Biodiversity Disclosures Set to Become Part of Company Reporting.

Taskforce backed by French President Emmanuel Macron presses financial-services and other industries to more closely assess their nature-related risks.

A global initiative aimed at measuring the impact that financial institutions and corporations are having on the natural world, which received an endorsement from French President Emmanuel Macron, is officially underway.

The Taskforce on Nature-related Financial Disclosures will assist companies in assessing their “emerging nature-related risks and opportunities,” much like a similar initiative known as TCFD has helped increase corporate executives’ focus on climate change-related financial risks, according to a statement Friday from the group. Elizabeth Maruma Mrema, executive secretary of the United Nations Convention on Biological Diversity, will co-chair the TNFD with David Craig, founder of financial-data company Refinitiv who will become a senior adviser next month at London Stock Exchange Group Plc.

Earth’s biodiversity is in peril with over-consumption, pollution and deforestation resulting in severe declines in wildlife populations. Today,  as many as 1 million species of plants and animals face extinction. It’s a major problem because more than half of the world’s economic output is dependent on nature and it’s also a key defense against global warming.

“Statistics on biodiversity loss are really depressing,” Mrema said in an interview. “We are losing biodiversity at an unprecedented rate in human history.”

Much like big business is being reimagined to support the transition to a low-carbon economy, the TNFD is intended to help reorient the flow of investment and capital expenditure to activities that support rather than destroy biodiversity.

The creation of TNFD was first announced in July 2020 after which an informal working group--a diverse coalition that included officials from BP Plc, Citigroup Inc. and the government of France--was set up to develop recommendations for the scope and strategy of the initiative. A task force of about 30 members, drawn from financial institutions, companies and data providers from both developed and emerging markets, will guide the project under the leadership of Mrema and Craig. The group has committed to deliver, by 2023, a framework for companies “to report and act on evolving nature-related risks, to support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.”

“Collective action is needed to help protect our natural ecosystems and stop their degradation,” Jean-Laurent Bonnafe, chief executive officer of BNP Paribas SA, said in the statement. “Common and applicable standards are needed to leverage the power of finance for nature. The TNFD is key in convening market participants towards such standards.”

The TNFD aims to “build upon the success” of the Task Force on Climate-related Financial Disclosures, or TCFD, which encourages companies to put details about their environmental risks in the public domain and for investors to disclose the emissions of their portfolios. The TCFD, which was unveiled in December 2015, released its first set of disclosure recommendations in June 2017 and today has more than 2,000 supporters. (The task force was founded and is chaired by Michael R. Bloomberg, the majority owner of Bloomberg LP, the parent company of Bloomberg News.)

“Whilst many companies and the investors behind them are starting to get their head around climate-related risks, they don’t yet appreciate the nature-related risks that many of the industries and companies that they’re investing in are exposed to,” Craig said in an interview. “And they also don’t fully understand the impact to nature that those companies are having.” 

Biodiversity represents the breadth and variety of life on Earth--and the multitude of ecosystems that sustain it. The data available to measure biodiversity are limited, and there are currently no high-level government targets for nature akin to the Paris climate accord’s “well below 2 degrees Celsius” objective.

The topic is “so complex that it may not be easy to have one number that all stakeholders can rally behind,” Mrema said. “Unlike when we talk of climate change, biodiversity is deforestation, it’s water, air, food, agriculture, pollution and invasive species.”

Instead of the equivalent for biodiversity of a 2 degrees target, Mrema said the best approach is to think of moving from nature-negative to nature-positive activities with the overarching goal of halting and reversing biodiversity loss. One example of a nature-negative activity is the food system, where demand for meat is providing an incentive for deforestation and chemicals used in the production of fruit and vegetables are harming the soil.

In October, the United Nations Convention on Biological Diversity is scheduled to take place in Kunming, China. Mrema has said the event should see governments agree on a global biodiversity framework that will provide the basis for the next 10 years of action to protect nature and reverse nature loss. The biggest challenge for the task force will be the lack of data and other measurement tools.

“There’s a big gap in data,” Craig said. “We all proudly talk about our ESG data sets, but the honest truth is that there’s very little ‘E,’ there’s quite a bit on climate. There’s almost no ‘S,’ and there’s quite a lot of ‘G’. So it’s almost CG at the moment, and we need to definitely put the environment back into ESG.”

4 June 2021

Bloomberg Green