(Bloomberg) -- The agreement reached at COP15 in Montreal to protect a third of Earth’s land and water by the end of this decade also has the potential to shake up the regulatory landscape for the investment industry. But implementing it won’t be easy.

The landmark deal, signed after four years of talks and a two-week UN-sponsored conference in Canada, has been hailed by organizers as a Paris Agreement for biodiversity, in reference to the 2015 accord that kicked off a global movement for climate action. The Kunming-Montreal Global Biodiversity Framework has been praised by the governments that wrote and signed it, as well as by the private sector, environmental organizations and activists. 

“The room’s atmosphere had a combination of elation over the world doing something incredible together and a sense of awesome responsibility for the work ahead to make the ambition real,” said Jay Ritchlin, director-general for the Western Canada and Nature programs at the David Suzuki Foundation. “Setting targets for reversing species loss, reducing pesticides and protecting the most at-risk habitats is amazing.”

Overall, the deal could yield meaningful progress on halting and reversing damage to ecosystems, but that will require countries to actually deliver on the targets set out, according to analysis by BloombergNEF, which rates the success of the summit at 6 out of 10. Crucially, the final deal lacks a mandatory ratcheting mechanism to hold governments accountable — an aspect that was key to the Paris Agreement.

Just achieving the main goal, protecting 30% of the planet by 2030, will require individual governments to set up programs that effectively protect and restore lands, inland waters, coastal areas and oceans. At the moment, 17% of the world’s land and 10% of the world’s marine areas are protected, but the quality of that protection varies, leaving wide room for improvement, according to researchers.

“The agreement represents a major milestone for the conservation of our natural world,” said Marco Lambertini, director general at WWF International. “But it can be undermined by slow implementation and failure to mobilize the promised resources.”

Here are some of the biggest takeaways from the meeting, and the challenges ahead:

The private sector is all over biodiversity

For decades, climate COPs shunned the idea of private-sector involvement in environmental problem-solving. Poor countries felt that inclusion of the private sector meant that rich governments were sloughing off their responsibilities on investors and companies. During COP15 it became clear that take is receding into the past.

One sign is that Elizabeth Maruma Mrema, the executive secretary of the UN Convention on Biological Diversity, is also co-chair of the Taskforce on Nature-related Financial Disclosures, a group that’s developing a framework for companies to report their reliance and impact on nature.

Among the top issues  was whether biodiversity disclosure should be “mandatory” for business. While that word didn’t make it into the final document, negotiators agreed countries should “ensure” compliance, including with requirements that their companies are transparent with regulators, investors and the public on their biodiversity footprint. It’s a key step that should encourage the finance industry to disclose their reliance and impacts on natural resources, which had previously been treated as something they could take for granted. It’s also a global acknowledgment that the private sector can be a powerful force for change.

“Much of what businesses have called for at Montreal was ahead of the political curve, urging governments and multilateral organizations to adopt bolder targets to drive the policies needed to accelerate and incentivize business action,” said Clare Shine, Chief Executive Officer at the Cambridge Institute for Sustainability Leadership. “However, for every gain made at COP15 there is a gap to fill.”

Inequality drives biodiversity geopolitics, too

Developing countries rich in biodiversity are chewing through it to increase their short-term livelihoods, aligned with local and global market signals. Finance is the key to fix that.

The goal is to mobilize $200 billion per year by 2030 in domestic and international biodiversity-related funding from public and private sources. Of that, developed countries have pledged annual financing of $25 billion by 2025 and $30 billion by 2030 that will flow, at least in part, to developing nations through a new fund under the Global Environment Facility.

That seems “feasible” when compared with the $124 billion to $143 billion spent in 2019, according to BloombergNEF. Along with the elimination of $500 billion a year worth of harmful subsidies, also promised by signatories, the hope is it would close the $700 billion biodiversity funding gap identified in the document. 

The agreement also called for a fairer approach to genetic resource sharing, meaning the distribution of benefits — including profit — that come from using genetic information found in the world’s living organisms to create new products. In agriculture, for example, much of the genetic information used to create new, drought-resistant crops comes from plants in the Southern hemisphere. But the companies developing them are typically in the north. 

The post-World War II economic era is over 

The Bretton Woods agreements that gave rise to the World Bank and the International Monetary Fund are under siege by developing countries, which are being crushed by debt to multilateral development banks (MDBs). A proposal known as the Bridgetown Initiative, spearheaded by Barbados Prime Minister Mia Mottley, argues that the terms of this debt place poor nations at a disadvantage in developing with the agility that rich nations did.

Just like the COP27 final agreement in November, the final Kunming-Montreal document calls out reform of the MDBs as critical to economic health. The new agreement "calls for fundamental transformation of the global financial architecture," including MDBs and investment banks, to accommodate biodiversity protection and sustainable, just development. Targets 16, 17 and 18 encourage some of the world's most powerful development institutions to transparently embrace the mission of COP15's new framework and contribute to global funding goals. 

Another recipient of criticism was the Global Environment Fund. This 30-year-old multi-purpose finance mechanism has been lambasted by developing countries for slowness, bureaucracy and suboptimal outcomes. As a result, and following heated discussions, the financing that comes out of COP15 will partially flow through a new structure within the fund.

The modern world owes a debt to indigenous peoples

Indigenous peoples make up about 5% of the population and their existence — and survival — is deeply intertwined with nature, as they live within 80% of biodiversity hotspots. The final agreement recognizes the rights of indigenous communities and their role in preserving the environments in which they live.

“For us, it’s a major shift — they are recognizing this important role that was invisible,” said Viviana Figueroa, from the Omaguaca-Kolla peoples in Argentina, speaking on behalf of the International Indigenous Forum on Biodiversity. “Without the inclusion [of Indigenous Peoples’ rights], we could suffer human rights violations in the name of conservation.”

Facts really do drive progress forward

Scientific research is the factor that has brought unprecedented gravity to the biodiversity arena. Landmarking reports include those by the UN-sponsored Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, IPBES, as well as the non-profit WWF’s Living Planet report, which recently revealed animal populations have declined 69% since 1970. The economic debate at COP15 was framed by a 2020 Paulson Institute report on the biodiversity funding gap. 

The next frontier on that field will be financial disclosure. Once again, only clear and transparent information will drive favorable outcomes that lead to a better understanding of risks, stable returns, lower cost of capital and — advocates hope — the finance industry saving the natural systems that allow everything to exist. 

--With assistance from Danielle Bochove.

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