Nature is declining globally at unprecedented rates. This is a significant issue for the global economy and the ability to achieve sustainable growth in the future. has assessed that more than 50 per cent of the world’s gross domestic product (some US$44 trillion) is moderately or highly dependent on nature and its ecosystems, according to the the World Economic Forum (WEF).
“Biodiversity protection is not ‘just about nature’. It is integral to future economic growth, standards of living and community wellbeing.”
WEF classifies biodiversity as a top three risk to the global economy, as it may lead to global famines, loss of communities through land degradation and the inability to manufacture a quarter of the drugs used in modern medicine.
Construction, agriculture and food and beverage are the largest highly nature-dependent industries. On current projections, up to US$577 billion in annual crop production is at risk from pollinator loss alone.
Biodiversity loss also eliminates a substantial source of carbon capture and storage in the form of deep forests and vegetation – reflecting how biodiversity protection is inextricably linked with the mitigation of climate change.
On 19 December 2022, representatives from 188 countries adopted a new agreement at the 15th Conference of the Parties to the United Nations Convention on Biological Diversity in Canada (COP 15).
The Kunming-Montreal Global Biodiversity Framework (Biodiversity Framework) seeks to halt and reverse biodiversity loss through four key goals and 23 targets by 2030. The foundation of the Biodiversity Framework is the so-called ‘30x30 pledge’ – which seeks to conserve 30 per cent of the world’s land and 30 per cent of the world’s oceans by 2030.
There is also a goal to mobilise at least US$200 billion a year from public and private sources and to increase international financial flows from developed to developing countries to at least US$30 billion by 2030. This would help implement national biodiversity strategies and action plans.
The private sector is rapidly aligning to take committed action on biodiversity protection. For example, the UN Principles of Responsible Investment – a network of 150 global financial institutions with more than US$24 trillion in assets under management – has pledged to work with its customers to implement the vision of the Biodiversity Framework to ‘live in harmony with nature’ by 2050.
A new coalition of institutional investors, Nature Action 100, was also announced at COP 15, and will now work with 100 leading companies in key sectors to address nature loss and environmental degradation.
With the WEF estimating that a positive environmental transformation effort could generate up to US$10.1 trillion in business value annually and create 395 million jobs by 2030, aligning business operations with biodiversity protection and transitioning to a ‘nature positive’ provides strong business and investment opportunities.
The adoption of the Biodiversity Framework gives impetus to the implementation of domestic regulations on biodiversity protection.
A more immediate regulatory focus may be for large enterprises and financial institutions to monitor, assess and transparently disclose their biodiversity risks, dependencies and impacts throughout their operations, portfolios and supply chains. This prospect is identified in the Biodiversity Framework.
Significantly, last month the UN Taskforce on Nature-Related Financial Disclosure (TNFD) released the fourth version of its beta framework for nature-related risk management and disclosures. The finalised framework is expected to be released for market adoption in September 2023.
The TNFD format is modelled around governance, strategy, risk management and metrics. This follows a similar path to developments in climate change disclosure. The standards released by the UN Taskforce on Climate-Related Financial Disclosure (TCFD) are now generally considered international best practice.
The International Sustainability Standards Board has also indicated it will include ‘natural ecosystem topics’ in its Sustainability Disclosure Standards, expected to be released this year.
The Australian Government is currently consulting on whether to introduce a mandatory climate risk disclosure regime for Australian companies (dependent on size) – similar to systems introduced in the United Kingdom, Canada and New Zealand. It is possible that any mandatory disclosure regime in Australia could in future extend to biodiversity protection.
Biodiversity protection is not ‘just about nature’. It is integral to future economic growth, living standards and community wellbeing. The Biodiversity Framework adopted at COP 15 has laid the groundwork for public and private partnerships to assess the role of nature in different parts of the economy, and to take action to ensure biodiversity conservation as a foundation for sustainability.
With future regulations in this area expected, all companies and financiers should actively consider their exposure to biodiversity loss across their business and investment lines and the opportunities available from transitional measures to support biodiversity protection.
Scott Atkins is Global Chair and Head of Risk Advisory in Australia at Norton Rose Fulbright.
Elisa de Wit is Partner and Head of Climate Change and Sustainability in Australia at Norton Rose Fulbright.