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2023 in Review: Nature Finds a Way

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The publication of the Taskforce for Nature-related Financial Disclosures’ (TNFD) reporting framework in September cemented biodiversity as a sustainability cause just as important as climate change.

In a 152-page document detailing its recommended approach to disclosing the impact on nature of financial institutions’ activities, the TNFD codified a way to channel capital into reviving lost habitats and protecting those – and the life in them – that survive. By funding the protection of nature, it argued, finance would also be contributing to the fight against global warming and protecting humanity. That applies especially to communities living in parts of the world vulnerable to the ravaging impacts of a changing climate.

The publication was warmly welcomed by an ESG and technology industry that had already been galvanised by investor demand for information on the precarious state of the natural world. Over the past few years, rising global temperatures, intensifying weather abnormalities and the accelerating loss of forests and waterways have raised awareness of the risks that financial institutions’ investments face now and into the future.

With an estimated half of the world’s GDP reliant on nature, financial institutions have reacted to the realisation that its rapid destruction threatens their assets by looking at the data to identify where they could minimise their vulnerabilities.

“It’s increasingly being observed and appreciated as a significant risk to some sectors,” Emme Bickerstaffe, managing director of ESG and sustainability at investor services company Apex told ESG Insight. “The importance of identifying, maintaining and improving biodiversity, particularly as it impacts the operations and supply chains of some companies is not only important from an impact perspective, but also there’s a financial cost to that which is gaining more attention.”

New Lens

Financial institutions understand that biodiversity is inter-related with climate change. Increasing temperatures are having a variety of impacts on the natural world, from aridification of once tillable land to the migration of species as their habitats are lost to floods, fires and other climate-related events.

In a recent blog, Swiss Life Asset Managers’ head of equity in France Emmanuelle Sée said biodiversity loss and climate change were a “joint-crisis” that need equally urgent attention. Fidelity International, a member of the Finance for Biodiversity pledge signed by 153 institutions, explained in its “Nature Roadmap” position paper that the asset manager had redrawn  its investment theses to give greater focus to biodiversity.

Groupings of sustainability-focused financial companies and non-government organisations have also begun to take biodiversity seriously. The Glasgow Financial Alliance for Net Zero (GFANZ), a network of 650 financial companies that oversee US$130 trillion in assets, is expected to reveal how its members will embed nature-based factors into their transition plans.

Data Strategy

Data and technology companies have long been offering metrics into multiple aspects of biodiversity, but focusing chiefly on the most pressing topics – water scarcity and deforestation. QauntCube offers satellite imagery that charts the retreat of forests and changes in water levels across the planet. This year NatureAlpha integrated into its platform the Integrated Biodiversity Assessment Tool (IBAT), which in itself combines data from The International Union for Conservation of Nature (IUCN) Red List of Threatened Species, The World Database on Protected Areas and the World Database of Key Biodiversity Areas.

At the beginning of the year S&P Global’s Sustainable1 created a TNFD-aligned risk-assessment product with the United Nations’ Environment Programme. In the spring the fruits of a collaboration between sustainability technology platform Clarity AI and data provider GIST Impact was unveiled in the form of a database that tracks the impacts of 30,000 companies on the natural world. And at the end of the year Bloomberg had announced a collaboration with London’s Natural History Museum to provide a data-rich tool that, once built, will offer investors a snapshot of the state of nature mapped to more than a million assets at any given place in the world.

“There’s obviously a lot of focus on reducing carbon emissions but equal focus also needs to be on removing carbon from the atmosphere and biodiversity has a really important role in that,” said Apex’s Bickerstaffe. “It’s an increasing area of focus for clients as they think about climate in its entirety and not just a piece of the climate agenda.”

Overseers React

Regulatory momentum to address biodiversity accelerated in 2023 too. The COP15 nature summit in Montreal at the end of 2022, which guided the creation of the TNFD’s disclosure framework, also galvanised financial market overseers. In June, for instance, the House of Lords – the UK parliament’s upper house – incorporated biodiversity into the net-zero requirements of the Financial Services and Markets Act. Last month, the Financial Conduct Authority (FCA) said the sector needed to take heed of growing nature-related risks.

In September, the CDP called on the Group of 20 rich nations to legislate for the creation of nature-focused reporting rules after it complained that institutions had been too slow to disclose their own metrics. A month earlier, the International Sustainability Standards Board (ISSB), fresh from publishing its first set of reporting frameworks, said it would offer non-mandatory guidance on including “nature and social aspects of climate-related risks and opportunities” into its standards.

The TNFD has set a course to encourage investors to take a similar materiality-led approach to tackling biodiversity challenges to its sister organisation, the Taskforce for Climate-related Financial Disclosures (TCFD). Already, however, it has taken a step further by signalling the creation of two free, centralised repositories of Sustainability data for use by investors.

