05/18/2023 | News release | Distributed by Public on 05/18/2023 08:21
Nature-related regulatory disclosures will come into effect in Europe in 2024, with the recommendations of the Taskforce for Nature-Related Financial Disclosures (TNFD) being finalized in September 2023. Firms must start taking biodiversity and nature seriously and act now to assess their footprints, limit impact and take positive action. New Verdantix research details how different businesses are exposed to nature-related risks, unpacks the TNFD's key components and explains where firms should get started.
Biodiversity disclosures are already incorporated into the EU's Sustainable Finance Disclosure Regulation (SFDR), as financial institutions operating in the EU must disclose activities that negatively impact biodiversity in vulnerable areas. Furthermore, from 2024 the EU's Corporate Sustainability Reporting Directive (CSRD) will require more than 49,000 firms in other industries to file biodiversity disclosures, and new analysis shows that at least 10,000 organizations outside the EU will also be under the directive's scope. Additionally, the European Central Bank's supervisory expectations call for financial institutions to identify, monitor and manage their material exposure to nature-related risks.
Biodiversity is finally becoming a priority in business planning and financial decision-making, after Western economic systems have historically ignored natural capital. The Dasgupta review, commissioned by the UK Treasury in 2019 and completed in 2021, is a landmark paper that highlighted that nature is a blind spot in economics and is not incorporated when quantifying value. This study provided a foundation for biodiversity economics and was a call to arms for the latest biodiversity COP, where key biodiversity conservation and restoration targets were agreed.
Despite impending disclosure requirements and the biodiversity protection targets agreed at COP15 in December 2022, nature-related trade-offs are still not being properly considered in climate-related or decarbonization plans and strategies. For example, in the rush for critical minerals vital for EV battery production - and spurred on by domestic sourcing conditions incorporated into the Inflation Reduction Act - a manganese and zinc mine in Southern Arizona (South32's Hermosa project) is being fast-tracked through the review and approval process. The site is located in the Patagonia mountains, an area known for its ecological diversity. The Patagonia Resource Alliance has warned of the potential impact the project will have on surrounding wildlife and the nearby town of Patagonia, including pollution, groundwater depletion and contamination of water wells below the mine. It's clear that natural capital reporting and data collection needs to be improved to ensure that biodiversity trade-offs are thoroughly considered and understood, as well as to boost overall transparency.
Digital data providers are already responding to the growing need for information on nature and biodiversity. RepRisk, for example, launched a Geospatial Analytics dataset in October 2022, while S&P Global launched a nature and biodiversity risk dataset in May 2023. For more information on the challenges surrounding biodiversity and nature-related data, as well as why businesses must address biodiversity risks, check out our latest report Strategic Focus: Navigating Nature-Related Risks.
Alice is an analyst in the Verdantix ESG and Sustainability practice. Prior to joining Verdantix she completed a Master's degree in Nature, Society and Environmental Governance at the University of Oxford, earning a distinction. Her thesis project focused on species redistribution due to climate change and woodland ecosystems. Alice also holds a BA in English Literature from the University of Warwick.