Biodiversity, once seen as a nice to have, is now regarded as a fundamental necessity in terms of the functioning of our personal and commercial lives. The key difficulty, of course, is placing a value on those services that biodiversity provides and attempting to internalise the externalities caused by the unsustainable use of natural capital. As most biodiversity and ecosystem services are public goods, we also enter that conflicting state of the Tragedy of the Commons. How do we break that deadlock?

Building capacity
Awareness is certainly the first stage in addressing the implications of the loss of biodiversity, but this needs to be supplemented with an action orientated capacity building programme. At the United Nations Environment Programme Finance Initiative (UNEP FI), we now have a dedicated Working Group on Biodiversity and Ecosystem Services (BES). This is a multi stakeholder initiative that is looking into the risks and opportunities associated with biodiversity loss, and building up the business case for action. This is not an easy task, but one which has the commitment and energy from a wide and experienced group of individuals and organisations. Toolkits are also being developed to assist in the identification and mitigation of potential biodiversity loss. The Working Group will not only concentrate on the potential direct effects of biodiversity loss, but also look at the indirect effects through aspects such as supply chain management.

This is an exciting development in a sector that can really help make a difference given its breadth and depth of operations in the areas of banking, insurance and asset management, which in turn cover both the retail and commercial sectors. How we address biodiversity At Westpac, a UNEP FI signatory, we have already started to address the issue of biodiversity, which is particularly important to us given the implications for key areas such as tourism, forestry and agriculture, which are at the greatest risk from biodiversity loss. Westpac strongly supports initiatives to maintain and restore Australia’s unique biodiversity, through our day-to-day risk and lending policies and practices, via market mechanisms and through the volunteer efforts of our employees.

Westpac’s Environmental Lending Policy seeks to identify and mitigate environmental risks when evaluating lending proposals to avoid causing environmental harm and unacceptable credit risk, in accordance with environmental law and regulation in every jurisdiction in which we undertake business activities. Westpac’s Environmental Lending Policy forms part of a comprehensive framework to manage the Environmental, Social and Governance (ESG) impacts of our business activities, including:

The adoption of the Equator Principles;
Being signatory to the United Nations Principles for Responsible Investment; and Offering a range of environmentally-linked products and services.

Where security offered may be subject to environmental risk, we require evidence of responsible and adequate management of the environmental issues associated with that security. Where dealing with customers or security associated with industries with the most significant environmental impacts, we may require an external environmental assessment to be carried out before any loan approval.

Westpac’s Institutional Bank assesses environmental risk at the individual corporation or institutional level based on its industry category. Transactions with perceived environmental risks are subject to an initial environmental screening using assessment processes to determine whether a potential risk exists and whether that risk impacts the customer capacity to meet its financial obligations. Environmental risk assessment includes:

Compliance with all regulatory requirements; Management and financial capacity; External advice and site inspections where relevant ; and Whether the activities are likely to cause harm, despite expertise available to mitigate the risk.

Markets for biodiversity
As a bank, Westpac is, unsurprisingly, supportive of market-based systems which encourage innovation and best practice around reducing greenhouse gas emissions, water efficiency or biodiversity management. On 1 March 2007, Westpac announced a partnership with Landcare Australia to establish CarbonSMART, an innovative, not-for-profit carbon trading pool and brokering service for Australia.

CarbonSMART gives landowners the opportunity to secure a regular income for up to 30 years just by maintaining and growing the vegetation on their land. CarbonSMART aims at conservation activities such as erosion control, salinity reduction and streamside rehabilitation. The areas of most interest are sites that landholders consider permanent plantings (1).

Westpac has also worked with Landcare Australia to develop and launch the Westpac Landcare Deposit account. For every dollar invested in a Westpac Landcare Term Deposit, Westpac lends the equivalent to Landcare farmers across Australia with a view to supporting more sustainable agriculture endeavours. As at 30 September 2006, the product held AUD 1.4m in balances, and AUD 2.9m in lending was consequently directed to Landcare farmers or farmers practising sustainable agriculture.

We see enormous potential in using product-based, trading and market mechanisms to achieve environmental goals, particularly through the use of carbon offsetting mechanisms to create additional revenue streams for farmers and help improve local biodiversity through reforestation.

Community involvement
Our employee volunteering programme, ‘Operation Backyard’ was established in partnership with Landcare Australia. It provides funding for the protection of our biodiversity through habitat restoration projects.

Whether it is fishing European Carp out of waterways in Moree NSW or re-vegetating sand banks and fencing off protected areas in Victor Harbour South Australia, this program provides our people with great opportunities to address environmental issues in their local community.

Since it began in 1998, we have provided circa AUD 1.4m to help around 250 environmental projects in local communities across Australia. As you can see from the above, there are many ways to address the issue of biodiversity loss. Action can be taken at both the individual and corporate level, and forward looking and enlightened companies are providing the impetus for that change.

Whilst we all need to think global, we also need to act local !

Martin Hancock is Chief Operating Officer, Westpac, London and Chair, UNEP Finance Initiative. Emma Herd is Senior Advisor, Corporate Responsibility & Sustainability, Westpac, Sydney.

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(1) CarbonSMART.com