Angus Clelland

Dubai, UAE – 9^th Dec, Global Ethical Finance Initiative (GEFI), Islamic Finance Council UK (UKIFC) and HSBC Bank Middle East have come together today to launch a new 1-year partnership to cultivate a purpose-driven Islamic finance ecosystem that can increase sustainable finance flows at scale.

Against the backdrop of UAE Banks Federation’s COP28 pledge of over AED 1 trillion in sustainable finance by 2030 and DIFC’s Sustainable Finance Catalyst commitment to scale future capacity by training 1 million sustainability leaders by the same year, the Islamic Sustainable Finance Initiative (ISFI) aims to accelerate Islamic finance’s role in achieving sustainable development goals, with a focus on creating systemic change through awareness, capacity building, and engagement across the Middle East, North Africa, and Turkey (MENAT) region.

Having recognised the shared principles of ethical investing and societal responsibility, GEFI and UKIFC have been working collaboratively for several years to integrate Islamic finance into mainstream sustainable finance. The ISFI will build on GEFI / UKIFC’s previous work with a structured programme focused on:

• Market Awareness & Engagement – round tables and conferences
• Capacity Building – a structured CPD-accredited training course covering both sustainable finance and Islamic sustainable finance
• Knowledge Hub & Portal – Repository of guidance, best practices, and resources including toolkits
• Retail survey – focusing on GCC consumers, the survey will look to capture understanding and appetite towards sustainability linked products.

HSBC has been a leader in integrating sustainability with Islamic finance, pioneering initiatives such as sustainable sukuk offerings and ESG-linked Islamic structures to support environmentally and socially responsible investments in line with Islamic principles of ethical financing. With its support of the ISFI, through philanthropic funding, HSBC Bank Middle East is demonstrating its commitment to supporting the development of sustainable finance infrastructure in the middle east.

The ISFI also aligns with the UAE Central Bank’s vision, as set out at COP28, for Islamic finance to be a beacon of sustainable finance in the region.

The announcement was made during the Global Capacity Building Coalition’s (GCBC) inaugural Climate Finance Capacity Building Forum, delivered in partnership with GEFI and DIFC, with support from UAE Banks Federation and CISI. The Forum provided practical advice and guidance on building the capacity required to align financial flows with long-term climate goals and accelerate the journey to net zero.

With its leadership in green finance, commitment to sustainable development, established position as a global hub for Islamic finance, and supportive strategic government policies and financial infrastructure, the UAE is well placed to host the regional Islamic Sustainable Finance Initiative.

Omar Shaikh, Managing Director of the Global Ethical Finance Initiative (GEFI), delivered a compelling presentation on the pivotal role of Islamic finance in advancing global sustainability goals. He began by outlining GEFI’s mission to build sustainable finance ecosystems through advocacy and solutions, emphasizing the importance of private sector engagement in driving meaningful change. 

Omar highlighted how events like the global financial crisis and the climate crisis have reshaped the narrative around finance, leading to concepts like profit with purpose and stakeholder capitalism. He pointed out that while Islamic finance is inherently ethical—avoiding investments in harmful sectors—there is a significant opportunity to deepen its impact on sustainability issues such as climate change and social justice. 

Central to his message was the shift from focusing solely on what is permissible (halal) to embracing what is wholesome and good (tayyib). This transition involves not just avoiding harm but actively promoting environmental stewardship and social well-being, aligning with the ethical and spiritual dimensions of Islamic principles. 

Omar also addressed unique features of Islamic finance that can enhance sustainable finance, such as the prohibition of speculative financial instruments and the integration of spiritual values like baraka (blessings). He acknowledged challenges within the industry, including the need for greater authenticity and alignment with the spirit of Shariah law. 

In closing, Omar emphasized the substantial market opportunity. If just 5% of the projected $8 trillion Islamic finance market by 2030 is dedicated to sustainable finance, it would represent a $400 billion opportunity. He called for collaborative efforts among regulators, industry players, and grassroots organizations to unlock the full potential of Islamic sustainable finance. 

 Key Takeaways: 

• Opportunity for Growth: Islamic finance can significantly contribute to global sustainability by moving beyond compliance to proactive impact. 

• Shift in Mindset: Embracing the concept of tayyib encourages a deeper commitment to environmental and social responsibility. 

• Market Potential: Aligning Islamic finance with sustainability principles presents a substantial economic opportunity, benefiting both the industry and global efforts to address climate challenges. 

