Why “nature positive” is as important as “net zero”

adminonJanuary 30, 2023February 19, 2023Leave a Comment

The conservation of animal and plant species, as agreed at the UN World Summit on Nature in Montreal, also concerns businesses and investors. (Image: Shutterstock.com/Chinnapo)

The UN Biodiversity Conference in Montreal, also known as COP15, could do for biodiversity what the 2015 Paris Agreement did for climate with its decision: Put the issue firmly on the agenda for businesses, policymakers and investors, writes U.S. asset manager Fidelity.

After about two weeks of negotiations, participants at the United Nations World Summit on Nature in Montreal, Canada, agreed on a final declaration. The 200 or so countries involved set u.a. on the goal of putting at least 30% of the world's land and marine areas under protection by 2030. They also want to spend more money on biodiversity conservation. The UN Biodiversity Conference could do for biodiversity what the 2015 Paris Agreement did for climate, points out Jenn-Hui Tan, global head of stewardship and sustainable investing at Fidelity.

The concept of "nature positive Is on everyone's lips, the idea that the true economic value of nature should be taken into account and that we should go beyond mere damage limitation. One of the goals in Montreal was to agree on standards that promote nature-friendly capital allocation. The ambitious goal: reverse biodiversity loss by 2030 and restore natural ecosystems by 2050.

Even more difficult than the fight against climate change

Although the conferees have now agreed on this goal, it is not an easy undertaking: Biodiversity, which refers to the variety and abundance of life on Earth, is an even tougher nut to crack than climate change, Jenn-Hui Tan of Fidelity notes. For example, available assessment tools are less developed than in other areas of sustainability. There, investors who want to compare the climate impact of projects or portfolios can, for example, use the now widely used metric "CO2 equivalent." use.

There is no comparable method for biodiversity. While emissions to the atmosphere contribute to climate change regardless of where they occur, the impacts of human interactions with nature vary greatly from place to place. What is devastating in one place may have minimal impact elsewhere. Each ecosystem has its own combination of soils, minerals, water, climatic conditions and other factors that make it difficult to develop universally applicable metrics.

Comparable data must be available

"Still, a global disclosure standard is possible and would be a big improvement,", said the Fidelity expert ahead of the conference. Currently, one company may report the number of hectares of land it protects, while another in the same industry may report how many tree species it plants. "Figuring out which company is doing more for nature is a difficult task", says Jenn-Hui Tan.

Requiring similar companies to disclose comparable information would be an important step in unlocking the financial resources needed to combat the threat to biodiversity. The same applies to the international alignment of standards and, where possible, the integration of new regulations into existing climate standards. After all, we are talking about one and the same planet.

The example of France

French law now requires financial institutions to disclose their risks and impacts related to biodiversity as well as those related to climate. At the international level, the Taskforce for Nature-related Financial Disclosures (TNFD), modeled on the former Taskforce for Climate-related Financial Disclosures (TCFD), is scheduled for completion in 2023. TCFD reporting is already mandatory for some activities in the UK and Switzerland, and is set to be introduced in other countries. The same is likely to happen in time with the TNFD.

According to the World Economic Forum, about half of the world's GDP is dependent on nature to a low or high degree. "Either we change our way of life to preserve natural capital, or we consume it and have to change our way of life anyway.

Giving investors tools such as the right data to act on biodiversity is an important step, Fidelity's Sustainable Investing chief advises. Montreal has laid the foundation for this work, the "backbreaking work" starts now.

Vacations

Prudent tax planning is also essential when buying property abroad.

Swiss people have always shown a great interest in real estate abroad. Especially the sunny south like Tuscany, Southern France or Spain are popular places for buying condominiums and vacation homes. Favorable purchase opportunities are nowadays in abundance in view of the oversupply. But be careful: Real estate can also become a tax trap abroad. Careful planning in advance is therefore worthwhile in any case also in this respect.
Acquisition taxes: Similar to Switzerland, the state usually takes a big bite out of the purchase price. Notary fees, land registry costs and purchase taxes similar to the Swiss real estate transfer tax easily add up to 5 percent or more of the purchase price. These costs are in addition to the brokerage fees of around 3 to 5 percent. Occasionally, sales tax must also be paid. In Spain, for example, the tax rate is 6 percent for residential properties and 15 percent for undeveloped land and newly constructed buildings.

