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Businesses need to prepare for closer scrutiny of nature’s risks –

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Business leaders are increasingly aware of the business risks associated with the continued loss of nature, including the disruption of supply chains, particularly in highly exposed sectors such as agriculture and food production. foods and beverages. Biodiversity – and other facets of nature, such as freshwater and the ocean – are now becoming the new frontier of sustainable finance and business.

This increased attention is both justified and welcome. However, there is a risk that businesses and financial institutions will feel ahead of the curve if they start considering these issues now. Instead, nature’s business risks are already there.

More than 50% of the global economy is directly dependent on nature and the ecosystems it provides. Yet incomprehensible tracts of rainforest have already disappeared and extreme droughts are limiting the availability of fresh water in many parts of the world.

Solving the climate crisis will also depend on nature. The global race towards net zero emissions will only succeed if we race just as fast towards positive nature. By 2030, nature-based solutions could contribute to more than a third of cost-effective greenhouse gas emission reductions. If we fail to halt and reverse the loss of nature, global climate risks will intensify dramatically.

In addition to these direct physical risks, governments now recognize the urgency of the problem and the role business and finance play in destroying nature – and therefore the role they must play in protecting and restoring it. Therefore, businesses should soon expect more nature-related regulations and should prepare accordingly.

Springboard

In December this year, nature will take center stage on government agendas, as governments around the world come together for the final negotiations of the Convention on Biological Diversity’s post-2020 Global Biodiversity Framework (GBF). As Executive Secretary of the Convention on Biological Diversity, I have for several years worked closely with Heads of State and policy makers for an ambitious GBF.

Last year, in June 2021, we published a first draft of the framework. Governments then met in October 2021 for the first phase of negotiations, which culminated in the Kunming Declaration, under which 99 ministers, nine heads of state and heads of delegation committed to negotiate, adopt and implement an effective GBF this year.

This commitment provides a solid foundation as we move towards the final phase of the negotiations. The GBF is a stepping stone towards a vision of living in harmony with nature by 2050. The current draft of the framework, which is expected to be adopted by world leaders later this year at the UN biodiversity conference COP15, has several relevant objectives for institutions and companies. For example, the current draft Target 15 sets out measures to reduce the negative impacts of businesses and financial institutions on biodiversity and increase their positive impacts, including requiring them to assess and report on their impact and of their dependence on biodiversity.

This biodiversity-related assessment and reporting objective proposed by governments around the world has a close relationship and aligns with another market-driven initiative, the Taskforce on Nature-related Financial Disclosures (TNFD), which I have the pleasure of co-chairing alongside David Craig, founder of data provider Refinitiv.

TNFD is working with the market to develop a framework for companies to assess and disclose their nature-related risks, dependencies and opportunities. Following the release of a first prototype for consultation in March this year, we received over 500 comments from 138 organizations and individuals in 37 countries, which were used to update a second prototype, which was released in June. Over the next few months we will continue this open innovation approach, running through a series of new prototype builds and external feedback before launching a final framework in September next year.

Powerful synergies

As I have the pleasure of working in both the government-led post-2020 GBF framework and the market-led TNFD framework, I see a set of powerful synergies emerging.

First, the fact that major private sector players are now supporting TNFD sends a signal to world governments that halting and reversing the loss of nature is not just a human and societal imperative, but an economic and financial imperative. This increases the likelihood of an ambitious GBF after 2020 when governments meet in December.

Second, provided that Biodiversity Assessment and Reporting Target 15 remains intact in the final version of the post-2020 GBF, the TNFD framework will offer a practical guide for businesses and financial institutions to achieve and report on biodiversity. this goal.

Third, while the TNFD framework will initially be voluntary for businesses and financial institutions, over time governments and regulators may mandate disclosure against the framework. Over the past year, we have seen considerable interest in the TNFD from policymakers and regulators around the world, including endorsement from G20 and G7 members.

Ultimately, it will be up to them to decide whether or not to incorporate the TNFD recommendations into mandatory risk management and reporting requirements in their respective jurisdictions. Climate space has set a precedent for regulating environmental disclosures, and we shouldn’t be surprised to see that governments can act faster on nature than they have on climate. As the global scientific community reminds us, the 2020s are the last decade we have to protect and restore nature. After that, it will be too late.

Reverse the loss of nature

As we move forward with the post-2020 GBF framework and the TNFD framework, we must remain strictly focused on this ultimate goal: to halt and reverse the loss of nature. Asking companies and financial institutions to assess and disclose their nature-related risks is just one tool, a fundamental step that, in turn, can lead to a change in behavior and investment flows, away from negative results for nature and towards positive results for nature. .

We cannot save nature without the incredible intellectual and financial resources of the private sector. Governments around the world have already set global biodiversity targets and have failed to meet them. We committed to achieving the Aichi Targets in 2010 and, by the 2020 deadline, we had collectively not achieved any of the 20 targets in full. Although a complex array of causes led to this failure, the lack of effective engagement with the private sector was one of the main reasons.

our new nature-related frameworks must enable business and finance to serve nature and people

It’s different this time. Governments are at the center of the negotiations for global biodiversity targets, but businesses and financial institutions have been involved throughout the process. At the same time, these organizations have a much stronger appetite to contribute their resources to nature’s challenge because they see the business value of doing so. Governments, businesses and financial institutions also recognize that we will not succeed without close collaboration with scientific experts, civil society and the guardians of much of the world’s remaining biodiversity, indigenous peoples and communities. local. We are all in there.

Our new nature-related frameworks must enable business and finance to serve nature and people, while helping nature-friendly businesses thrive in the process. The GBF can provide the private sector with more political certainty and achievable targets for the protection and restoration of biodiversity, playing a similar role in the natural space to what the 2015 Paris Agreement achieved for climate change. .

The TNFD framework can provide businesses, financial institutions and businesses with the practical guidance they need to achieve these global goals. CEOs, risk managers, and strategists who are just beginning to recognize that nature is business-relevant will not be able to fully anticipate nature-related risks or opportunities. But, if they immediately begin to build capacity on nature within their teams and actively engage in the nature-related frameworks being developed by TNFD and governments around the world, their organizations can be ready for a future where governments – and the natural world itself – further increase the pressure to deliver for nature.

Elizabeth Mrema is Co-Chair of the Working Group on Nature-Related Financial Disclosures and Executive Secretary of the Convention on Biological Diversity.