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The UN Environmental Programme Finance Initiative (UNEP FI) has begun consultations on a ‘Natural Capital Statement' for financial institutions, potentially modelled on the successful Equator Principles.
"It's very early days, but we want to send a clear message that [natural capital] is something to take account of, because it will be [financially] material," Margot Hill, programme assistant in the biodiversity and ecosystem services project at UNEP FI in Geneva, told Environmental Finance.
The concept of natural capital encompasses ecosystems and the services they provide, such as food provision, climate control, water and air purification, etc. As set out in the influential Economics of Ecosystem and Biodiversity reports over recent years, these services can and should be valued to help incentivise their protection.
UNEP FI is working towards the Rio+20 environmental summit in May 2012 for the launch of the ‘Natural Capital Principles for Sustainable Finance', with an intermediary statement produced in the middle of next year. Hill stressed that the final shape of any principles is far from settled.
They would likely address how financial institutions take material biodiversity and ecosystem services (BES) issues into account in investment decisions, but Hill said it is unclear how prescriptive they are likely to be.
"There's a very fine line between a statement with teeth, and something that requires [too much] time and resources," she said. "People are wary of the proliferation of initiatives, they want something that is additive."
She said that early consultations with financiers - in Nagoya at the Convention on Biological Diversity, and in Hong Kong, hosted by Credit Suisse - had been positive, but were as much about "building capacity" - getting financial institutions to begin thinking about the issues involved - as starting to flesh out what any principles might cover.
Hill noted that a number of similar initiatives have been launched around climate change or wider environmental and social issues, such as the Equator Principles, which provide an environmental and social risk management framework for banks to apply to project financings. Those principles, launched in 2003, are adhered to by almost all international project finance houses.