Note that in many countries the property is jointly liable for the seller's property gains taxes. In order not to take risks, the payment of these taxes should be ensured. In Spain, in addition to the regular property gains tax, a local tax of up to 30 percent of the increase in the value of the property since the last change of hands is levied on a municipality-by-municipality basis. The real estate gains tax must be paid by the seller in the event of a resale.
Current taxes: Most countries levy annual local property taxes. In Spain, these amount to 0.4 to 1.7 percent of the cadastral value. In addition, the property income must be taxed. Many countries also levy a property tax of up to 1 percent of the market value. The property tax in the USA is particularly well known and is used to finance schools. There are major differences in the taxation of imputed rental value. Some countries do not have such a tax, but do not allow debt deduction for it. Spain, for example, levies an imputed rental value tax of 25 percent on 2 percent of the cadastral value.

As the owner of a foreign property, you are obliged to declare it in the Swiss tax return. In principle, you must pay tax on the income from the foreign property in the country where the property is located. As a rule, the tax value of the property is also taxable as an asset in these countries. On the other hand, the income from the foreign property as well as the assets are taken into account for the calculation of the tax progression in Switzerland. If you finance the foreign property by increasing the mortgage on your Swiss home, the additional mortgage interest is distributed between Switzerland and abroad according to the situation of the assets.

Inheritance taxes: Particularly annoying is the very high inheritance tax in most surrounding countries for direct ownership of the property; in Spain the rate goes up to 81 percent. Generally, however, much lower rates apply to transfers to descendants, or tax allowances exist. The following maximum rates apply to inheritance tax: France 60 percent, Florida 55 percent, Greece 60 percent, Ireland 30 percent, Italy 33 percent, Portugal 50 percent and Spain, as previously stated, 81 percent.

The question of who should own a foreign property must be carefully considered in each case. Buying property outright in children's names prevents inheritance tax from being levied when parents die. If you hold the property through a real estate company (for example offshore in Gibraltar or Jersey), the shares are subject to any inheritance tax in Switzerland, as movable assets are taxed at the last residence.

Two black professors whose house in Baltimore was built around 278.000 dollars higher than it was appraised to agents shown by a white colleague, suing for discriminatory lending practices.

Nathan Connolly, a researcher on the role of race in the housing market, and his wife Shani Mott, who are both professors at Johns Hopkins University, said they wanted to take advantage of low interest rates and refinance their mortgage last year.

However, her application to refinance her mortgage was denied when her four-bedroom home, which sold in 2017 for 450.000 US dollars was purchased, despite several upgrades to increase the value to 472.000 US dollar was estimated.

The couple said they later applied for another assessment after they "whitewashed" their home – replacing family photos with pictures that suggested a white family lived there and having a white colleague stand in for them.

At the second valuation, their house was valued at 750.000 US dollars, which is 59 percent more than the estimate seven months ago.

"We were clearly aware of the valuation discrimination," said Dr. Connolly, an expert on "redlining," to the New York Times.

"But to be told in so many words that our presence and the life we have built in our home is lowering property values? It is an absolute gut punch."

Issue highlighted by Joe Biden

Much of the research by Dr. Connolly focuses on the legacy of white supremacy in U.S. cities and the impact of racial bias on the country's housing market.

The professors have filed a lawsuit in a Maryland district court arguing that their initial low "rating was due to racial discrimination".

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The U.S. housing industry has a long history of racial discrimination, a legacy of the Jim Crow era. The issue brought into the spotlight by Joe Biden, the U.S. president, who last year launched an interagency initiative to combat bias in home appraisals.

According to the U.S. Bureau of Labor Statistics, more than 97 percent of home appraisers are white.

Dozens of black homeowners have reported alleged discrimination in the valuation of their homes following the murder of George Floyd, which sparked a nationwide reckoning over racial bias in the U.S.

The Maryland lawsuit is the latest high-profile case to highlight differences in home valuations.

The lender claims it strongly rejects bias

Last year, a black couple in California filed a lawsuit accusing an appraiser of inflating the value of their home by nearly 500.000 dollars to have underestimated.

In the lawsuit filed by Dr. Connolly and Dr. Mott, they claim that the appraiser ignored nearby sales in majority white areas, similar to theirs, with higher values.

They claim that their house was compared with houses of lower value, including one outside their neighborhood boundary and in a majority black area.

The lender charged in the case, LoanDepot, said it strongly rejects bias. "While valuations are conducted independently by external expert valuation firms, all parties involved in the home financing process must work to find ways to help eliminate bias," the company said.

The valuation was done by 20/20 Valuations. The company could not immediately be reached for comment.

Even more difficult than the fight against climate change

Comparable data must be available

The example of France

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