Jun 09, 2023
Three new reporting requirements are pushing nature and biodiversity up the ESG agenda. Orla Delargy explains why
Environmental, Social and Governance (ESG) topics are currently top of mind in business and finance. Climate change has dominated under the ‘E’ of ESG, but nature and biodiversity are catching up. Three developments have helped drive the momentum: the Taskforce on Nature-related Financial Disclosures, the EU’s Corporate Sustainability Reporting Directive and the new Global Biodiversity Framework.
Taskforce on Nature-related Financial Disclosures
The latest Taskforce on Climate-related Financial Disclosures (TCFD) status report found that over 3,800 organisations support the TCFD and are working towards TCFD-aligned reporting. The question is whether the newer Taskforce on Nature-related Financial Disclosures (TNFD) will follow the same path, and whether nature-related disclosures will become mandatory in certain jurisdictions.
Like the TCFD framework, the TNFD proposes disclosures across four pillars:
- Governance – the organisation’s governance around nature-related dependencies, impacts, risks and opportunities;
- Strategy – the actual and potential impacts of nature-related risks and opportunities for the organisation’s businesses, strategy and financial planning where such information is material;
- Risk & impact management – how the organisation identifies, assesses and manages nature-related dependencies, impacts, risks and opportunities; and
- Metrics & targets – the metrics and targets used to assess and manage relevant nature-related dependencies, impacts, risks and opportunities where such information is material.
Relatively few organisations have started incorporating biodiversity into their broader ESG governance and strategy. However, over 200 organisations are piloting the TNFD guidance and there is a public consultation currently open, with the first full version of the framework expected in September 2023.
Corporate Sustainability Reporting Directive
Where the TNFD is a global, voluntary framework, the Corporate Sustainability Reporting Directive (CSRD) is EU-specific and mandatory. The CSRD significantly expands the existing rules on non-financial reporting, with close to 50,000 companies across Europe likely to be affected in the coming years.
The CSRD disclosure requirements on biodiversity go much further than the previous reporting directive, requesting information on biodiversity metrics, policies and targets. Again, organisations are asked to identify and assess material impacts, risks and opportunities that relate to biodiversity, and the TNFD is explicitly referenced.
Crucially, organisations are asked to disclose whether they have a transition plan in line with the new Global Biodiversity Framework, agreed during the UN conference in Montreal in December 2022.
Global Biodiversity Framework
The overarching vision of the Global Biodiversity Framework (GBF) is no net loss of biodiversity by 2030, net gain from 2030 and full recovery by 2050. The GBF sets out a plan for the next decade, with four long-term goals and 23 targets, spanning a wide range of topics including spatial planning, nature restoration, invasive alien species, agriculture and climate change.
Although almost all the targets are relevant to the private sector, Target 15 stands out. It asks countries to take measures to ensure that organisations assess and disclose their risks, dependencies and impacts on biodiversity. The question is how national governments will interpret this and what measures they will take.
How organisations can use the frameworks
Organisations will be encouraged to see the degree of alignment and overlap between emerging frameworks such as the TNFD, CSRD and GBF. The challenge is to get familiar with these frameworks and, crucially, get started now.
As many of the frameworks discussed above are still in development, it is tempting to adopt a ‘wait-and-see’ approach. However, organisations can progress training and capacity building now. This is a new topic for many people but getting informed is the prerequisite for taking the right actions.
Orla Delargy is an Associate Director with KPMG
This article was first published by Chartered Accountants Ireland at the following URL: https://www.charteredaccountants.ie/Accountancy-Ireland/Articles2/News/Latest-News/nature-and-biodiversity-ascend-the-esg-agenda