Tariq Al-Olaimy, Advisor to the Ummah for Earth Alliance with Greenpeace, delivered an insightful presentation on the critical role Islamic finance can play in advancing renewable energy investments. He highlighted that the Islamic finance industry, managing $4.5 trillion in assets, has the potential to unlock $400 billion for climate finance by 2030 by allocating just 5% of its assets to renewable projects. 

Tariq emphasized the significant growth in ESG Sukuk markets and the expansion of renewable energy capacity in countries like Saudi Arabia and the UAE, demonstrating the sector’s momentum. He showcased case studies such as the Saudi Electricity Company’s green Sukuk and Indonesia’s sovereign green Sukuk program, which have resulted in substantial environmental and social impacts. 

To provide a practical roadmap, Tariq introduced the “EDUCATE” framework for Islamic finance institutions: 

• Engage: Connect financiers with renewable energy developers. 

• Disseminate: Share success stories and best practices. 

• Unlock: Position Islamic finance as a preferred source for renewable projects. 

• Collaborate: Work across sectors to amplify impact. 

• Advocate: Push for supportive policies and regulations. 

• Take Action: Implement tangible measures towards sustainability. 

• Evaluate: Assess outcomes based on Islamic principles. 

In closing, Tariq stressed the necessity for Islamic finance institutions to establish sustainability infrastructures, set clear green financing targets, and innovate with new financial products. He affirmed that by aligning financial practices with environmental stewardship, Islamic finance can significantly contribute to global climate solutions. 

Key Takeaways: 

• Islamic finance can unlock $400 billion for climate finance by 2030. 

• Growth in green Sukuk reflects increasing investor interest in sustainability. 

• The “EDUCATE” framework offers actionable steps for engagement. 

• Innovation and collaboration are vital to meet sustainability goals.

Tariq’s session highlighted the immense potential of Islamic finance to drive renewable energy investments and address climate challenges. By integrating sustainability into financial strategies, Islamic finance institutions can play a pivotal role in fostering a sustainable and resilient future. 

A dynamic panel comprising Razvan Dumitrescu (ENBD Capital), Debashis Dey (White & Case), and Basheer Ahmad (DFSA), moderated by Luma Saqqaf (PRI), delved into the opportunities and challenges of the green and sustainable Sukuk market. 

The discussion highlighted the UAE’s leadership in sustainable Sukuk issuances, with the DIFC hosting a significant portion of global activity. Razvan Dumitrescu noted that regulatory initiatives like the UAE Central Bank’s sustainable finance guidelines have been pivotal catalysts. 

Debashis Dey pointed out that while investor demand for green and sustainable Sukuk is growing, supply remains constrained. Limited offerings and a need for greater capacity building and awareness are hurdles that the industry must overcome to meet investor appetite. 

From a regulatory perspective, Basheer Ahmad emphasized the role of authorities in fostering market growth. He mentioned that while the DFSA currently defers to issuers’ Sharia governance, there is potential for more proactive measures, including incentives, to stimulate the market. 

The panel agreed that Islamic finance’s foundational principles of “do no harm” align naturally with sustainability goals. However, the industry needs to move beyond mere compliance to actively focus on creating positive environmental and social impact. 

Key Takeaways: 

• UAE’s Leadership: The UAE is at the forefront of sustainable Sukuk issuances, driven by supportive regulatory frameworks. 

• Supply-Demand Gap: Growing investor demand contrasts with limited supply, highlighting the need for more issuances and product innovation. 

• Regulatory Support: Enhanced collaboration between regulators and industry players can help unlock the market’s potential. 

• Ethical Alignment: Islamic finance principles align with sustainability, but a shift towards proactive impact is necessary.

The panel underscored the significant potential for Islamic finance to drive sustainable investment. Realizing this potential requires collective efforts from industry practitioners, regulators, and other stakeholders to foster innovation, expand offerings, and educate market participants. 

Tayyab Ahmed, Head of Research for Islamic Finance at the London Stock Exchange Group (LSEG) Data and Analytics, presented valuable insights from the “Green and Sustainability Sukuk 2024: Crossing Borders” report. He highlighted the rapid growth of the green and sustainability Sukuk market, the evolving regulatory landscape, and the steps needed to scale the market further. 

One of the key highlights Tayyab mentioned is the impressive growth in the issuance of green and sustainability Sukuk, which reached $11 billion by the third quarter of 2024. This marks a significant rise since the market’s inception in 2017, indicating strong momentum. Despite this growth, green and sustainability Sukuk still represent a small fraction of total ESG bonds and Sukuk issuance, suggesting substantial room for expansion. 

