“Lots of companies want to contribute to biodiversity,” says Bart Van Vooren at Covington, “but the stacking of one benefit-sharing obligation after another has created a complex regime that is difficult to navigate.” First proposed at COP 16, the fund launched this week – but questions remain over how it will work.
The Cali Fund, which aims to protect biodiversity, was officially launched in Rome on 25 February, as part of the United Nations-led COP 16 on the Convention on Biological Diversity (CBD).
The fund will finance projects which grow out of the implementation of the Convention on Biological Diversity, as well as benefitting indigenous peoples, who will receive at least 50% of the contributions, according to a press release.
The fund was proposed at the main session of CBD COP 16 in Cali, Colombia, on 2 November 2024. Almost 200 parties to the CBD adopted a draft decision declaring that companies which directly or indirectly benefit from digital sequence information (DSI) should contribute either 0.1% of revenues or 1% of profits to the fund.
DSI is the data obtained from sequencing genetic material from living organisms, which can be stored and accessed online for research and commercial purposes.
The fund’s scope captures entities that use DSI genetic resources and which exceed two out of three of the following thresholds: total assets of US$20 million, sales of US$50 million or profit of US$5 million averaged over the preceding three years – although contributions are not mandatory.
The CBD says that the principal sectors which are highly dependent on the use of DSI include pharmaceuticals, cosmetics, plant and animal breeding, agricultural and industrial biotechnology and artificial intelligence. Academic and public databases or research institutions operating in the sector but not relying on DSI are exempted from contributing to the fund.
A UN spokesperson told Forward Law Review: “All companies who fit the criteria in paragraph 3 of the annex to decision 16/2 should contribute, and governments hosting them are invited to put measures in place to incentivise and encourage them to.”
Elizabeth Mrema, deputy executive director of the United Nations Environment Programme, said: “Today’s launch is the culmination of multilateralism that delivers. The ball is now in the court of businesses around the world. Those who pay into the Fund will go down in history as pioneers and will reap the benefits as the public increasingly recognises the importance of giving back to nature.”
The voluntary nature of the fund has attracted criticism from some quarters, however, as has the lack of clarity on how it will operate. Contributions to the fund can be made directly or through a member state – but member states must make their own legal provisions to ensure that they are in line with the mechanism.
Additionally, the steering committee has not been announced. The spokesperson told Forward law Review that the CBD Secretariat received a large number of nominations and is in the process of selecting candidates. “The list of members and observers will be published in a notification in the coming weeks,” they said.
The Secretariat cannot interpret COP decisions, so legal advice to entities must be provided by member state governments – although they currently have little to work with. The spokesperson said general guidance is currently being drafted and will be posted online once approved by the steering committee.
Bart Van Vooren, partner at Covington & Burling, Brussels, has been nominated for a position on the steering committee. He is an advocate of the multilateral approach to the fund but acknowledged that there is much that needs to be done. He spoke to Forward Law Review in November 2024 and said: “When I speak with companies on biodiversity and ESG in general, they’re willing to contribute. But they want to also see what you get in return: transparency and accountability are key.”
“What are the details? What is the basis of calculation? How to avoid double payments? What is the demonstrable impact and how does it link to biodiversity reporting?” he asked.
He told Forward Law Review on 24 February that these questions remain unanswered.
“Lots of companies want to contribute to biodiversity,” he said, “but the stacking of one benefit-sharing obligation after another has created a complex regime that is difficult to navigate.”
He said it remains unclear what is in scope and, if an entity pays into the Cali fund, whether it will be awarded a certificate of compliance.
“Global North countries think that a certificate of compliance should be given to anyone who contributes, whereas Global South countries consider that they should only be given to those that actually pay 1% of their profit or 0.1% of revenue,” he said.
He explained that the risk of double payments will deter some companies: “If, for example, a Brazilian company contributes to the Cali fund, will Brazil’s national ABS [Access and Benefit-Sharing] law recognise this if Brazil also has a 1% payment requirement on the final product? We don’t know. Providing clarity on this to entities is the challenge.”
He continued: “The Cali Fund expects annual payments, and not simply a one-off contribution. Committing a company to pay 1% of profit in perpetuity is not something any CFO will commit to, especially in return for vague ‘reputational benefits.’”
Van Vooren said there are some critical questions to be answered before companies can consider contributing to the fund – for instance the binding benefit-sharing laws of the Nagoya Protocol still continue to apply alongside the voluntary Cali Fund. He said at least 40 countries already require DSI payments, including Brazil, Kenya, India and South Africa.
“There is no legal guarantee that if companies pay to the global mechanism, no more payments are required nationally,” Van Vooren said. “So, logically, companies will adopt a wait-and-see approach.”
Van Vooren pointed out that the turnaround from the proposal of the fund in November to its launch in February is very fast by the standards of international co-operation.
He concluded: “Have all these problems been resolved? No. And it’s now clear that the steering committee has a huge role in making decisions going forward.”