Biodiversity loss and ecosystem collapse, alongside climate change, are among the top three existential threats that humanity will face in the next decade. The adoption of the Global Biodiversity Framework (GBF) under the Convention on Biological Diversity (CBD) in 2022 set an ambitious target of halting and reversing global biodiversity loss by 2030, aiming for a ‘Nature-Positive’ world by 2050. As of the current year of 2024, governments worldwide are laying out their strategies to fulfill these commitments.

A critical key to achieving the global biodiversity goals lies in mobilizing sufficient financial flows to protect and restore nature while eliminating harmful financial practices. This has led to the rise of ‘Nature Finance’. GBF Targets 18 and 19 call on countries to mobilize at least 200 billion USD annually for nature and reduce 500 billion USD in harmful subsidies, which would close a 700 billion USD Nature Finance gap. Meeting these financial goals is a prerequisite for achieving the three Rio targets, such as limiting global warming to 1.5°C, protecting 30% of land and sea, and achieving land degradation neutrality by 2030.

While public sector funding for nature, too, remains insufficient, the largest gap lies in private finance. International organizations estimate that Nature Finance still predominantly comes from public and philanthropic sources, underlining the urgent need for the private sector to step up significantly. Banks and financial institutions must play a pivotal role in this transition by embedding biodiversity risks and opportunities into their financial frameworks and adopting stringent policies to integrate Nature Finance into their core investment policies. Leading banks are already embracing innovative mechanisms, also known as Nature-based Solutions (NbS).

However, South Korea, despite having an outsized Ecological Footprint on the rest of the world, remains a biodiversity laggard, failing to leverage its influential private banking sector. This report estimates that South Korea is responsible for contributing a portion of 2.67 billion USD to the GBF 200 billion USD target, necessitating an almost threefold increase in its biodiversity financing by 2030, with at least a third of it supporting developing countries. Even in a rosy scenario in which public spending continues to increase as projected by government research, the private sector will still need to contribute an additional 1.60 billion USD to meet the country’s fair share.

This grand challenge of scaling Nature Finance cannot be accomplished without leaps and bounds coming from the banking sector. While South Korea’s five largest commercial banks are increasingly recognizing the importance of biodiversity, none are yet aligned with the financial targets set out by the GBF. Relevant policies of most banks are poorly constructed and lack the rigor and decisiveness needed to deliver meaningful impact, with only a few banks putting restrictions on financing activities linked to deforestation. Between 2020 and September 2023, these ‘Big Five’ banks collectively financed at least 909 million USD to industries with high deforestation risks, such as biomass, pulp and paper, palm oil, and timber. In contrast, their Nature-Finance investments were sporadic at best, without being wholly integrated into their broader corporate portfolios.

Overall, both the South Korean government and commercial banks are only beginning to incorporate biodiversity into their policy frameworks, often adopting international standards that lack measurable biodiversity outcomes in the local context. Introducing robust exclusion policies, phasing out harmful subsidies, and scaling Nature-Positive investments remain as the most important areas for improvement.

As global Nature Finance gains momentum, this report urgently calls for South Korea’s banking sector to seize the timely opportunity to transform and take a leading role in this critical transition.

To accelerate this green transition, banks are advised to follow the seven recommendations:

1. Strengthen exclusion policies

2. Phase out harmful subsidies and investments

3. Enhance Nature-Positive investments

4. Adopt no-go policies

5. Improve risk management and disclosure practices

6. Strengthen due diligence procedures

7. Establish time-bound financial goals

To lay the foundation for this change, the government and regulators are advised to:

1. Strengthen regulations to disclose and mitigate biodiversity impacts

2. Enhance the National Biodiversity Strategy and Action Plan (NBSAP)

3. Revise the K-Taxonomy to exclude large-scale bioenergy projects