Tayyab pointed out that while demand is increasing—with 55% of investors planning to invest in green and sustainability Sukuk in the next three years—there are supply-side challenges. Nearly 45% of investors cite limited offerings as a key obstacle, and 60% have only a basic understanding of Sukuk and sustainability principles. This underscores the need for capacity building and greater awareness to bridge the knowledge gap and expand the market. 

To address these challenges, Tayyab called for promoting common regional and international standards, building capacity within the market, and expanding the investor base beyond traditional Sukuk investors. He emphasized that supportive regulatory frameworks and taxonomies in countries like Malaysia, Indonesia, and the UAE are crucial in fostering the growth of the green Sukuk market. 

In his closing remarks, Tayyab highlighted that achieving significant growth in the green and sustainability Sukuk market is a collective effort. By enhancing market depth through innovation and education, and leveraging supportive regulatory environments, the industry can move towards raising annual issuance from $30 billion to $50 billion, contributing meaningfully to global sustainable finance objectives. 

Key Takeaways: 

• The green and sustainability Sukuk market is rapidly growing but remains a small fraction of total ESG issuance. 

• Increasing investor demand exists, but supply limitations and knowledge gaps need to be addressed. 

• Capacity building, common standards, and expanding the investor base are essential for scaling the market.

Tayyab’s presentation underscores the significant potential of green and sustainability Sukuk in bridging the financing gap for sustainable development. By addressing current challenges and leveraging opportunities, the Islamic finance industry can play a pivotal role in advancing global sustainability goals. 

In a thought-provoking fireside chat, Dr. Mohammed Damak highlighted how the core principles of Islamic finance inherently support sustainable development. He noted that Islamic finance prohibits interest, avoids investment in illicit sectors, emphasizes profit and loss sharing, and promotes ethical and responsible finance deeply integrated into the local economy. 

Dr. Damak shared that the Islamic finance industry, excluding Iran, currently stands at $3.3 trillion and has been growing at double-digit rates for the past 20 years. This growth is expected to continue, especially in regions like the GCC and Malaysia. He observed a rising interest among younger generations in both Islamic finance and sustainable finance, indicating a promising future as these sectors converge. 

A key point discussed was the growth of the sustainable Sukuk market, which has expanded from zero to over $10 billion in issuance within five years. Dr. Damak emphasized that sustainable Sukuk appeal to a broader investor base, including those focused on sustainability, thereby increasing investment opportunities. 

However, he identified challenges that need to be addressed to fully unlock the potential of Islamic sustainable finance. Simplifying the Sukuk issuance process is paramount. Currently, issuing Sukuk can be more complex than issuing conventional bonds, potentially deterring issuers. Streamlining this process could make Sukuk more appealing, especially for smaller issuers like SMEs. 

Dr. Damak also touched on the importance of collaboration among regulators, standard-setters, and industry stakeholders to drive growth. He suggested that the future of Islamic finance will be not only sustainable but also digital, with technological advancements like tokenization and digital platforms making Sukuk issuance more accessible and efficient. 

Key Takeaways: 

• Inherent Alignment: Islamic finance principles naturally align with sustainability goals, providing a strong foundation for growth in Islamic sustainable finance. 

• Market Growth: The sustainable Sukuk market is rapidly expanding, offering significant opportunities for issuers and investors. 

• Simplification Needed: Streamlining the Sukuk issuance process is critical to making Islamic financial instruments more accessible and attractive. 

• Future Outlook: Collaboration and digitalization are key to unlocking the full potential of Islamic finance in contributing to global sustainable development. 

By distilling these insights, the discussion underscored the vital role Islamic finance can play in addressing global sustainability challenges, provided that industry stakeholders work together to overcome existing hurdles. 

The second fireside chat moderated by Shereen Osman of PwC Middle East brought to light the unique opportunities and challenges in building green Islamic portfolios. The discussion featured insights from Khurram Hilal of Standard Chartered and Mohammed Dawood of HSBC, both leaders in the field of Islamic and sustainable finance. 

Aligning Islamic Finance with ESG Goals 

Mohammed Dawood emphasized that the principles of Islamic finance naturally align with Environmental, Social, and Governance (ESG) objectives. He highlighted HSBC’s pioneering efforts in issuing green Sukuk since 2018, underscoring the bank’s commitment to sustainability. Dawood stressed that Islamic finance should play a leading role in financing real economy and infrastructure projects, leveraging its ethical foundations to drive sustainable development. 

He also pointed out the importance of industry bodies in setting standards and providing direction. “Building capacity and thought leadership within the industry is crucial,” Dawood remarked. He called for greater collaboration among financial institutions to expand the impact of Islamic sustainable finance. 

