With biodiversity loss quickly accelerating across the globe, investors increasingly recognize the quantifiable risks in their portfolios — and many are engaging with companies to take bold actions that reduce their impact on nature.
Over half of the world’s GDP ($44 trillion of economic value generation) is at risk from the looming danger posed by nature loss, and supply chains for critical resources that depend on vital natural ecosystems are under growing threat. Between $235 billion and $577 billion of global crop outputs are at risk annually from pollinator loss alone, which is an operational risk for companies that source agricultural commodities. The global community cannot afford to let these tremendous risks escalate further.
Fortunately, there is good news for investors seeking to capitalize on this momentum and confront the substantial risks in their portfolios. If we implement policies and measures that protect nature, we can avoid an estimated global GDP decline of $2.7 trillion annually by 2030, according to the World Bank.
Investors are responding in kind by taking important steps to address nature and biodiversity loss as shown by the launch of bold new initiatives like Nature Action 100. Launched in December, the global investor engagement partnership with leading sustainability groups aims to drive greater corporate ambition and action to reduce nature and biodiversity loss.
There are several essential actions that companies must take to ensure they are effectively addressing their nature-related risks. Thanks to new benchmarks and frameworks, companies can now knowledgeably execute those actions while investors can gain the insights they need to inform their investment decisions and engagements on nature with the businesses in their portfolios.
Companies should be evaluating and disclosing nature-related risks and opportunities. The Taskforce on Nature-related Financial Disclosures, a market-led, science-based initiative backed by members representing $20.6 trillion in assets, is developing a framework that will help companies with this assessment and disclosure. Over 150 companies and financial institutions worldwide have piloted the framework, which will be finalized in September. The Taskforce also created an assessment process that companies can use to analyze the risks they face in specific ecosystems and to manage those impacts, as a complement to their disclosure recommendations.
Companies must also set a commitment to address nature and biodiversity loss by creating actionable and accountable goals. The Science Based Targets Network looks to build on the adoption of science-based targets for climate and equip companies to set similar targets for protecting nature and biodiversity. The coalition released draft technical guidance for companies to measure, set and disclose freshwater targets for public consultation late last year. Most recently, the initiative concluded a public consultation period on a draft of their land target’s technical guidance focused on the protection and restoration of ecosystems.
In addition, investors can track progress being made by companies within industries on their actions to tackle nature and biodiversity loss. The World Benchmarking Alliance’s Nature Benchmark makes this tracking possible by ranking major companies on their efforts to protect nature and biodiversity. By 2023, the Alliance will have benchmarked 1,000 companies across 22 industries.
The development of these frameworks and benchmarks further enables effective investor engagement with companies on the immense crisis of nature and biodiversity loss. Important global initiatives like Nature Action 100 and others in the biodiversity space will leverage these new capabilities to support investors in taking on the challenge of driving urgent corporate action and reduce risks from nature loss.
While we can applaud progress to date, companies are urged to continue to act ambitiously on their nature-based risks. If we do not, it will become increasingly difficult to reverse the damage to our planet.
Image credit: Wim van 't Einde and Guillaume Bolduc via Unsplash
Leslie Cordes is Vice President, Programs for the sustainability nonprofit Ceres, where she oversees the Climate and Energy, Water, and Food & Forest teams. Leslie has over 30 years of domestic and international experience in the clean energy, water, environment, and climate fields. She is currently leading the development of the Nature Action 100, a global investor engagement initiative focused on driving greater corporate ambition and action to reduce nature and biodiversity loss.