The hope now is that it can be as successful in galvanising the financial ecosystem to act in the same way that the now-defunct TCFD did with climate change.

In a 152-page document detailing its recommended approach to disclosing the impact on nature of financial institutions’ activities, the TNFD codified a way to channel capital into reviving lost habitats and protecting those – and the life in them – that survive. By funding the protection of nature, it argued, finance would also be contributing to the fight against global warming and protecting humanity. That applies especially to communities living in parts of the world vulnerable to the ravaging impacts of a changing climate.

The publication was warmly welcomed by an ESG and technology industry that had already been galvanised by investor demand for information on the precarious state of the natural world. Over the past few years, rising global temperatures, intensifying weather abnormalities and the accelerating loss of forests and waterways have raised awareness of the risks that financial institutions’ investments face now and into the future.

With an estimated half of the world’s GDP reliant on nature, financial institutions have reacted to the realisation that its rapid destruction threatens their assets by looking at the data to identify where they could minimise their vulnerabilities.

“It’s increasingly being observed and appreciated as a significant risk to some sectors,” Emme Bickerstaffe, managing director of ESG and sustainability at investor services company Apex told ESG Insight. “The importance of identifying, maintaining and improving biodiversity, particularly as it impacts the operations and supply chains of some companies is not only important from an impact perspective, but also there’s a financial cost to that which is gaining more attention.”

New Lens

Financial institutions understand that biodiversity is inter-related with climate change. Increasing temperatures are having a variety of impacts on the natural world, from aridification of once tillable land to the migration of species as their habitats are lost to floods, fires and other climate-related events.

In a recent blog, Swiss Life Asset Managers’ head of equity in France Emmanuelle Sée said biodiversity loss and climate change were a “joint-crisis” that need equally urgent attention. Fidelity International, a member of the Finance for Biodiversity pledge signed by 153 institutions, explained in its “Nature Roadmap” position paper that the asset manager had redrawn  its investment theses to give greater focus to biodiversity.

Groupings of sustainability-focused financial companies and non-government organisations have also begun to take biodiversity seriously. The Glasgow Financial Alliance for Net Zero (GFANZ), a network of 650 financial companies that oversee US$130 trillion in assets, is expected to reveal how its members will embed nature-based factors into their transition plans.

Data Strategy

Data and technology companies have long been offering metrics into multiple aspects of biodiversity, but focusing chiefly on the most pressing topics – water scarcity and deforestation. QauntCube offers satellite imagery that charts the retreat of forests and changes in water levels across the planet. This year NatureAlpha integrated into its platform the Integrated Biodiversity Assessment Tool (IBAT), which in itself combines data from The International Union for Conservation of Nature (IUCN) Red List of Threatened Species, The World Database on Protected Areas and the World Database of Key Biodiversity Areas.

At the beginning of the year S&P Global’s Sustainable1 created a TNFD-aligned risk-assessment product with the United Nations’ Environment Programme. In the spring the fruits of a collaboration between sustainability technology platform Clarity AI and data provider GIST Impact was unveiled in the form of a database that tracks the impacts of 30,000 companies on the natural world. And at the end of the year Bloomberg had collaborated with London’s Natural History Museum to provide a data-rich tool that offers investors a snapshot of the state of nature mapped to more than a million assets at any given place in the world.

“There’s obviously a lot of focus on reducing carbon emissions but equal focus also needs to be on removing carbon from the atmosphere and biodiversity has a really important role in that,” said Apex’s Bickerstaffe. “It’s an increasing area of focus for clients as they think about climate in its entirety and not just a piece of the climate agenda.”

Overseers React

Regulatory momentum to address biodiversity accelerated in 2023 too. The COP15 nature summit in Montreal at the end of 2022, which guided the creation of the TNFD’s disclosure framework, also galvanised financial market overseers. In June, for instance, the House of Lords – the UK parliament’s upper house – incorporated biodiversity into the net-zero requirements of the Financial Services and Markets Act. Last month, the Financial Conduct Authority (FCA) said the sector needed to take heed of growing nature-related risks.

In September, the CDP called on the Group of 20 rich nations to legislate for the creation of nature-focused reporting rules after it complained that institutions had been too slow to disclose their own metrics. A month earlier, the International Sustainability Standards Board (ISSB), fresh from publishing its first set of reporting frameworks, said it would offer non-mandatory guidance on including “nature and social aspects of climate-related risks and opportunities” into its standards.

The TNFD has set a course to encourage investors to take a similar materiality-led approach to tackling biodiversity challenges to its sister organisation, the Taskforce for Climate-related Financial Disclosures (TCFD). Already, however, it has taken a step further by signalling the creation of two free, centralised repositories of Sustainability data for use by investors.

The hope now is that it can be as successful in galvanising the financial ecosystem to act in the same way that the now-defunct TCFD did with climate change.

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