Standard Chartered’s Approach to Sustainable Islamic Finance 

Khurram Hilal shared how Standard Chartered is integrating sustainability into its Islamic finance offerings. He noted that the “do no harm” ethos inherent in Islamic finance is intrinsically connected to ethical and sustainable practices. Hilal highlighted the growing interest from clients, especially younger generations, in products that combine Islamic and sustainable finance principles. 

Standard Chartered’s global commitment to sustainability includes the Global Islamic Finance Program (GIFP), an initiative aimed at incubating sustainable projects. Hilal emphasized the need for both institutional support and customer demand to drive the industry forward. “It’s about creating a push and pull effect,” he said, “where institutions offer sustainable products, and customers actively seek them.” 

Challenges and the Role of Regulators 

Both speakers acknowledged challenges in aligning Islamic finance with sustainability goals. A significant hurdle is the need for more talent and expertise in this niche field. They also discussed the critical role of regulators and industry bodies in promoting sustainable Islamic finance. Proactive government initiatives, such as those associated with COP28 in the UAE, are seen as positive steps toward fostering growth. 

“Building trust and credibility is essential,” Dawood stated. Hilal agreed, adding that transparency and clear standards are vital for the industry’s advancement. They highlighted that while progress is being made, there is still much work to be done to fully integrate sustainability into Islamic finance practices. 

The Path Forward: Islamic Finance Leading in Sustainability 

The discussion concluded with a shared vision for Islamic finance to take a leading role in global sustainability efforts. Both Dawood and Hilal called for the industry to increase its share beyond the current 5% of sustainable finance. By leveraging its ethical principles and focusing on financing projects that have tangible environmental and social benefits, Islamic finance can significantly contribute to addressing global challenges. 

“Islamic finance has the potential to be a powerful force for good,” Hilal asserted. Dawood echoed this sentiment, emphasizing that collaboration and innovation are key to unlocking this potential. 

Key Takeaways 

• Natural Alignment: Islamic finance principles inherently support ESG and sustainability goals. 

• Industry Leadership: Banks like HSBC and Standard Chartered are pioneering efforts to integrate sustainability into Islamic finance. 

• Collaborative Effort: Building green Islamic portfolios requires collaboration among institutions, regulators, and customers. 

• Challenges Ahead: Talent gaps and the need for clear standards are hurdles that must be addressed. 

• Future Potential: With proactive efforts, Islamic finance can lead in financing sustainable projects, amplifying its impact on global sustainability. 

Alia Al Zarouni, Chief Operating Officer of the Dubai International Financial Centre (DIFC), addressed the Unlocking Islamic Sustainable Finance Summit, emphasizing the pivotal role of Islamic finance in sustainable development. She highlighted that Islamic finance inherently aligns with the United Nations Sustainable Development Goals (SDGs) due to its ethical and holistic framework. 

Alia noted the significant growth of the Islamic finance market, currently valued at $4 trillion and expected to reach $6.7 trillion by 2027. She pointed out that the UAE accounts for over 40% of global sustainable issuances, many hosted within the DIFC, positioning the nation as a leader in sustainable finance. 

To bridge the annual $6 trillion investment gap required by 2030 to meet climate targets, Alia outlined the DIFC’s key initiatives: 

• Co-founding the Dubai Sustainable Finance Working Group to embed ESG principles and support Islamic finance potential. 

• Launching the ‘Path to COP28’ program with the Global Ethical Finance Initiative (GEFI) to raise awareness and support financial sector transition. 

• Announcing the region’s largest sustainable finance capital hub with ambitions to: 

• Increase sustainability cash inflows to Dubai by $100 billion by 2030. 

• Grow the sustainability-linked finance sector by 20%. 

• Create an AI-enabled sustainability knowledge hub. 

• Train 1 million sustainability leaders by 2030. 

She concluded by calling for collaborative efforts to scale Islamic finance, not only to meet climate goals but to catalyse global decarbonization and resilience. “By harnessing the principles of Islamic finance and aligning them with the sustainable development agenda, we can foster a more equitable, sustainable, and prosperous future for all,” Alia affirmed. 

Key Takeaways: 

• Islamic Finance Alignment with SDGs: Islamic finance principles naturally support global sustainability goals. 

• UAE’s Leadership Role: The UAE and DIFC are at the forefront of sustainable finance initiatives. 

• DIFC’s Ambitious Goals: Significant initiatives are underway to bridge financing gaps and promote sustainable development. 

• Call to Action: Collective efforts are essential to scale Islamic finance’s impact on global sustainability. 

