The Secretariat of the Convention on Biological Diversity (CBD) has opened four consultations inviting stakeholder input on the development of the new Multilateral Mechanism on Benefit-Sharing (MLM) for Digital Sequence Information (DSI), including the establishment of the global benefit-sharing fund known as “The Cali Fund.”
Companies are encouraged to actively participate in these consultations by submitting their views and suggestions. The deadlines for contributions span from February to April 2025. Covington is closely monitoring this process and stands ready to assist companies in preparing and submitting their comments.
Modalities of the MLM
As we reported a month ago, at the 16th Conference of the Parties (COP16) in Cali, Colombia, the 196 parties to the CBD achieved a breakthrough in the operationalization of the MLM. A decision (COP16 decision) was made to encourage private sector players to contribute a portion of their profits from DSI into biodiversity conservation, with an ambitious cross-sector funding target of $1 billion annually. The modalities for operationalizing the MLM stipulate that companies in selected sectors – agriculture, biotechnology, pharmaceuticals, cosmetics, lab equipment, and artificial intelligence – should contribute 1% of profits or 0.1% of revenue annually to the Cali Fund, alongside providing non-monetary benefits.
While these developments mark a major milestone, further work is required to ensure the MLM can function effectively in practice. These four consultations, building on the COP16 decision, aim to refine and operationalize the application of the MLM and its modalities. Importantly, the consultations provide an opportunity to expand the application of the MLM to sectors not explicitly identified in the COP16 decision, such as food producers and other industries that use DSI only for some products or services. In addition, the collected views could also inform and influence the way in which CBD parties chose to impose the MLM in their national legislation – a process which is currently taking place.
The Four Consultations
Companies in key affected sectors, as well as those in adjacent industries, are strongly encouraged to participate in the consultations and provide their input to help shape the MLM and ensure their interests are considered in the mechanism’s final design. They can submit their views to the CBD Secretariat here.
- Operationalization of the Multilateral Mechanism for Benefit-Sharing, Including “The Cali Fund” (Notification 2024-113)
Deadline for Submissions: 7 February 2025
The MLM, including the Cali Fund, will function under the guidance and accountability of the CBD COP, supported by a dedicated Steering Committee. This Steering Committee will assist the COP by fulfilling the following key responsibilities:
- Providing oversight of the Cali Fund’s operations, ensuring that funds are disbursed in accordance with the established modalities.
- Guiding the operations of the Secretariat for the multilateral mechanism.
- Reporting to and advising the COP on relevant matters.
- Developing a draft methodology for reviewing the effectiveness of the multilateral mechanism, including the Cali Fund, by COP18 in 2028. This methodology will include appropriate indicators for assessing the mechanism’s performance.
As part of this consultation process, the CBD Secretariat invites stakeholders to submit nominations for candidate members or observers to the Steering Committee. Companies are encouraged to nominate two individuals to serve as observers representing the private sector to the Steering Committee. We suggest that companies reach out to their industry organizations to inform themselves of possible nominations, as a united cross-industry response support would have a better chance of success.
- Potential Additional Modalities for the Multilateral Mechanism (Notification 2024-114)
Deadline for Submissions: 21 March 2025
Leading up to COP16, negotiators debated several models for operationalizing the MLM. Two prominent options emerged: a product sales tax (applying to products and services developed using DSI) and a corporate income tax (targeting businesses in sectors that “directly or indirectly benefit” from DSI). Ultimately, the corporate income tax model was chosen as the foundation for the MLM. However, negotiators left the door open to potentially expand the mechanism to include products and services placed on the market that have benefited from DSI use. Such an expansion could bring in contributions from additional sectors, such as food companies, beyond those currently covered.
This consultation, building on the COP16 debates, invites stakeholders to provide input on whether the MLM should be expanded to cover products and services, and if so, to identify which specific products and services should be included. Companies are also encouraged to raise objections or concerns, including whether such an expansion would create unreasonable or disproportionate administrative burdens, such as requiring businesses to track-and-trace internally to determine which products and services have utilized DSI during their development.
- Innovative Tools and Models for Public Access to DSI (Notification 2024-115)
Deadline for Submissions: 4 April 2025
During the MLM negotiations, there were heated debates whether existing data bases and data-sharing practices provide sufficient accountability, transparency and inclusive governance, enabling the fair and equitable benefit-sharing from the use of DSI. A proposal was made by Egypt to establish a new database for DSI under the clearing-house mechanism, requesting that only DSI which has been cleared through a prior informed consent by the country of origin should be uploaded. While this proposal did not make it to the final text of the COP16 decision, negotiators allowed for the possibility for this topic to be further explored.
Stakeholders are encouraged to submit proposals for new technological tools and models, including digital databases and knowledge-sharing platforms, aimed at facilitating public accessibility and the transparent utilization of DSI. The submissions are expected to contribute to the development of digital infrastructures that support equitable access.
- Standards for Classifying Entity Size Thresholds (Notification 2024-116)
Deadline for Submissions: 18 April 2025
Currently only large entities are expected to contribute to the Cali Fund. “Large entities” are defined as those that meet at least two of the following thresholds: total assets of $20 million, sales of $50 million, or profit of $5 million, averaged over the past three years. However, during the negotiations, it was widely discussed if medium and small companies should also be encouraged to participate, whether through lower threshold payments, or through a phased out obligation approach. During the negotiations, medium-sized entities we described as those which meet at least two of the following criteria: total assets of $5 million; sales of $10 million, or profit of $1 million, averaged over the past three years, while entities which are neither large- nor medium-sized would be classed as small-sized entities. In order to make this assessment, stakeholders are invited to submit their views on national and international standards for the identification of the small, medium and large entities. The classification will inform the scope of obligations under the benefit-sharing framework, thereby delineating differentiated responsibilities for entities of various sizes.
Next Steps
Upon receiving stakeholder submissions, the CBD Secretariat will make all received views available online. Additionally, a synthesis of these views will be prepared and presented to the Subsidiary Body on Implementation for its sixth meeting in late 2025 or early 2026. During this meeting, recommendations will be developed to refine the modalities of the Cali Fund. These recommendations will be presented for adoption at COP17 in Armenia.
If you have any questions concerning the material discussed in this client alert, please contact the members of our Food, Drug, and Devices practice.