Abstract:

Background & Aims: It has been globally recognized that biodiversity loss poses socio-economic and financial risks. A growing body of research shows that the loss of biodiversity is not only ecologically relevant, but also could threaten financial stability. Financial institutions play an important role in financing biodiversity conservation. The rapid development of green finance in recent years has also brought historic opportunities and challenges to newly emerging biodiversity finance initiatives in China. Efforts have been made to integrate biodiversity into green finance standards and other areas, but the concrete practice of biodiversity finance is still under-explored. This article focuses on recent explorations of biodiversity finance by various countries and emphasises on the innovative practices of financial products at national and regional levels.

Progress:Innovative financial products such as green credit, green securities and green insurance direct funds towards biodiversity-friendly projects and have become an important way for countries to explore the field of biodiversity finance. The United States, the United Kingdom, Canada, Germany, the Netherlands, Sweden and other countries have accumulated a wide range of practical experience in the application and risk research of green financial products such as green credit and green bonds. They are now exploring innovative products and financing models such as blue bonds, eco-labels and natural debt conversion mechanisms. There are five main objectives for financial institutions taking on biodiversity conservation initiatives: (1) to guide investments in favour of nature conservation, (2) to fully integrate conservation awareness into their business, (3) to actively avoid investment and financing activities that would lead to biodiversity loss internally and (4) to strengthen international cooperation in biodiversity and investment in eco-friendly projects.

Prospects: Under the enormous challenges facing global biodiversity, the rapid development of biodiversity finance is urgent. It is imperative that biodiversity conservation be fully integrated into the green finance classification criteria. Financial institutions will become the most important actors in biodiversity financing by pushing resources towards biodiversity conservation and nature-based solutions, directing capital to eco-friendly projects, and exploring synergies between biodiversity conservation and climate change. As people’s awareness of biodiversity conservation increases, the scale of funding demand for biodiversity conservation and development in China will continue to grow. Financial support for biodiversity conservation in China will help to transform enterprises in an eco-friendly, green and low-carbon direction. In the future, financial institutions will use the relatively well-established green financial standards as a reference to incorporate biodiversity risks into their biodiversity management framework.

Challenges & Recommendations: Currently, China faces many problems in reaching biodiversity conservation. There are insufficient regulations and guidance at the national level, and a lack of awareness and assessment of biodiversity risks among financial institutions. This paper proposes diversified support paths and makes recommendations for China’s financial institutions to participate in biodiversity conservation. Financial institutions must incorporate biodiversity conservation into the green finance standard system, formulate relevant to innovate biodiversity friendly financial products, accelerate the development of biodiversity impact assessment tools, and improve the system for biodiversity information disclosure.

Key words: biodiversity, green finance, practical cases, future challenges, policy recommendations