(Bloomberg) — When negotiators from 196 countries gather at COP16 in Cali, Colombia in October, trying to find the money to plug an annual funding gap of $200 billion for biodiversity protection and restoration will be at the top of the agenda.
So far, proposals have ranged from rich country donations to impact funds or bonds deploying private capital, as well as a new international market for so-called biodiversity credits—tradable instruments representing a unit of protected or restored nature (akin to a carbon credit).
But possibly the biggest initiative would be an agreement on the final details of a new global system to collect and share a sliver of the trillions of dollars in revenue raked in by the world’s largest companies. Conglomerates in sectors like pharmaceuticals, biotechnology and agriculture would be asked to contribute to a fund to compensate countries from which their resources are derived. Those funds would in turn be used to protect nature.
“It’s a new paradigm,” said Siva Thambisetty, associate professor of law at the London School of Economics. “We have seen these resources as abundant, replenishable and ‘free’ for far too long, and that’s changing.”
Over the last decade, technological innovation has fundamentally changed how companies make use of the world’s genetic resources. These include microbes, plants or animals that contain genes of value for science or the commercial development of drugs, vaccines and food stuffs.
In the past, researchers interested in the sap of Malaysia’s trees or the orchids of Cameroon would simply go there and export samples. A global rulebook around access to and the sharing of benefits from those resources has been built around this process, enshrined in the 1992 United Nations Convention on Biological Diversity, and its supplementary agreement, the Nagoya Protocol, adopted in 2010.
These days though, researchers are more likely to take a digital fingerprint of that genetic resource, upload it to a database and make use of it in a lab overseas.
There’s no global rule governing how countries should be paid for that “digital sequence information” (DSI) on their genetic resources. Developing countries have pressed for measures to close this loophole, which some have labeled “biopiracy.”
“Suddenly there is this corpus of online data, which is very hard to trace back to an origin, and a company—without any mal-intent—is pulling down that data and using it to derive commercial value,” said Glen Gowers, chief executive of Basecamp Research, a biological data company. “Digital sequence information is all about capturing that digital flow of value from biodiversity to biotech.”
At COP15 in Montreal, parties to the UN Convention on Biological Diversity agreed to set up a new financial mechanism to address this new arena. They’re due to decide precisely how this will work at COP16.
Delegates will gather next week for the final negotiations ahead of the October event. They’ll debate which industrial sectors should be targeted, how a payment will be triggered as well as who will oversee and benefit from the fund. They’ll also discuss whether companies reliant on DSI should contribute a portion of their overall revenue or just a slice of the proceeds from products based on DSI.
Proposals for contributions range from 0.1% to 1% of revenue, which the UN estimates could yield $1 billion or $10 billion per year for nature, respectively — potentially among the single largest global contribution to biodiversity finance yet. African countries are set to go even further and propose 1% of all global retail sales, which alone could close the $200 billion per year funding gap. “It’s a cent on the dollar to save life on earth,” said Pierre du Plessis, a technical advisor to the African group of negotiators.
Pushback is expected. Countries like Japan and Switzerland have resisted a mandatory mechanism, and pharmaceutical giant GSK has warned of potential “negative implications for public health.”
Ultimately, the era of unbridled access to nature’s bounty could soon be over. “New accountability mechanisms are coming into place,” Thambisetty said. “The direction of travel is that biodiversity is not free.”
Sustainable finance in brief
Already tainted by widespread allegations of greenwashing, the arguments that carbon credits just aren’t a viable strategy for fighting global warming continue to pile up. The world’s top arbiter of corporate climate goals, the Science Based Targets initiative, described the instruments as mostly “ineffective” in a new review — a report likely to reverberate all the more given the group’s recent brush with controversy. Meanwhile, a key industry oversight group announced credits representing one-third of the carbon offset market won’t merit its quality label.
- Meanwhile in Asia, momentum is building to use a new type of carbon credit to help shutter coal-fired power plants early.
- Extreme weather causing wildfires, drought and floods drove insured losses 70% above historical norms in the first half of 2024, according to fresh data compiled by Munich Re.
- The debt-for-nature swaps market has a new entrant: UBS. The Swiss bank is working on a new $300 million deal for Barbados.
To contact the author of this story:
Natasha White in London at nwhite107@bloomberg.net
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