The assessment published last week by the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES) provides a timely rallying cry for businesses, capital providers and governments. Against a backdrop of increasing pushback against ESG, the Business and Biodiversity Report prepared over three years by 79 leading experts from 35 countries delivered an unequivocal message – the time for action has arrived.
The blueprint, approved by 150 member governments assembled at the IPBES Plenary in Manchester and comprising information from over 5,000 references, has a primary message: All businesses depend on – and impact – biodiversity. Even those that appear far-removed from nature or do not consider themselves as nature-based rely, directly or indirectly, on material inputs to processes and products, the regulation of environmental conditions in which they operate and non-material contributions such as recreational, educational and cultural values.
This has far-reaching consequences beyond businesses – many of whom bear little or no financial cost for their negative impacts on biodiversity and cannot currently generate revenue from positive ones – that effect the broader economy and financial system.
Rising systemic risk
As well as physical risks, nature loss increasingly represents a systemic threat. Just as the recent UK government report outlined how biodiversity loss and the collapse of critical ecosystems could affect the country’s resilience, security and prosperity, the IPBES report highlights the economic danger that this poses. For financial institutions and capital providers, nature risk – like climate risk – can’t be diversified away. It impacts all companies, geographies and asset classes – and therefore all investment portfolios.
Pervesely, current conditions and financial incentives mean that this risk continues to rise. The IPBES report found that finance flows directed to activities that encourage harmful business behaviour ($7.3 trillion) are around 33 times larger than those contributing to the conservation and restoration of biodiversity ($220 billion).
This runs counter to Target 15 of the Global Biodiversity Framework (GBF) that compels governments to reduce negative and increase positive impacts by taking policy measures that enable businesses and financial institutions to assess and report their nature-related impacts. Such disclosure is crucial so that capital can be reallocated to companies and sectors aligned with reversing nature loss, thereby reducing systemic risk. Yet with the GBF deadline only five years away, fewer than 1% of publicly listed companies currently report on nature and the information provided is often inconsistent making it difficult to assess and compare.
The IPBES report makes clear that a wide range of tools, knowledge and data exist to measure business impacts and dependencies. No universal reporting method is suitable – what to measure depends on context and the decision to be taken – with multiple approaches or metrics often necessary. Information for assessing business impacts is more advanced than for measuring dependencies but a lack of data is not the issue.
Action over perfection
What is also clear is that reporting is just the start. Disclosure matters, but real progress depends on action and outcomes. Data will never be perfect, but businesses do not need perfect information to act. TNFD (Taskforce on Nature-related Financial Disclosures) provided an important framework for businesses to identify key priority gaps in reporting and uses the LEAP Approach (Locate, Evaluate, Assess, Prepare) to help them act.
Another IPBES report finding is the need for improved engagement between business, scientific and indigenous communities to avoid important information sitting in silos – better decisions and outcomes come from better knowledge. By sharing data, insights and collaboration, risks can be managed and opportunities realised.
Another key finding of the IPBES report is that businesses cannot, by themselves, deliver the scale of change needed to halt and reverse biodiversity loss; transformation requires a fundamental shift in our enabling environment that only governments can facilitate. It identifies five specific components: policy, legal and regulatory frameworks; economic and financial systems; social values, norms and culture; technology and data; and capacity and knowledge. The assessment also outlines more than 100 specific actions across these components that businesses, governments, financial institutions and society can take today.
Science has spoken and inertia is no longer an option. For businesses who all rely on nature for survival, capital providers who face rising portfolio risks, and governments whose security is threatened by biodiversity loss, now is the time to act.