Nature based solutions

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Paris alignmentReasoning
Paris alignedAFD is very active in international initiatives supporting the development of biodiversity standards and tools. Furthermore, AFD has a comprehensive exclusion list -which applies to the entire Group- related to biodiversity and critical habitats. Additionally, AFD has pledged a share of climate finance favourable to biodiversity from 15% in 2018 to 30% by 2025 and already exceeded its target 2025 target in 2021. This showcases AFD’s commitment to biodiversity finance. This continues to represent an area open to strong leadership among DFIs, and by raising this target further AFD has the potential to achieve a “transformational” rating.

Explanation

Biodiversity

AFD established its biodiversity roadmap in its territorial and ecological transition 2020-2024 strategy:

  • Focusing on conservation, restoration of natural environments and projects and operations related to water, sanitation, agriculture, livestock and oceans.
  • Aiming to mainstream biodiversity in all sectors by reserving a share of their climate finance envelope for biodiversity.
  • Incorporating guidelines and priorities on biodiversity with the SDGs and Paris agreement.

Exclusion list

AFD screens projects individually in terms of their biodiversity impact using a set of binding exclusion criteria, which can be found in appendix of the territorial and ecological transition strategy 2020-2024.

The AFD Group will not finance:

  • Any operations that may cause a net loss of biodiversity in critical habitats. Critical habitats are defined as:
    • Primary forests or high conservation value forests;
    • Spaces with high biodiversity value;
    • Spaces with a particular importance for endemic species or whose geographical range is limited;
    • Critical sites for the survival of migratory species;
    • Spaces welcoming a significant number of individuals from congregatory species;
    • Spaces presenting unique assemblages of species or containing species which are associated according to key evolution processes, or which fulfil key ecosystem services;
    • Territories with socially, economically or culturally significant biodiversity for local communities.
  • Any operations linked to the trade of animals, plants or any natural products as per the CITES convention.
  • Operations involving fishing activity using drift nets of more than 2.5 km in length.
  • The production, use or sale of pharmaceutical products, pesticides/herbicides, ozone-layer-depleting substances or any other dangerous substances that are banned or being progressively phased out internationally, particularly by the European Union.
  • Research on the purchase, promotion or multiplication of genetically modified seeds.
  • Projects leading to land concentration that is incompatible with equitable local development or which results in indigenous populations being deprived of their rights to natural resources.

 Commitments and progress

 In 2020 AFD pledged to:

  • An annual funding envelope of at least € 1 billion for ‘finance favourable to biodiversity’.
  • Doubling the share of climate finance favourable to biodiversity from 15% in 2018 to 30% by 2025.

According to the AFD climate finance activity report 2021:

  • It exceeded its 2025 goal already in 2021.
  • A total of 31 projects which included biodiversity co-benefits were implemented:
    • The majority of these projects were related to the green cities and water resources and sanitation sectors.

Accounting methodology

AFD’s methodology for accounting ‘finance favourable to biodiversity’ is the following:

  • Identification of projects resulting in climate co-benefits and determining the climate finance funding envelope for each project.
  • Analysis of the relevant projects using the Rio Convention on Biological Diversity (CBD) objectives. AFD applies a Rio marker on biodiversity to each project.
    • Projects which:
  1. do not fulfil any of CBD’s objectives are categorised as DAC0;
  2. Address the CBD objectives are categorised as DAC1;
  3. Aligns its principal objective fully with the CBD are categorised as DAC2.

The 30% rate corresponds to the share of climate finance from the projects marked as “biodiversity-friendly” (DAC1 or DAC2) within the total AFD climate finance.

Therefore, AFD reports “green finance” and not “biodiversity finance” for which the Biodiversity Finance Tracking Method is used.

Cooperations

AFD cooperates with several international stakeholders to mainstream biodiversity, for example:

  • In 2020, the AFD supported IUCN in the launch of a “Global Standard for NBS”, which consists of eight criteria and a series of associated indicators, revised every four years.
    • This standard seeks to help “…agencies, policy-makers and other relevant stakeholders assess the effectiveness of NbS projects as well as their environmental and economic contributions.”
  • AFD participates in the Task Force on Nature-related Financial Disclosures (TNFD), by convening and leading the TNFD’s Development Finance Hub.
  • In 2018, it launched the Clean oceans initiative together with EIB and KfW.
    • It aims to finance € 2 billion in projects that reduce plastic waste by the end of 2023 focusing on river and coastal areas in Africa, Latin America and Asia.
    • By Q1 2022 80% of this goal has already been achieved.
    • Since the early 2000s AFD has been active in marine biodiversity initiatives, e.g., the pacific initiative for biodiversity, climate change and resilience, and the Kiwa initiative. These focus on preserving marine biodiversity in the Pacific region through NbS.

Forests

  • AFD supports zero deforestation strategies of producer countries based on their own national strategies.
  • It has committed to support sustainable harvesting of wood and halt deforestation within the framework of the French National Strategy against Imported Deforestation 2018-2030.
  • AFD promotes the mainstreaming of:
    • sustainable forestry development plans;
    • the restoration of degraded landscapes;
    • eco- and social labelling for forest value chains and the logging industry;
    • improvement of the economic, energy;
    • environmental and social performance of the wood-processing industry and;
    • capacity-building for national authorities.

 Recommendation:

AFD has pledged a share of climate finance favourable to biodiversity from 15% in 2018 to 30% by 2025 and already exceeded its target 2025 target in 2021. This showcases AFD’s commitment to biodiversity finance. This continues to represent an area open to strong leadership among IFIs, and by raising this target further AFD has the potential to achieve a “transformational” rating 

Last Update: November 2022