Humberto Delgado Rosa is the Director for Natural Capital, DG Environment, European Commission. Previously he was Director for Mainstreaming Adaptation and Low Carbon Technology in DG Climate Action. He is experienced in European and international environmental policy, particularly in biodiversity and climate change issues. He served as Secretary of State for Environment of the Portuguese Government from March 2005 to June 2011. Between 1995 and 2002 he was an advisor for environmental matters to the Prime Minister of Portugal. Versión en español.
Mercados de Medio Ambiente.- The new EU Action Plan for nature, people and economics sets out a roadmap with 15 measures that need to be implemented by 2019 to rapidly improve the implementation of the Birds and Habitats Directives. It is an ambitious planning whose success hinges upon the involvement of national authorities and stakeholders, and especially the engagement of young people. What will be the keys to success on all fronts that are addressed in the Action Plan at the appointed time?
Humberto Delgado Rosa.- The success of the Action Plan for nature, people and the economy hugely depends upon engagement and efforts by all relevant actors – Commission, Member States, regional and local authorities, and private stakeholders. The Action Plan sets an ambitious work programme for the next two and a half years. It is aiming to boost implementation of the Nature Directives, accelerate progress towards the EU’s 2020 biodiversity targets, while meeting the concerns of businesses and land owners that were expressed in the Fitness Check. Measures will be taken at EU level, but Member States and stakeholders concerned will also need to act, with increased support and assistance.
One should keep in mind that the actions in the plan emerged from the findings of a comprehensive check on the Birds and Habitats Directives, which led to the conclusion that these are still fit for purpose. The actions are based on needs that have been conveyed by Member States’ national and regional authorities as well as different stakeholders’ groups. We therefore believe the plan responds to real demands and can therefore gain wide support. The positive reactions we have had at the conference where the Action Plan was presented and debated with all relevant actors, as well as the Conclusions recently adopted by the EU Environment Ministers welcoming the Action Plan, are first positive signals of the commitment needed for it to be a success.
MMA.- How will the desired engagement of all actors be achieved, especially in a sector as critical and with as much potential as that of young people?
HDR.- The Commission will spare no outreach effort in this area. We firmly believe young people have a mayor role to play in the Nature Directives implementation and, more in general, in nature and biodiversity protection. That is why the Action Plan identifies them as a key target group when it comes to increasing awareness and engagement of citizens and communities.
On 7 December 2016 the European Commission launched the European Solidarity Corps which aims to provide young people with opportunities to participate in a wide range of solidarity activities at home or abroad, throughout the EU. The European Solidarity Corps offers opportunities for volunteering, traineeships or jobs that will provide young people with a chance to gain invaluable experience develop their skills and make a contribution to society. The initial phase for the Solidarity Corps was launched in December 2016 with the first placements starting in Spring 2017. With the support of the LIFE programme, this offers the chance to contribute to the management of Natura 2000 sites. Activities may include the monitoring of species and habitats, ecological restoration activities, reforestation and tree planting and care, wildfire prevention, identification and eradication of invasive alien species, environmental clean-up activities (for example marine litter).
In 2017 the European Solidarity Corps will be consolidated by a dedicated legal framework. It will offer the opportunity to young people willing to show solidarity to go to another Member State and experience different practices to tackle the challenges of nature protection and disaster prevention, while gaining invaluable experiences for future occupation. We believe this will be key to engage the youth in nature conservation.
MMA.- The European Commission and the European Investment Bank have recently signed the first loan from the Natural Capital Finance Facility Natural (NCFF), one of the two financial instruments launched under the LIFE Programme at the end of 2014. This mechanism aims to provide loans and investments in funds to support projects which promote the preservation of natural capital, including adaptation to climate change. More than two years have elapsed between NCFF launch and the signature of the first loan agreement, why it took so long? Has it been due to the lack of financially viable initiatives?
HDR.- The Commission and the EIB are very happy with the signature of the first NCFF operation. It clearly shows the relevance of nature for business opportunities. This first operation took indeed more time than expected, but that can be understood from the innovative character of this financial instrument. At the launch of the NCFF, we were aware of the challenges, one of which is for stakeholders to develop a viable business plan. Many of them are more used to grants rather than repayable loans, and have limited experience in identifying mechanisms to recoup the financial benefits from investments in nature. However, the signature of the Rewilding Europe operation demonstrates the feasibility of the approach.
I encourage readers that have a proposal for a potential NCFF operation with concrete biodiversity or climate change adaptation benefits to contact the EIB. The colleagues at the Bank will be happy to discuss. There is also a Technical Support facility that can finance consultancy expertise to help developing projects in fuller detail.
MMA.- What are the European Commission’s forecasts on the signature of new loan agreements backed by the NCFF until the end of its pilot by the end of 2019?
HDR.- The aim remains to sign some 9 to 12 operations with the currently available funding, but we may extend the period until 2021. There are several projects in the pipeline, and two or more of them may still be signed this year.
