An integrated approach to climate and nature – an emerging trend

Sustainability Risk Review talked to Valerie Pinkerton, an interdisciplinary environmental professional and a director at specialist climate change investment and advisory firm Pollination, about progress at the reconvened COP16 and what corporates need to be aware of, as well as the growing focus on the need for nature-based solutions, accessing reliable data on nature-related risks, and how global reporting standards can be aligned.

Has there been any progress/decision-making at the reconvened COP16? What is the situation going forward?

Valerie Pinkerton: Yes, the reconvened COP16 session achieved significant progress, particularly for scaling urgently needed finance for nature. Governments agreed to mobilise $200bn annually by 2030 – a commitment decades in the making. This milestone included agreement on a roadmap to develop the ‘permanent financial mechanism’ and mobilise funding from ‘all sources’, bringing the private sector to the table.

The Cali Fund was also officially launched in Rome, through which companies will share proceeds from the use of digital sequence information with biodiverse countries. The fund is notable not only as a mechanism to further mobilise private sector finance, but also because it commits to allocating 50% of proceeds to indigenous peoples and local communities.

What decisions or proposals from the reconvened COP16 do corporates need to be aware of, particularly in terms of risk and managing that risk?

Valerie Pinkerton: Target 15 of the Global Biodiversity Framework (GBF) calls for countries to implement measures to encourage and enable businesses to assess, disclose and reduce biodiversity-related risks and negative impacts. When countries do enact disclosure regimes to implement Target 15, they will likely do so through reference to the Taskforce on Nature-related Financial Disclosures. (TNFD). A total of 46 National Biodiversity Strategies and Action Plans (NBSAPs) have now been published, after more than 85% of countries missed the UN deadline to submit nature pledges ahead of COP16 in Colombia. Some of the NBSAPs already submitted, including by Japan, now include reference to the TNFD, signalling that corporates should increasingly prepare for new mandatory disclosure requirements.

The reconvened COP also agreed the monitoring framework that will be used to measure country-level progress towards GBF targets. NBSAPs and key indicators will provide corporates with a sense of policy direction at the national level, as well as how their own performance against potential new legal and regulatory measures may be assessed.

Is there a growing focus on the need for nature-based solutions, and how is this being driven (incentives, regulation)?

Valerie Pinkerton: We’re observing an emerging trend towards an integrated approach to climate and nature, grounded in a clearer understanding of the significant role of nature in supporting climate change mitigation and adaptation. This is evidenced in uptake of nature-based solutions (NbS) for climate solutions, for example through the price premium realised by carbon removal projects, with significant biodiversity co-benefits.

Corporates in sectors that are highly exposed to nature risk are also increasingly exploring how implementing NbS within their supply sheds can help build supply chain resilience, achieve resource efficiency, and deliver on aligned climate, biodiversity and water targets.

An exciting example is Google, who announced a goal in 2021 to replenish 120% of freshwater volumes they consume and have invested in a portfolio of 74 water stewardship projects globally to deliver conservation and restoration of freshwater habitats.

Potential access to new markets and nature-based revenue streams has also catalysed interest in NbS. For example, Goldman Sachs Asset Management recently announced the launch of a $500m biodiversity bond fund that aims to support nature conservation.

In terms of both disclosure and mitigation, how do corporates access reliable data on nature-related risks?

Valerie Pinkerton: Corporates can increasingly benefit from authoritative guidance and support tools emerging from key frameworks such as the TNFD, Science Based Targets Network (SBTN), and the Accountability Framework Initiative on how to secure reliable, cost-effective, and decision-useful data on nature-related risks. TNFD already provides a tools catalogue to facilitate access to nature-related data tools available to the market, while exploring the development of a nature data public facility. SBTN similarly provides a series of technical tools as part of target-setting guidance to help corporates access and collect credible data needed to manage nature-related risks.

Corporates can also partner with a growing ecosystem of nature tech providers who can efficiently provide specialist support on key risk areas, such as deforestation, land-use change, and conversion of natural ecosystems. Key technologies such as remote sensing, eDNA, artificial intelligence, and machine learning have significantly reduced the cost and difficulty of measuring and monitoring nature-related risks, enabling corporates to confidently tackle these challenges in their operations and supply chains.

What steps are being taken to align global reporting standards?

Valerie Pinkerton: Clear efforts are underway to align standards and clarify the reporting landscape.

For example, the structure of TNFD’s recommended disclosures mirrors that of the Taskforce on Climate-related Financial Disclosures (TCFD). These recommendations have already been adopted by over 500 publicly listed companies and 129 financial institutions to improve transparency in nature-related financial risks.

In turn, the International Sustainability Standards Boards (ISSB), which has developed a corporate sustainability reporting framework currently being adopted in more than 30 jurisdictions, is exploring how to incorporate TNFD’s recommendations into a new biodiversity, ecosystems and ecosystem services standard. This will help investors and companies align nature-related disclosures with broader financial and sustainability reporting.

GRI and TNFD have also created an interoperability mapping tool to align TNFD’s disclosure recommendations with the GRI Biodiversity Standard, enabling companies to report nature-related impacts more seamlessly.

TNFD and EFRAG also published correspondence mapping to support users to understand commonalities between the TNFD and European Sustainability Reporting Standards (ESRS). This assessment highlights that all 14 TNFD recommended disclosures are reflected in the ESRS, although this may be subject to change as a result of the recent Omnibus proposal.