The results of the COP15 biodiversity conference have far-reaching impacts on businesses of all sizes.
They will need to start taking action to identify and report on the way their business processes engage with nature, taking steps to minimise negative effects. The most agile companies will be in a better position to navigate through the turbulence of nature-focussed economic changes and be seen as better investment prospects in the long term.
The Convention on Biological Diversity’s COP15 closed after a marathon final session of negotiations with countries agreeing the Post-2020 Global Biodiversity Framework (GBF) – a pact to protect nature with short-term goals to 2030 and longer term targets to 2050.
The whole framework was finally negotiated over two weeks, setting targets to protect 30% of the planet for nature by the end of the decade, reform $500bn of environmentally damaging subsidies, and restore 30% of the planet’s degraded terrestrial, inland water, coastal and marine ecosystems.
The COP15 decisions make it imperative that businesses fully address their ESG (Environmental, Social and Governance) policies. As an adjunct, the finance sector will be reshaping strategic targets around nature-positive narratives.
The biodiversity summit in Canada was the climax of more than four years of detailed discussions, hampered by the COVID-19 pandemic. And 30 years after the initial conference, the 196 Parties have created a clear and measurable framework for actions will halt and reverse the catastrophic losses in nature.
Countries, with the exception of the US (and the Vatican), have agreed to set up a new biodiversity fund, to sit within the UN’s existing Global Environment Facility, pooling development aid, private sector money, philanthropic donations, and funds raised through the use of digital sequence information of genetic resources.
The new 2030 goals agreed by all attendees mean that governments will have to work more closely with business, communities and conservation organisations to ensure the new framework is embedded in all economic decision-making.
Wealthy nations pledged more funds – international aid for biodiversity increasing to $20bn annually by 2025 and $30bn by 2030 to help developing countries in the global south conserve biodiversity hotspots.
Companies of all sizes will need to assess “nature impacts” throughout their value chains, managing and reporting on their nature-related risks and opportunities. These actions will have positive outcomes from increased resilience, and at the same time responding to evolving stakeholder expectations as well as new regulatory requirements.
It’s imperative that they transform their processes. The World Economic Forum advises that more than half of the world’s GDP ($44 trillion) risks disruption from nature loss, with every sector being affected.
On the flipside, the WEF predicts that a nature-based transition could create US$10 trillion in business opportunity and create 395 million jobs by 2030.
This is supported by the ‘Nature in the Balance’ report from McKinsey, which says that large businesses could help rebalance the corporate-nature equation, generating billions of dollars of social and economic benefits in the process.
The McKinsey report advises that human activity has pushed the planet beyond a “safe operating space” for several planetary boundaries, including biochemical flows, freshwater use, water pollution and biodiversity loss.
Natural resources are being consumed at a rate almost twice as high that considered sustainable with terrestrial biodiversity loss showing rates of loss 2.7 times greater than the planet can sustain.
But the report also emphasises that most investments in natural resource conservation and restoration deliver strong returns on investment and that action is generally cheaper than inaction.
Global Biodiversity Framework
The GBF has laid the foundations for alignment of private and public financial flows to halt and reverse nature loss by 2030. And private finance one of the key solutions, linking this with assessment and disclosure of impacts and dependencies on nature.
A key sections of the agreement – Goal D and Target 14 – requires alignment of financial flows with 2030 targets and the 2050 vision, which should provide a map for the short, medium and long term, provoking action and acceleration from the finance sector.
This is seen as crucial. It stimulates governments to develop a policy environment that supports financial institutions in better management of portfolio risk and action to exploit new nature-beneficial opportunities.
The alignment of public financial flows will require governments by 2025 to identify, eliminate, phase out or reform incentives, including subsidies that are harmful to biodiversity.
The real business kicker in the agreement is Target 15, which requires governments to ensure that large companies and financial institutions assess and disclose their risks, impacts and dependencies on biodiversity throughout operations, value chains and portfolios. This target is supported by subsidiary clauses.
But the word “mandatory” has been excised from the final text, after fierce and prolonged debate, and references to an international acknowledged disclosure framework have also been removed.
“Ensuring” is the operative term now, which does still mean that governments would need to develop policies and regulatory frameworks to ensure that big businesses and financial institutions assess and disclose nature impacts and dependencies.
The GBF also has strident text on increasing financial resources for nature “from all sources”, leveraging private finance as well as promoting blended finance to raise more new resources for conservation, restoration and sustainable use of nature.
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Businesses can get ahead of the impending regulatory changes by accessing current, evolving guidance and frameworks for assessing and reporting on nature-dependencies and impacts.
The Taskforce on Nature-related Financial Disclosures (TNFD) framework provides guidance for companies, with ongoing development of developed an integrated four-step assessment process for nature-related risk and opportunity management – LEAP:
- Locate the interface with nature
- Evaluate our dependencies and impacts
- Assess risks and opportunities
- Prepare to respond to nature-related risks and opportunities and report.
The reporting methodology is based on the structure of the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) well-known to investors.
The Business for Nature coalition has also developed a framework for action based on its ACT-D framework and companies can also use the Science Based Targets Network’s interim targets.
More advice is available from the Accountability Framework Initiative, focusing on ethical supply chains while the Partnership for Biodiversity Accounting Financials) offers with guidance for financial institutions in assessment and disclosure of biodiversity impacts in their portfolios. And the Natural Capital Protocol offers a framework to identify, measure and price the impacts and dependencies on natural capital.
It will be interesting to see how the government responds to the GBF in the coming weeks and months. The framework calls on countries to revise their Biodiversity Action Plans, which means that the UK will need to substantially revise the targets it has only just set.