MMA.- A new phase of the B@B (Business@Biodiversity) platform was launched at the end of last April, which will be extended over the next three years. What will be the priorities of this new phase?
HDR.- Modern enterprises, companies and investors are in principle aware of the importance of dependencies and impacts on natural capital and biodiversity and their implications for business and financial performance. They increasingly recognise that there is a need to assess and quantify these impacts and dependencies, in order to understand how a given business relies on natural capital and ecosystem services, and how this translates into financial risk, both through upstream supply chain disruptions and significant reputational risks.
The members of the EU Business@Biodiversity platform are sharing and developing methods to assess and quantify these impacts and dependencies. Over the next three years we envisage to enhance the cooperation between us and other frameworks to facilitate the integration of biodiversity and ecosystem services into business decision making. We want to link businesses closer to innovation platforms and in particular we also facilitate a community of practice of financial services providers addressing such risks and developing new business opportunities.
MMA.- Members of the B@B initiative will work during the next three years to consolidate a critical mass of companies committed to mainstreaming natural capital into their corporate strategies within the EU. What role will play in this mission the Natural Capital Protocol, an framework designed by the Natural Capital Coalition to help generate trusted, credible, and actionable information for business managers to inform decision?
HDR.- Frameworks such as the Natural Capital Protocol provide a clear structure for understanding and reporting these risks. It is a framework from business for business – and the EU Business and Biodiversity platform and its members are contributing to its further development. The protocol itself is complemented by sectorial guides addressing specific needs and cross cutting supplements under development. There we wish to actively contribute. Notably the draft supplement to the Natural Capital Protocol for the finance sector, as well as a supplement to refine the assessment methodology for biodiversity impacts and dependencies, will be central to our cooperation.
MMA.- Metrics that most companies use to measure success prioritize profitability and not the ability to protect or enhance nature. How to reverse this approach?
HDR.- I think that metric – to measure and prioritize profitability – is what businesses always have been doing and will have to continue to do, there is no point in changing that. However, it is precisely because every business wants to create greater value, be more efficient and make better decisions, that it is so important to include natural capital into their decision making. In fact if you are not already incorporating natural capital into your decision making, you are very likely to be missing significant risks and opportunities for your business.
The Natural Capital Protocol to help businesses to do just that. All companies impact and depend in their activities in some way or another on natural capital and biodiversity. The Natural Capital Protocol offers a standardised framework to identify, measure, and value these impacts and dependencies on natural capital, and thereby helps the management to reduce raw material cost, reduce risk of interruption of supply, realise efficiency gains, reduce financing cost and improve access to finance attracting investors.
MMA.- Why is it so complicated to convince the business sector that investing in natural capital conservation is also profitable and beneficial not only from an economic point of view but also with regard environmental and social perspectives? Is it a communication?, or is it about finding the business case?
HDR.- I do not think it is that complicated to explain. Think of a water supplier or beverage company that obviously depends on clean water from nature. Would you invest in it if the company had not credibly assessed, managed and secured the sustained availably of their clean high quality drinking water for the decades to come and reported on it?
Or think of companies in the food or apparel industry: their supply chains often begin in another continent; upstream they depend on sustainable production and supply directly related to agro-ecosystems; while downstream their marketing and sales depend on the trust and reputation among consumers in the ecological and social dimensions of production. The tourism sector depending on the quality of the environment and landscape or the rubber industry for tyres are further obvious examples, among many. Not managing the ecosystem services and their related supply chain risks in an integrated way endangers access to investors and bears direct financial risk.
Hence, the problem I see is not the lack of recognition of these links, which are vital for the sustained profitability, but rather the wide application and acceptance of standardised methodologies for the assessment and quantification of such dependencies. That is why I see so much value in the work of the Natural Capital Coalition, with entities such as the World Business Council for Sustainable Development and the International Union for Conservation of Nature as founding members, and the Natural Capital Protocol as such a standardised framework.
MMA.- The fundamental role of the financial sector as the driving force behind the transition to the green and circular economy pursued by the EU and demanded by our world is unquestionable. However, recent research concludes that, although financial institutions do take biodiversity loss or climate change seriously, they do not institutionalize risk management associated with both aspects at the required scale and pace. One of the workstreams of the B@B platform focuses precisely on the natural capital-finance relationship, whose members have launched the new EU CoP (EU for Finance and Biodiversity community). EU CoP held its first meeting last April. How will you work from this forum to help financial institutions reach the pace and scale required by global commitments to halt biodiversity loss and fight climate change?
HDR.- There is clearly an increasing demand for methodologies to remove these blinds spots in the financial risk management with regards to natural capital and biodiversity and this holds for various levels – for individual projects or the whole portfolio of a bank or even the big funds or institutional investors. In this community of practice we work with a group of financials of different sizes to tackle this demand – we do not direct the work but rather facilitate cooperation. The financials themselves share best practice to learn about different biodiversity footprint methodologies; they are sharing methodologies, goals, successes and challenges; they are connecting to other initiatives in relation to biodiversity accounting; and they are discussing accounting principles. It is not only on the risk management, they also explore new business models.
