Biodiversity law and regulation
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The four pillars that organisations should use to consider nature-related impacts and dependencies
[fig. 9]
Governance: The organisation’s governance around impacts, dependencies, risks and opportunities. Strategy: The actual and potential effect of the organisation’s impacts and dependencies on nature and associated risks and opportunities on its business, strategy, and financial planning. Risk management: The processes used by the organisation to identify, assess and manage its impacts and dependencies on nature and associated risks and opportunities.
Metrics and targets: The metrics and targets used to assess and manage relevant impacts and dependencies on nature and associated risks and opportunities.
Nature related risks: In each of the above pillars, the organisation must consider its impacts on nature, dependencies on nature, and the resulting financial risks and opportunities.
Disclosure frameworks for climate risk are coalescing, most recently with announcement at COP26 that the International Financial Reporting Standards Foundation (IFRS) would be creating an International Sustainability Standards Board (ISSB), to deliver a comprehensive global baseline of sustainability-related disclosure standards to provide investors with information about companies’ sustainability-related risks and opportunities. 229 To date the ISSB has received two prototypes from its advisory group 230 - one of which focuses on climate-related disclosures building on the TCFD’s recommendations and including industry-specific disclosures, 231 and a second that sets out general sustainability disclosures. 232 Biodiversity is envisaged to fall within the scope of the latter framework together with labour practices, human rights and community relations and water.
Following in many ways the playbook of TCFD, the Taskforce on Nature-related Financial Disclosures 233 (TNFD) is working towards a goal of providing a framework for organisations to report and act on nature- related risks. The TNFD will broadly seek to align with the two global targets in the CBD’s goal under the Global Biodiversity Framework of “no net loss by 2030 and net gain by 2050.” 234 The TNFD was set up to support a shift in global financial flows away from nature-negative outcomes and towards nature-positive outcomes. 235 The TNFD disclosure framework will not be a new standard but rather an aggregator of the best tools and materials to promote worldwide consistency for nature- related reporting. Like TCFD, the intention is that reporting forms part of a company’s mainstream report (not a sustainability report or a TNFD-specific report) and is structured around the four pillars developed by TCFD: governance, strategy, risk management, metrics and targets. [fig. 9]. A beta version of TNFD is due to be launched in the first quarter of 2022, with the final release expected in 2023.
The emergence of nature-related risk assessment and reporting coincides with action on biodiversity from the financial sector. On 25 September 2020, 26 financial institutions joined forces to launch the Finance for Biodiversity Pledge which commits signatories to protect against biodiversity risk through their financial activities and investments by 236 : 1. Collaborating and sharing knowledge on assessment methodologies, biodiversity-related metrics, targets and financing approaches for positive targets. 2. Engaging with companies by, inter alia, incorporating criteria in ESG policies. 3. Assessing impact of financing activities and investments for significant positive and negative impacts on biodiversity and identifying drivers of its loss. 4. Setting and disclosing targets based on the best available science to increase significant positive and reduce significant negative impacts on biodiversity. 5. Reporting annually and publicly on the above before 2025.
There are now 84 company 237 signatories representing over EUR 12.6 trillion in assets 238 , including Aviva Plc, AXA Group, ABN AMRO, Allianz France, HSBC Global Asset Management, Manulife Investment Management Canada, SCOR SE, and PensionDanmark.
Other business and industry initiatives include:
– CBD’s Global Partnership for Business and Biodiversity 239 – The Cross-Sector Biodiversity Initiative (CSBI) 240 – Business for Positive Biodiversity Club (B4B+) 241 – Act4Nature international 242 – Finance for Biodiversity Initiative 243 – The ‘Biodiversity in Good Company’ Initiative 244
237 Signatories, Finance for Biodiversity Pledge, 2021. 238 Guidance to the Pledge, Finance for Biodiversity Pledge, 2021. 239 The Global Partnership for Business and Biodiversity. 240 Cross Sector Biodiversity Initiative. 241 Global Biodiversity Model for Policy Support, Global Biodiversity Score, 1 November 2017. 242 Act 4 Nature International. 243 F4B Initiative - Finance For Biodiversity. 244 Business and Biodiversity.
229 About Us, International Sustainability Standards Board. 230 Technical Readiness Working Group, International Sustainability Standards Board. 231 Technical Readiness Working Group, Climate-related Disclosures Prototype, IFRS Foundation, November 2021. 232 Technical Readiness Working Group, General Requirements for Disclosure of Sustainability-related Financial Information Prototype, IFRS Foundation, November 2021.
233 Taskforce on Nature-related Financial Disclosures 234 Post-2020 Global Biodiversity Framework, IUCN. 235 A summary of the proposed scope, governance, work plan, communication and resourcing plan of the TNFD, TNFD, June 2021.
236 About the Pledge, Finance for Biodiversity Pledge, 2021.
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