Biodiversity loss and the ecological transition

Climate change and the drive to net zero sit atop the global environmental agenda. And appropriately so. But over the past few years, biodiversity loss has joined climate change as a key systemic risk threatening the global economy.

Scientists, policy-makers, companies and investors increasingly recognise humanity’s role in driving biodiversity loss and how it impairs the ecosystem services upon which our economy is based. In addition, there is now solid recognition of the complex and dynamic connections between biodiversity and climate change.

To advance an ecological transition to a low-carbon economy that also protects biodiversity, business as usual is not a viable strategy. We need game-changers: concepts, strategies and actions that will change how capital markets interact with the environment. Here are three:

1) Kunming-Montreal Global Biodiversity Framework

On 19 December 2022, 190 countries signed the Kunming-Montreal framework, which includes protecting 30% of land and oceans by 2030 plus 22 other targets to enhance the ability of the environment to provide the ecosystem services upon which the economy is based.

Target 15 specifically calls upon business and financial institutions to reduce negative impacts on biodiversity and promote actions to ensure sustainable patterns of production. To achieve these goals, business and financial institutions are asked to regularly monitor, assess and disclose their risks, dependencies and impacts on biodiversity and provide information needed to consumers to promote sustainable consumption patterns.

2) Taskforce on Nature-Related Financial Disclosures

Modelled on the Taskforce for Climate-Related Financial Disclosures (TCFD), the Taskforce on Nature-Related Financial Disclosures (TNFD) aims to develop and deliver a risk management and disclosure framework for organisations to report and act on evolving nature-related risks. The ultimate aim is to support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.

The TNFD framework uses the four main disclosure categories of the TCFD: governance, strategy, risk and impact management, and metrics and targets. The TNFD also calls for disclosure of oversight of nature-related dependencies, impacts, risks and opportunities. Critically, the TNFD advances disclosure of how stakeholders are engaged in response to nature-related dependencies.

The final version of the TNFD framework will be confirmed this year.

3) Finance for Biodiversity and Nature Action 100

With the Finance for Biodiversity Pledge, financial institutions promise to protect and restore biodiversity. As of January 2023, the pledge includes 126 financial institutions in 21 countries representing €18.8trn.

In December 2022, Finance for Biodiversity partnered with other key groups to launch Nature Action 100, a new global initiative created to engage companies in key sectors deemed to be systemically important for reversing nature and biodiversity loss by 2030. Modelled on Climate Action 100+, Nature Action 100 will drive greater corporate ambition on tackling biodiversity loss and drive companies towards taking the actions necessary to protect and restore nature.

Raising the alarm

It is challenging to discuss the risks posed by climate change and biodiversity loss without sounding alarmist. But the reality is that the world has now entered an era where humanity has become the dominant evolutionary force on Earth and is triggering deep changes to our climate and the greatest extinction of species we have known.

Because of the foresight and diligence of so many individuals and institutions, we have in our possession the game-changers we need to overcome this challenge. What we need now is action.

Robert Walker is sustainability policy manager at the International Corporate Governance Network. This article is based upon the ICGN Viewpoint Biodiversity as Systemic Risk: 10 Game-Changers for Board Directors and Stewardship Teams