MMA.- Information on environmental accounts is very relevant for improving policy-making at the national level. Which countries are most advanced in natural capital accounting within the EU? How is your unite working on this matter?
HDR.- The EU is currently supporting a number of projects on Natural Capital Accounting at national level, both in the EU and internationally. In the EU we launched a project to develop EU level natural capital accounts. We call it Knowledge and Innovation Platform – Integrated Natural Capital Accounting (KIP-INCA), and it involves several services of the European Commission, including Eurostat and the Joint Research Centre, as well as the European Environment Agency.
The EU is also contributing to the WAVES project with the World Bank and a Partnership Instrument with the UN Statistical Division for partnership countries such as Brazil, China, India, Mexico, and South Africa. We will be testing and experimenting with ecosystem accounting in the broad sense in the EU and with our partners, and we want this work to guide the further development of future accounting standards.
MMA.- Based on your experience as DG Environment Natural Capital Managing Director, what nationality are the business sectors more aware of the need to incorporate natural capital into corporate strategies?
HDR.- This is hard to say in the absence of statistics that could capture such incorporation. I am glad that there is a range of initiatives of business and biodiversity platforms at members state or regional level across the EU – you can find on our website the link to about 15 of them. I have been impressed on how some are driving the methodological work with good links to scientific institutes, while some others are engaging the financial sectors and others are very focussed in engaging in specific sector based fora and business associations. Some are even running training programs on the Natural Capital Protocol.
MMA.- Innovation is critical to facilitating progress towards a sustainable planet, in line with the Sustainable Development Goals of the 2030 Agenda and the Paris Agreement on Climate Change. Where are headed eco-innovative trends related to ODS linked to biodiversity and ecosystem services conservation and adaptation and mitigation to climate change?
HDR.- It is remarkable how well the global Sustainable Development Goals provide guidance also within businesses, strategically influencing the management of companies. This happens together with the other salient political decisions on climate change as agreed in Paris, or on biodiversity as enshrined in the Aichi targets of the Convention on Biological Diversity. It is today common sense in society and in business that this planet has to be managed differently and that business has a key role in this transition towards sustainability. Any company must understand and address these sustainability mega-trends – not least if it wants to ensure to be still in business in the decades to come.
MMA.- Directive 2014/95 on disclosure of non-financial and diversity information is applicable only to large companies. Will we see the extension of its application to other types of companies (SMEs and star-ups) along the path that this Directive should follow?
HDR.- : While for SMEs in principle the same logic applies as for larger companies, smaller companies often may lack appropriate human resources and information so that handling costs may get proportionately higher. Thus, the overall administrative burden may be disproportionately high for SMEs. Hence, SMEs are not required by the Directive to disclose non-financial information. This does not mean that they would not benefit from better understanding their impacts and dependencies and from better transparency.
MMA.- SMEs are the backbone of the European economy. They make up more than 99 per cent of all European businesses, provide two out of three private sector jobs and contribute to more than half of the total added value created by businesses in the EU. Therefore, the good functioning of SMEs is vital to the health of European economy, that is totally dependent upon healthy biodiversity and ecosystem services, both assets on which rely all SMEs´ operations and activities. In this scenario, it is clear that SMEs play a decisive role in biodiversity protection. How is the involvement of SMEs in B@B initiative? What measures could be developed to enhance their engagement?
HDR.- As mentioned above, in essence the same logic applies in principle for SMEs or start-ups as for larger companies, but it is often a challenge for them to have the dedicated human resources on sustainability in their management. Hence, I would like to see them better represented at the B@B platform, and we will continue our efforts to make the EU’s business and biodiversity platform also useful for them.
MMA.- The EU is committed to halt the loss of biodiversity and the degradation of ecosystem services by 2020. The Biodiversity Strategy sets out 6 targets and 20 specific actions geared towards this overall objective. Action 7 is to ensure no net loss of biodiversity and ecosystem services. The implementation of this action requires the presentation of the European Commision´s long overdue initiative on no net loss of biodiversity and ecosystem services. Several studies have been developed at European level to evaluate different tools (habitat banking, payment for ecosystem services, compensation or offsetting schemes…) to achieve this objective. What is the current status of this goal?
HDR.- The Action Plan for nature, people and the economy, adopted to enhance the implementation of the EU Nature Directives, will bring an important development for such. The plan foresees an initiative to provide guidance and encourage the integration of ecosystems and their services into planning and decision-making.
This guidance, envisaged to be finalised by mid-2018, will also address the application of the impacts mitigation hierarchy – avoid-reduce-compensate -, in decision-making. It will build on recent advances in the mapping and assessment of ecosystems and their services, on progress in natural capital accounting and on the growing experience in the valuation of ecosystems and their services in different contexts. Activities of the EU Business and Biodiversity Platform and recent development in the Member States will also provide useful opportunities for exchange of best practices in this domain.