This paper provides an overview for financial institutions of the most pertinent issues identified by Planet Tracker from the UN Biodiversity Conference (COP16) in Cali, Colombia. Topics range from the availability of nature transition plans, to who has responsibility for nature in government structures – it’s looking complicated, to the availability of nature data – or rather its processing and analysing. The struggle to finance countries’ nature and ecosystem services remained unresolved.

It is widely recognised that there is a significant shortfall in financial flows into nature positive investments. In 2002, nature-based solutions (NbS) flows were USD200 billion. But these investments were overwhelmed by nature negative payments of USD6.7 trillion.ⁱ COP16 witnessed several discussions about environmentally harmful subsidies (EHS), as a potential solution to meet the funding shortfall through reallocation rather than relying on new sources. See ”Nature finance: is relying on subsidy reallocation realistic?”. The International Institute for Sustainable Development (IISD) intends to release a more detailed analysis of EHS later this year.ⁱⁱ

When nature flows are examined, so is the term “nature positive”. Aware of the manipulation of terms such “carbon positive” and “net zero”, and keen to avoid greenwashing claims, the Nature Positive Initiative (NPI) was very active in convening meetings to build a consensus on ‘The State of Nature’ Metrics.ⁱⁱⁱ The NPI commented that it will carry on our work beyond the conference, providing a measurement framework to credibly report on progress towards nature-positive outcomes”.^iv

Many at COP16 were encouraged by the attendance of several Finance Ministers, implying that nature considerations are moving beyond the Environment and Agriculture Ministries.^v The overarching challenge is whether the bioeconomy can be linked to the existing economic system. In our pre-COP16 blog – “What financial institutions need to know before the UN Biodiversity (COP16)” – we listed a range of financial instruments being used to finance nature. Planet Tracker sensed a growing unease over debt-for-nature swaps, largely because of their costs to sovereign states. Biodiversity credits continue to attract a lot of discussion assisted by the launch of the Framework for high integrity biodiversity credit^vi markets by the International Advisory Panel on Biodiversity Credits, but with little to show in terms investment. Some question whether so much effort is worthwhile. To help scale these credits, the Biodiversity Credit Alliance has proposed digitally native frameworks.^vii BloombergNEF (BNEF) estimated that less than USD 1 million of credits have been purchased to date.^viii In comparison, it estimated existing biodiversity inflows are USD 208 billion annually.

As expected, some issuers took the opportunity to publicise new nature-linked instruments. For example, the Inter-American Development Bank (IDB) and BBVA Colombia, announced the placement of the first thematic bond with an exclusive focus on biodiversity projects in Latin America and the Caribbean.^ix Meanwhile, the International Finance Corporation (IFC) announced an investment of up to US$50 million in a biodiversity green bond issuance by Banco Davivienda, to finance Colombian projects aimed at conserving, protecting, and restoring biodiversity and nature.^x An USD 60 million ‘Country Package’ for Forests, Nature, and Climate collaboration was announced by France, the Fonds d’amorçage des Partenariats Pays, The Nature Conservancy (TNC), the Global Environment Facility (GEF), and the United Nations Development Programme (UNDP), which will work together to support Gabon’s commitments to forests, nature, and climate via the Global Biodiversity Finance Initiative (BIOFIN).^xi

Also worthy of mention is the partnership between WWF and European Investment Bank (EIB). The former will establish an ‘incubation facility’ to develop a pipeline of Nature-based Solutions from origination until they are investment-ready, while the latter will provide guidance on mobilising public and private funding for them.

Progress was made in negotiations regarding sharing benefits from use of digital sequence information on genetic resources (DSI), despite opposition from the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA). It stated, “The ability to rapidly use scientific data known as “digital sequence information” (DSI) is essential for developing new medicines and vaccines. Any new system should not introduce further conditions on how scientists access such data and add to a complex web of regulation, taxation and other obligations for the whole R&D ecosystem – including on academia and biotech companies.”^xii (Note that academia is exempt under the guidelines.) In contrast, the Convention for Biological Diversity (CBD) heralded this agreement as “a historic decision of global importance”.^xiii This mechanism is likely to affect pharmaceutical, nutraceuticals, cosmetics, biotechnology, animal and plant breeding and other related industries which benefit from DSI.

