INSIGHT by Dr Rebecca Drury and Gemma James, Chronos Sustainability

This year’s World Biodiversity Day theme is “From Agreement to Action: Build Back Biodiversity”. In December, the United Nations Biodiversity Conference (CoP15) ended with a landmark biodiversity agreement, clearly signalling action stations for investors.  In a rapidly evolving landscape for biodiversity assessment and disclosure, it can be challenging for investors to know where to begin. However, there are a clear areas where investors can take immediate and ambitious action on biodiversity.  From the high seas to transition plans, here are three areas of progress that have been on our watchlist since COP15, why they matter, and what the finance sector needs to prepare now to do their part on biodiversity.

 

Nature-Related Disclosure: Finalising TNFD

TNFD is a key disclosure framework which will bring some necessary consistency to nature reporting. After a highly collaborative consultative process, the final TNFD framework is nearing release (due September), with a number of key additions in the latest release of the beta framework (V4.0). Highlights are:

〉Disclosure Recommendations: a complete set of disclosure recommendations applicable to all sectors. This builds on the TCFD with a change to the risk management heading to include impact management so that impacts and dependencies can be disclosed as well as risks and opportunities.

〉LEAP approach: additional guidance on doing the assessment such as scoping questions for corporates (in addition to those which already exist for financial institutions), criteria to identify priority locations, metrics to assess responses to risks and opportunities, and specific guidance on sectors and biomes.

〉Metrics: Core disclosure metrics which are mandatory for TNFD alignment reporting and additional metrics which are suggested to complement but not mandatory. The core disclosure metrics are split into global (applicable to all) and there are sector specific metrics too.  For the core global metrics, there are four metrics on risk, one on opportunity, and 10 related to the IPBES impact drivers although invasive species is not yet incorporated

〉Additional guidance: There are also additional materials on engaging affected stakeholders, target setting and scenarios.

Investors should prepare for disclosure on nature by screening and assessing portfolios for nature-related risk and opportunities aligned to the TNFD framework. They can also engage portfolio companies on assessing nature-related impacts, dependencies, risks and opportunities, and in turn on mitigating risks and promoting opportunities.