ImpactAlpha, Dec. 8 – Even as a mandatory climate disclosure rule proposed by U.S. regulators hits speed bumps, efforts are underway to require global corporations to report on their impact on nature.
The issue is one of the key negotiating points at the COP15 biodiversity summit in Montreal this week, where environmental ministers from 191 countries are hammering out a global biodiversity framework that advocates hope will be akin to a Paris Agreement for nature.
The framework builds on a draft produced last year that lays out high level goals to stem and reverse biodiversity loss, value the contributions of nature, ensure fair and equitable sharing of genetic resources (think climate-resilient crops or nature-derived medicine), and closing the $700 billion per year financing gap to achieve those goals.
The biodiversity “conference of parties,” delayed by two years due to the Covid pandemic, comes as human development is pushing the planet towards a sixth mass extinction. One million animal and plant species are threatened with extinction, more than ever before in human history, according to scientists.
“We do hope that Montreal 2022 will be to nature what Paris 2015 was to climate,” said Planet Tracker’s Robin Millington.
The biodiversity goals are broken down into 23 targeted actions, from cutting subsidies harmful to biodiversity by at least $500 billion a year (Target 18) to ensuring equitable participation by indigenous peoples and local communities in biodiversity related decision making (Target 21).
Target 3 calls for the conservation of 30% of global land and oceans to be protected by 2030. More than 100 countries, including the U.S., support for the goal. At COP15, Canadian prime minister Justin Trudeau announced his government would spend $800 million over seven years for four Indigenous-led conservation projects covering 386,000 square miles of land.
Planetary boundaries
Target 15 would pressure companies to begin assessing and reporting on their dependency on biodiversity and efforts to reduce biodiversity-related risks.
About half of global GDP – some $44 trillion – depends on nature, according to a World Economic Forum analysis. Like climate change, that presents both a systemic and company-level risk.
Food, land and ocean use are encroaching on the natural world and threatening species. The hidden costs of these sectors, estimated at $12 trillion, exceed their contribution to global GDP. A decline in bees and other pollinators, for example, would affect crops worth up to $577 billion annually.
“A strong and ambitious Target 15 would be a meaningful step,” CDP’s Bridget Schrempf told ImpactAlpha. “Not only does disclosure drive environmental action, but it also has tangible benefits to those companies.”
Any agreement would take years to filter through governments that are party to the agreement, which would need to enact policies or regulations that require such disclosure. (The U.S., along with Andorra, Iraq and Somalia, has never ratified the Convention on Biological Diversity first laid out in Rio de Janeiro in 1992. The Biden administration is active in COP15 discussions, however, and has appointed a special biodiversity envoy akin to John Kerry’s role at the COP27 climate summit that wrapped up last month in Sharm el-Sheik, Egypt.)
Almost half of the 7,700 global corporations responding to CDP’s latest climate reporting survey said they are considering biodiversity in their strategies. But less than half have taken action and few are assessing the impact on nature of their value chains, the “scope 3” equivalent for nature.
This year was the first time that CDP included biodiversity in the annual survey. The idea, says Schrempf, is to “expand our definition of the ‘E’ in ESG to cover planetary boundaries, including ocean and land use, biodiversity, food production and waste.”
Climate playbook
Investors are borrowing from the climate action playbook to spur action on nature and biodiversity. “Montreal will see the rapid promotion of financial markets tools – the uptake of financial metrics for natural capital, a financial framework in the form of TNFD and the announcement of the new Nature Action 100,” said Millington of Planet Tracker.
The Taskforce for Nature-Related Financial Disclosure is rushing to finalize a framework for reporting on nature-based risks and impact modeled on a similar task force for climate disclosure. It is based on a widely adopted framework for climate disclosure.
Another group, Nature Action 100, plans to launch at COP15. Modeled on the Climate Action 100+ investor group that engages the highest corporate emitters, it aims to mobilize investors to press corporations on nature-related risks and action. Nature Action 100 is led by Ceres and the investor network Institutional Investors Group on Climate Change.
More than 100 financial institutions have signed the Finance for Biodiversity Pledge. Another 330 business and finance institutions with combined revenues exceeding $1.5 trillion have called for mandatory nature-based reporting. The companies range from BNP Paribas and Rabobank to Nestlé and Tata Steel.
“Mandatory assessment and disclosure will create fair competition for business, increase accountability, engage investors, empower consumers, involve SMEs through supply chains, help ensure the rights of indigenous peoples and local communities and ultimately accelerate the transformation of our economies,” says the group, Business for Nature.