Under the agreed guidelines, entities benefiting commercially from DSI uses should contribute to “the Cali Fund,” The draft decision defines entities as which on their balance sheet dates exceed at least two out of three of these thresholds (total assets: USD 20 million sales; USD 50 million; profit: USD 5 million) averaged over the preceding three years, should contribute to the global fund one percent of their profits or 0.1 percent of their revenue, as an indicative rate. (Note the use of the word ‘should’ implies this is a voluntary scheme.) At least half of the funding is expected to support the self-identified needs of indigenous peoples and local communities (IPLC) through government or by direct payments through institutions identified by indigenous peoples and local communities. Exempt from such payments are academic, public research institutions and other entities using DSI but not directly benefiting. On a related subject, but likely to receive limited headlines was new, voluntary guidance on assessing the risks posed by living modified organisms (LMOs) containing engineered gene drives. This guidance aims to improve international biosafety management and increase scientific rigo”.r and transparency of risk assessment procedures. There was also an agreement for an expert group to guide identification of synthetic biology’s potential benefits and review the potential impacts of recent technological developments. See Planet Tracker’s “Long AI, Short Nature: Close the Short”.

There was no agreement reached on how to fund the deficit for global biodiversity initiatives by 2030. As negotiations overran the allotted time, the COP became inquorate. The CBD stated that Parties at COP 16 “will resume at a later date and venue to complete the agenda”.^xiv Nor was there a decision on a new dedicated global financing instrument for biodiversity to receive, disburse, mobilize and articulate funding needs.

Planet Tracker believes that the importance of the insurance industry warranted even more attention. Insurance companies are vital to the financial system because they are large investors in financial markets, because they provide important links with banks, and because insurers safeguard financial stability by insuring risks. Changes in climate and nature are highly relevant to risk controls, and therefore the global capital markets.

The nature community has never been too proud to learn from its climate change predecessors. And so it is with nature transition plans, especially because of the climate/nature overlap. With agriculture, forestry, and land-use change accounting for nearly one-quarter of global greenhouse gas emissions, and it also being the largest driver of nature loss – which has seen a 73% average fall in species population numbers between 1970-2020^xv – releasing a strategy with actionable steps to achieve science-based nature targets, as with climate, appears a required ask from financial institutions.

And there are transition plan outlines readily available or in the consultation process. In November 2023, Business for Nature published ‘Now for Nature’ which outlined high-level business actions on nature.^xvi At the beginning of 2024, WWF recommended integrating nature into climate plans as well as integrating nature positive objectives in supports of transition planning.^xvii At COP16, the Taskforce on Nature Related Financial Disclosures (TNFD)^xviii released its discussion paper on nature transition plans and so did the Glasgow Financial Alliance for Net Zero (GFANZ).^xix CDP published a useful paper at COP16, which summarises nature strategies and transition plans, providing a brief overview of each one.^xx Further assistance is available from the Science Based Targets Network (SBTN) which set the first corporate science-based targets for nature. At COP16, the first three firms announced validated science-based targets for nature – GSK [GSK], Kering [KER] and Holcim [HOLN].^xxi WBCSD is helping companies on nature positive journeys by providing guidance for credible business actions for specific value chains.^xxii And if that is not enough, expect more nature transition plan assistance from both WWF and World Economic Forum before the year-end.

Planet Tracker was pleased to see an increased focus on oceans. Work on protecting ecologically or biologically significant marine areas (EBSAs) began in 2010 but was stopped for more than 8 years due to legal and political concerns. At COP16, new mechanisms to identify new EBSAs and update existing ones, was agreed. This will ensure that the cataloguing of information of these areas can support planning and management with the most advanced science available.^xxiii This is an important part of the implementation of the 30×30 protected areas target^xxiv and to prepare for the future implementation of the new agreement for marine biodiversity beyond national jurisdiction.

Government policy – where does nature fit in?

While corporates and financial institutions discuss who should oversee nature responsibilities, it is the same for governments. (Note that some corporates have appointed Nature Officers – see the Nature Scorecard). Should nature issues be overseen by environmental departments, or perhaps climate or land-use ones? What was often repeated in discussions was that finance ministries need to be convinced as do those officials responsible for agriculture, fisheries & farming. Unsurprisingly, many argued for a holistic approach, mainstreamed in all government departments and central banks; certainly, this would be ideal, but the hardest to achieve.

