COP17: Calls for reform of subsidies that harm nature

Four years after countries around the world agreed on the global biodiversity targets, progress remains far too slow. At COP17 in Yerevan, one thing was clear: the priority must now shift from setting ambitions to delivering on them.

“Reforming subsidies that harm nature is one of the most important steps governments can take to halt nature loss. Getting the incentives right can also help direct capital towards investments that support the transition to a nature-positive economy,” says Jan Erik Saugestad, CEO of Storebrand Asset Management, who represented the global financial sector in the negotiations in Yerevan through Storebrand AM’s role as Co-Chair of Finance for Biodiversity.

Calls for concrete action

Ahead of COP17 in Yerevan, Storebrand and more than 130 global companies and financial institutions signed an open letter calling on governments to reform policies and incentives that contribute to nature loss. The letter was coordinated by Business for Nature and Finance for Biodiversity.

“By changing what public funding rewards, governments can create a more level playing field for sustainable investments,” says Emine Isciel, Head of Climate and Environment at Storebrand Asset Management.

Significant subsidies are moving in the wrong direction

More than USD 2.6 trillion in public spending each year contributes to increased resource depletion and nature loss.

“When governments continue to subsidise activities that harm nature, sustainable business alternatives are put at a clear competitive disadvantage. Public policy should reward the business models we need for the future, rather than give activities that damage nature a competitive advantage,” says Isciel.

Calls for better reporting

There was a continued agreement that corporate reporting is critical and that requirements need to be accelerated at the national level. This means companies need to measure and report their material impacts on nature, as well as the extent to which they depend on nature’s ecosystem services throughout their value chains, such as water and pollination.

“This is important for investors. We need standardized data to compare companies’ impacts and dependencies and make better-informed investment decisions,” she continues.

Better reporting gives investors a stronger basis for assessing nature-related risks and identifying which companies are best positioned for the transition to a nature-positive economy. Today, this information remains very limited. Less than 1 percent of the world’s listed companies report on their relationship to nature, according to the UN’s scientific body on biodiversity and ecosystem services, IPBES Inter governmental Science-Policy Platform on Biodiversity and Ecosystem Services.

Implementation will be decisive

COP17 focused on actions governments need to take.

“Capital can help finance the transition, but it cannot replace policy. Governments need to establish clear regulatory frameworks, align incentives and introduce reporting requirements. Only then can financial markets fully price nature-related risks and direct capital towards the solutions that are needed,” Isciel concludes.

COP17 resulted in several decisions aimed at advancing implementation of the Montreal agreement and showed that international cooperation can still move the agenda forward, even in a challenging geopolitical environment. But the decisions alone are not enough. What happens next at the national level will determine whether COP17 leads to real change for nature.