natural capital 4. Collaborate, when appropriate, with understanding and defining natural capital agenda worldwide. The Natural Capital the International Integrated Reporting challenges for the finance sector will also Declaration does not require signatories to Committee and other stakeholders to build present first movers in this space with new report or disclose additional information. a global consensus around the development business insights and opportunities. of Integrated Reporting, which includes natural capital as part of the wider Help shape the future of definition of resources and relationships natural capital accounting key to an organization’s success. Although a number of financial institutions By endorsement of this declaration, we wish to have started to embed environmental, social demonstrate our commitment to the eventual and governance (ESG) considerations in integration of natural capital considerations lending, investment and insurance products, into private sector reporting, accounting and there is still significant progress to be made decision-making, with standardization of in order to understand and systematically measurement and disclosure of natural capital integrate natural capital considerations into use by the private sector. risk management, underwriting and other core business aspects. By engaging with the Natural Capital Declaration, you can quickly engage with the wider communities working in this space and help shape the outcome.

6 7 Caisse des Dépôts, France Investment (UN-PRI) and coordinates the engagement group of new PRI signatories in “We won’t achieve a sustainable Brazil. We are also part of the CDP (Carbon development nor a stable global economy Disclosure Project) technical committee without biodiversity preservation and for Latin America: we have been offsetting promotion. Caisse des Dépôts, a first rank our greenhouse gas emissions since 2008, financial investor, has placed biodiversity as thus being the first Brazilian pension fund one of her criteria for investment strategies.” to become carbon neutral. The key is to effectively carry out actions that contribute to Antoine Gosset-Grainville improving life on Earth.” CEO, Caisse des Dépôts Carlos Frederico Aires Duque Rabobank CEO, Infraprev

“The Earth’s resources are the basis for Sovereign, New Zealand our economy, our food supply and our wellbeing. We therefore have to guard “As an insurer we routinely sell policies nature and act according to its rules. We are that we expect to be on our books for 50 stewards: for ourselves, for our economy, years – in fact the longest paying policy for food security, for nature itself and for the on our book is 92 years old. Delivering on generations to come. This thinking should our promise that we will be around and in be the core of business: working in full good shape to meet our obligations in 50 cooperation with nature!” years time is essentially how we define our challenge. It is clear to us that Piet W. Moerland, economic and social wealth is inextricably CEO, Rabobank Netherlands linked to the base and that to ensure a sustainable future our Infraprev, Brazil shared natural resource base must remain healthy and viable. Sovereign is committed “We live in a world where information has a to understanding the impact that our key role in the decision making process of investments have on natural capital and to investors, government and society. By joining make this visible to all of our stakeholders. this important UN initiative, Infraprev reaffirms We are therefore, very proud to support its commitment to the environment and to the Natural Capital Declaration as a global people, striving to encourage other Brazilian initiative to measure, disclose and take institutions to engage in the reporting of action to value natural resources as an their current use of natural resources. extension of capital and look forward to The issue of sustainability is increasingly working with others to realise this ambition.” important for Infraprev and it is part of our corporate strategy. Infraprev is already a Charles Anderson signatory of the Principles for Responsible CEO, Sovereign 8 9 For more information visit www.naturalcapitaldeclaration.org or contact us at [email protected]