Governments are struggling to sort out this issue as they compile national biodiversity strategy and action plans (NBSAPs). Is this one possible reason for the disappointing number of NBSAPs submitted before COP16. To date 44 Countries (out of 196) have submitted their NBSAP. In line with the Global Biodiversity Framework (GBF), countries that were “not in a position” to meet the deadline to submit NBSAPs ahead of COP16 were requested to instead submit national targets. These submissions simply set down biodiversity targets that countries will aim for without an accompanying plan for how they will be achieved. By the end of COP16, some 119 parties had published some national targets. ^xxv

The refrain that there is not enough data on nature and biodiversity was debunked many times at COP16. There are various methods for collecting this data, including remote sensing & camera trapping, environmental DNA (eDNA), bioacoustics, and satellite imagery. And technology is helping to make these collection methods more precise. For example, satellite imagery is able to analyse data in 10cm squares. The European Space Agency is making biodiversity data a priority for 2025.^xxvi As more data collection methods are invented, they become cheaper. For example, insects and pollinators can be monitored by using a device which uses low cost 2G, powered by solar, costing around USD 250 device.^xxvii eDNA is also proving particularly versatile in both aquatic and terrestrial environments, and to a lesser extent in air.^xxviii However, it is becoming increasingly clear that despite improved collection methods, no single process is completely reliable. The combination of satellite data with ground-based analysis, on the other hand, looks very promising.

There appear to be two main problems with biodiversity data. Firstly, there is an apparent backlog in the processing and analysing of these vast data sets. Are we being overwhelmed with biodiversity data maybe a more relevant question; will AI provide quicker insights? Secondly, the standardisation of nature data is a challenge. The frequent comparison with climate metrics has built up an expectation of a single measure – i.e. equivalent to 1.5°C of warming – using a single unit of measurement – i.e. CO₂e – across the globe. Nature and biodiversity are unlikely to be condensed into one unit of measure – e.g. species or ecosystem health or habitat quality – across all the world’s biomes. But that does not mean that an improvement of nature in a variety of ecosystems cannot be measured and achieved.

Receiving considerable airtime at COP16 were the rights of indigenous peoples and local communities (IPLC). According to the 2018 Colombian census, there are 1.9 million individuals belonging to 115 different indigenous groups in the country. Expect more focus on these rights when the 2025 climate COP (COP30) takes place in Belém, Brazil. Brazil is home to 266 indigenous peoples with a population of 1,693,535 people, or approximately 0.83% of the total Brazilian population.^xxix

At COP16, a new programme (Article 8[j]) was agreed that sets out specific tasks to ensure the meaningful contribution of IPLC towards the three objectives of the Convention – conservation of biodiversity, sustainable use of biodiversity, and fair and equitable sharing of benefits. In this programme, rights, contributions and traditional knowledge of indigenous peoples and local communities are further embedded in the global agenda. A new Subsidiary Body is expected to elevate issues related to the implementation of Article 8j and enhance the engagement and participation of indigenous peoples and local communities in all convention processes.^xxx

The COP16 convention was not officially closed, so further progress is possible to try and resolve the outstanding funding issues prior to the next CBD COP. Astrid Schomaker, Executive Secretary, Convention on Biological Diversity stated, “It will resume at a later date and venue to complete the agenda”.^xxxi Armenia was elected as the host of COP 17, to be held in 2026.

“The present economy is a bioeconomy as it is reliant on nature. But today’s bioeconomy is nature negative which means it is not sustainable. We need a new bioeconomy.” (Marco Lambertini, Convener, Nature Positive Initiative)

“We are eating the planet that feeds us. What kind of fertiliser do you wish to be for the planet?” (Indigenous leader at TNFD Adopter event)

“The present economic system incentivises nature negative policies by encouraging the likes of deforestation and overfishing, promoted by subsidies.” (Tony Goldner, Executive Director, TNFD)

“It is not a coincidence that the slowest rates of deforestation in Brazil are those inhabited by indigenous communities.” (Ceiça Pitaguary, National Secretary for Environmental and Indigenous Territorial Management, Ministry of Indigenous Peoples, Brazil)

“Presently nature data is roughly five years behind climate data.” (Christian O’Dwyer, Sustainable Finance Solutions Product Manager [Nature & Biodiversity])

“The Amazon is not just the lungs of the planet, but also its heart as it is the centre of the hydrological climate system.” (Atossa Soltani, Amazon Sacred Headwaters Alliance)

“When developing land restoration projects, the problem is not the solutions but the scaling.” (Daan Groot, Managing Director, Nature^Squared)

“The OECD has seen a doubling of biodiversity–related financing between 2017-2022, mainly from multi-lateral banks.” (Kumi Kitamori, Deputy Director, Environmental Directorate, OECD)

“Between 1992 and 2014, while produced capital per person doubled and human capital per person increased by about 13%, the stock of natural capital per person declined by nearly 40%” – The Interim Report of the Expert Review on Debt, Nature & Climate: Tackling the Vicious Circle

“We know what the problem is.” Susana Muhamad, Colombian Environment Minister and COP16 President

“Nature does not stand alone.” Executive Director of the United Nations Environment Programme

One of the greatest challenges we currently face is how to support the transition towards a more climate aware society without leaving people behind economically. COP28 last year in Dubai called for the transition from fossil fuels in a just, orderly, and equitable manner, but what could be the social impact from this? Lauran Halpin, Head of Impact Equities has participated in a number of recent forums and discussions in partnership with the Global Ethical Finance Initiative (GEFI) to discuss just that.

