The Convention on Biological Diversity (CBD), established in 1992, represents a critical framework for banks and financial institutions when conducting Environmental Impact Assessments (EIAs) for financing decisions. For the banking industry, the CBD’s provisions translate into both risk management imperatives and opportunities for sustainable finance leadership. Financial institutions must pay particular attention to three core CBD objectives: conservation of biological diversity, sustainable use of its components, and fair benefit-sharing from genetic resources.
In practical terms, banks need to focus their EIA processes on several CBD-relevant aspects. First, project screening must identify potential impacts on protected areas and endangered species, as defined by CBD Article 8. Second, assessments should evaluate how financed activities might disrupt critical ecosystem services that underpin economic value, such as water purification or soil fertility. Third, banks must verify compliance with National Biodiversity Strategies and Action Plans (NBSAPs) that signatory countries develop under CBD requirements. Particular attention should be given to the Nagoya Protocol’s provisions regarding access to genetic resources and benefit-sharing, which may affect agricultural and pharmaceutical sector projects.
The implications for banks of non-alignment with CBD principles are substantial. Legally, financial institutions may face penalties when financing projects that violate CBD-incorporated national laws, ranging from habitat destruction to unauthorized use of genetic resources. Financially, such projects risk asset stranding as regulatory interventions or community opposition halt operations. Reputationally, banks associated with biodiversity harm face growing risks from NGO campaigns and investor activism, particularly under evolving frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD). Conversely, banks that effectively integrate CBD considerations into their EIAs can develop competitive advantages in sustainable finance, access green funding opportunities, and build resilience against nature-related financial risks.
Operationalizing CBD commitments requires banks to enhance their due diligence processes. This includes adopting specialized assessment tools like the Integrated Biodiversity Assessment Tool (IBAT), developing sector-specific exclusion criteria for high-risk activities, and establishing robust stakeholder engagement protocols with indigenous communities as outlined in CBD Article 8(j). As the Kunming-Montreal Global Biodiversity Framework sets more ambitious 2030 targets, banks that proactively align their EIA processes with CBD principles will be better positioned to navigate the transition to nature-positive finance while avoiding the escalating risks of biodiversity-related financial exposures.