From cleared forests to polluted rivers and streams, investors and companies worldwide are recognizing the economic cost of nature and biodiversity loss and acting to protect the global economy that depends on thriving ecosystems.
The private sector’s growing momentum on nature action was evident throughout many of this year’s events, from the United Nations Biodiversity Conference, called COP16, which wrapped up earlier this month in Cali, Colombia, to COP29, which concluded last week. Business leaders made up a sizable number of the event’s 23,000 attendees, including – for the first time – representatives from some of the world’s largest banks like JPMorgan Chase and Bank of America.
Here are three key factors propelling investor and corporate action on protecting and restoring natural environments, alongside efforts to limit global temperature rise from reaching catastrophic levels.
The Business Case For Action
Like climate change, escalating rates of nature and biodiversity loss and water scarcity pose financial risks to investment portfolios, business operations, and the long-term stability of economies. More than half of global GDP – equal to about $58 trillion – depends heavily on nature, and global GDP is set to plummet $2.7 trillion annually by 2030 because of nature’s decline, according to World Bank estimates.
Companies around the world are facing severe risks and financial repercussions for their contributions to nature loss. These include reputational risks if companies are linked with activities that negatively harm nature, such as oil spills and forest fires, operational risks, including declining pollinator populations can disrupt crop yields, and regulatory risks from a number of new and developing laws being adopted globally that would require businesses to assess and disclose their nature impacts.
Critical Mass On Nature
As nature-related risks continue to stack up, more and more investors and companies are ramping up their efforts to confront these material threats. At the same time, consumers, regulators, and shareholders are expecting companies to accelerate how they are transitioning their business models toward ones that support nature’s conservation and restoration.
During COP15 in December 2022, Nature Action 100 launched as the first global investor-led engagement effort to support greater corporate action and ambition on nature and biodiversity loss, and the initiative now has over 230 investor participants representing more than $30 trillion in assets under management or advice. Since then, several other investor nature initiatives have sprouted up, including PRI’s Spring initiative and World Benchmarking Alliance’s Nature Collective Impact Coalition.
At COP16, the Taskforce on Nature-related Related Financial Disclosures – a leading initiative helping companies and financial institutions better understand and report their impacts, dependencies, risks, and opportunities – made a powerful statement, unveiling that more than 500 organizations have now signed as early adopters to its disclosure recommendations. Together, these organizations represent $6.5 trillion in market capitalization among publicly listed companies and over $17.7 trillion in assets under management among asset owners and managers.
And the first companies – Holcim, GSK, and Kering – to publicly adopt science–based targets for nature were also revealed during the conference. These milestones represent real progress in how the private sector is committed to take crucial action on nature and biodiversity loss.
New Guidance And Resources
The momentum behind action is also being spurred by a wave of new resources and tools designed to guide the private sector on its nature journey.
Nature Action 100 last month announced the results of its first benchmark of corporate progress toward key investor expectations on nature. The results showed most of the 100 assessed companies are still in the early stages of nature action. However, the benchmark offers a robust roadmap of the critical steps companies can take to protect and restore nature and ecosystems in line with global biodiversity goals, as well as shifting financial flows away from economic activities that harm nature.
Meanwhile, the Glasgow Financial Alliance for Net Zero and the TNFD launched two resources to guide financial institutions in weaving nature into their transition planning for cutting emissions and to help companies and investors overall in using disclosure to develop plans to act on their nature-related risks and opportunities.
This growing movement by the private sector sends a strong signal that investors and companies are up to the challenge of tackling nature loss and water pollution and scarcity. And we can expect more action in the coming year to combat these looming threats to our financial system, our economy, and our planet.