Martin Currie and GEFI have partnered because of a shared belief that private finance, especially in equity markets can have a pivotal role in helping solve social challenges. The ‘S’ in Environmental, Social and Governance is often overlooked, but even with the focus on climate related issues, there is a very human dimension within this that needs to be considered – a ‘just transition’.

The concept of a ‘just transition’ is a framework aimed at ensuring that the shift towards a low-carbon, sustainable economy is fair and inclusive. Its origins are from North American labour unions in the 1970s and 1980s seeking to protect workers impacted by (then) new water and air pollution regulations. The unions sought to align efforts to protect the environment while providing workers with decent jobs.

Today, this concept has found traction in a climate change context. It seeks to support those most affected by the low-carbon transition, and includes workers, vulnerable communities, the suppliers of goods and services, notably small and medium enterprises (SMEs) and finally, consumers. Action is needed because the impacts of climate change on people are uneven, and so too are the impacts of the mitigating actions. These can range from closing fossil fuel plants to the environmental impacts of climate change itself.

It is important for us not to leave anyone behind and to harness the opportunities for people, communities and enterprises that transition presents. We believe three of the biggest challenges facing a just transition are:

The private sector can support the process through company-level practices and by facilitating corporate investments in a just transition.

A holistic approach needs to be considered. Through public markets we can invest in companies that help society adapt and become more resilient – physically and economically speaking – to the uncertainty that lies ahead. They do this by re-skilling workers, increasing their efficiency or resource usage, and improving the safety and resiliency of communities. The provision of financial services to underserved communities through microloans and savings accounts can improve financial inclusion and increase financial resilience.

How can we help stakeholders and provide communities with voices? Asset managers, through proper due diligence, can seek to identify those companies who are materially helping the transition and supporting stakeholders. This can be through innovative products and services from well governed companies, they have economic incentive to aid the transition as it helps the firm’s bottom line.
As asset managers we can also consider what the material impacts are both up and downstream on suppliers and consumers. A firm might consider its environmental offsets, but what is its impact on actual people, especially in more disadvantaged regions?

Targeted engagement by asset managers focusing on these material issues can improve corporate behaviour, and accelerate the positive change created by the firm’s products and services.
The financial sector can also advocate at an industry and government level for policies that support a just transition, such as subsidies for green technologies, social safety nets for displaced workers, and regulations that promote fair labour practices. Collaboration with other investment firms and investor-led initiatives can amplify these efforts.

There is real momentum behind a just transition; we are seeing more carbon reduction and low emission policies now including explicit references to economic diversification, job creation, skills training, and social protection. The International Energy Agency has established a Global Commission on People-Centred Clean Energy Transitions, with its principles based on energy affordability and socio-economic developments. Several countries have implemented coal transition plans including Canada, Germany, Czechia, Spain and South Africa. They have varying approaches, and are at different stages of implementation, but all acknowledge the need for reskilling and community impact.

We are seeing innovation at companies offering technological solutions to mitigate the impact of climate change for communities. In the just transition space this includes companies that are focused on reskilling people from overlooked cohorts for high demand areas. Supporting the circular economy are companies helping improve the efficiency and resiliency of industrial processes, especially in the food and health sectors, or recycling wastewater. Others are providing solutions to support communities through resilience to natural disasters or improving the safety of more sustainable forms of transport.

As asset managers we are optimistic. We see improvements in disclosure around sustainability topics by companies, but we note that this is still developing. At Martin Currie, our own impact strategy’s company engagement has primarily been around this issue. Specific engagement with companies can also help accessibility of impact, for example encouraging expansion of products or revenue generation in regions such as emerging markets. By setting clear metrics and targets for products and services that deliver positive social outcomes, asset managers can track progress and ensure accountability to underlying investors. That way we can use public market investment to help accelerate a just transition.

This guest article was written by Lauran Halpin, Head of Impact Equities, and was published in Martin Currie’s 13th edition of Stewardship Matters that focusses on social impact and the potential of public markets to address societal challenges while assessing the risks these issues present to achieving financial returns for investors.