Biodiversity and Nature-related Disclosures

BIODIVERSITY AND NATURE-RELATED DISCLOSURES

2.2 BIODIVERSITY ACTION IN THE PRIVATE SECTOR

W ithin the private sector, this topic only started to gain traction around 2019 , when the Global Assessment Report on Biodiversity and Ecosystem Services came out and warned that, due to human activities, the planet’s biodiversity had suffered a disastrous decline unprecedented in human history.6 Investors and businesses thus were forced to consider how biodiversity loss posed financial and reputational risks to their portfolios and operations, respectively. Nonetheless, the lack of a globally-agreed upon framework and KPIs to set targets and measure progress towards halting biodiversity loss has hampered the efforts to drive action forward. According to ShareAction, an organization that aims to improve corporate behavior on ESG issues, reporting on biodiversity is where reporting on climate change was five to 10 years ago. Its most recent report found that, in 2020, only 11% of the world’s 75 largest asset managers had policies requiring portfolio companies to mitigate harmful impacts on biodiversity and none had a dedicated policy on biodiversity. In response to the latter, one of the most prominent biodiversity-related initiatives and most likely to impact the business sector moving forward, is the Taskforce on Nature-related Financial Disclosures (TNFD). Such initiative lays out for the first time a standardized framework to disclose biodiversity-related risks at the organization level. The TNFD is the sister framework of the Taskforce on Climate-related Financial Disclosures (TCFD). As of February 2023, the Taskforce is halfway through its 2-year phase design of the TNFD framework, with the support and insights from stakeholders in over 140 countries. The first beta version (or prototype) was unveiled in March 2022, and the final version of the recommendations are expected to be published in September 2023. The TNFD will provide recommendations to a wide array of market participants, including institutional investors, corporations, credit providers, and regulators, on how to assess and disclose their nature-related financial risks posed by ecosystem degradation and biodiversity loss. Because climate change and nature loss are deeply intertwined, the TNFD is expected to build up harmonization of KPIs and improve transparency across both themes (i.e., climate and biodiversity). The TNFD aims to build a risk management and disclosure framework that can be used by organizations of all sizes and in all jurisdictions to identify, assess, disclose, and manage nature-related dependencies, impacts, risks, and opportunities.7 And, as with the TCFD, it is expected that standardized data will help organizations successfully integrate such risks into governance structures and long-term strategy, and investors discern and compare such information across firms. The core structure of the TNFD framework is shown in the figure on page 5.8 Key components of the framework include: mapping the location of a company’s value chains to each ecosystem to help determine priority issues; evaluating business dependencies and impacts on nature, along with related risks, opportunities, and potential actions, and; defining a comprehensive biodiversity strategy , including short-, medium- and long term targets to reduce and reverse the business’ impact on nature.

6IPBES: Global assessment report on biodiversity and ecosystem services of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services. E. S. Brondizio, J. Settele, S. Díaz, and H. T. Ngo (editors). IPBES secretariat, Bonn, Germany. 1148 pages (2019), Link. 7TNFD, “Introducing the TNFD framework. Version v0.3 Beta Release” (November 2022), Link. 8Ibid. February 2023

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