Nature and biodiversity part 2: Strengthening business for a sustainable future
Nature and biodiversity part 2: Strengthening business for a sustainable future
In part one of the series, we explored how being nature-positive is key to business growth, continuity and resilience. In part two, we cover key regulations, sectors impacted by biodiversity net gain (BNG) requirements, the role of green finance and tax incentives in your nature transition and pursuit of new commercial opportunities guiding you towards a nature-positive future with prioritised action.
Regulations To Strengthen A Sustainable Future
In both the UK and EU, regulations are evolving to ensure businesses take a proactive approach to biodiversity conservation and restoration. Several key policies and frameworks require companies to integrate nature-related risks and opportunities into their operations, here are three of them:
- UK Town and Country Planning Act 1990
Schedule 7A introduces mandatory BNG requirements for development projects from April 2024. Developers must ensure new projects enhance biodiversity, leaving the environment better than before. The Act includes legally binding targets for biodiversity restoration. The Green Finance Institute published a Biodiversity Net Gain (BNG) guidebook as part of their Revenues for Nature Guidebook Series, breaking down the major components of BNG policy, why they were designed and how they were implemented.¹
- EU Taxonomy for Sustainable Activities
This framework guides investments towards sustainable economic activities. It sets criteria for environmentally sustainable operations, including those protecting and restoring biodiversity. Companies must disclose how their operations align with the taxonomy’s biodiversity and ecosystem objectives, making it a key tool for encouraging nature-positive transition planning.
- Corporate Sustainability Reporting Directive (CSRD)
The CSRD expands sustainability reporting for large companies in the EU and non-EU companies with significant EU activities. It will require companies to report on how sustainability issues, such as climate change impact their business and how their operations in turn affect people and planet – a unique principle called ‘double materiality’. These changes will ripple through the supply chain, even if suppliers are not directly in scope they will feel pressure to align with these standards because they supply goods and services to larger entities.
Additionally, the International Sustainability Standards Board (ISSB) is researching disclosure risks and opportunities related to biodiversity, ecosystems and human capital, focusing on their potential impact on a company’s investment prospects. There is anticipation of further potential mandatory standard setting beyond the current SI and S2 requirements on its conclusion in 2026. Separately, Botswana has become the first country to mandate Taskforce on Nature-related Financial Disclosures (TNFD) for companies listing on its stock exchange, indicative of a direction of travel with more countries expected to introduce mandatory nature-related disclosures over time.
Sectors Most Impacted by Biodiversity Regulations
While all businesses have a role to play in protecting nature, certain sectors face heightened regulatory scrutiny due to their direct impact on biodiversity.
Real Estate and Construction: The UK’s BNG requirement affects developers, who must now enhance local ecosystems. With the Autumn Budget outlining £5 billion investment to unlock housebuilding, developers will need to consider how BNG can be factored into their development plans. The EU Taxonomy highlights the construction sector’s role in land use and soil degradation, calling for sustainable building practices.
Agriculture, food production and manufacturing: Agriculture is heavily dependent on healthy ecosystems for pollination, soil fertility, and water regulation. The sector faces mounting pressure to adopt sustainable farming practices that protect biodiversity, reduce deforestation and prevent habitat loss.
Natural resources and energy: Companies involved in energy production, mining and resource extraction often operate in ecologically sensitive areas. These sectors must navigate the dual challenge of reducing carbon emissions and ensuring their operations do not contribute to habitat destruction.
Finance and Investment: The finance sector must steer capital towards sustainable activities. Financial institutions and investors need to align their portfolios with biodiversity targets and comply with the EU Taxonomy and other sustainability frameworks.
Green Finance and Responsible Tax
Various green finance tools and tax incentives support businesses in this transition, creating commercial opportunities and providing financial boosts for companies aligning with nature-positive goals. For example, innovative companies like Oxygen Conservation and Nattergal are realising value through nature-related projects, while NatureMetrics pioneer tech solutions to aid companies in measuring, reporting, and disclosing.
- Green Bonds and Sustainability-Linked Loans
These financial products enable businesses to access capital while committing to green or sustainable outcomes, such as reducing biodiversity loss or restoring ecosystems. Companies meeting specific environmental performance criteria may benefit from lower interest rates or better financing terms.
- EU Taxonomy-Aligned Investments
Businesses aligning their activities with biodiversity objectives are better positioned to attract investment from sustainability-focused funds. Financial markets are increasingly prioritising environmentally sustainable investments, creating opportunities for businesses embedding nature into their transition planning.
- Responsible tax
Governments in the UK and EU offer tax incentives and credits for businesses engaging in green innovations, transition and conservation efforts; including reforestation, wetland restoration and sustainable farming practices. These incentives help reduce the upfront costs of implementing nature-positive initiatives.
- Navigating the Nature Transition: Prioritising Action
To achieve a nature-positive future, businesses need careful planning, investment, and prioritisation, with Board-level leadership commitment being essential. Here are considerations in how you can navigate these requirements:
- Conduct a Nature-Related Risk Assessment
Understand how your business depends on and impacts nature. Conduct a nature-related impact and dependency assessment, guided by frameworks like the TNFD, to identify critical ecosystems and inform where your action is needed most. Following the conclusion of COP16, the total number of companies and financial institutions committed to getting started with voluntary reporting of their nature-related issues in line with the TNFD recommendations stands at 502, marking a 57% increase from January 2024.
- Integrate Biodiversity into Transition Planning
Align biodiversity goals with broader transition planning efforts, ensuring that nature-related risks are considered alongside climate and environmental targets. Incorporate measurable biodiversity targets into corporate sustainability strategies and use frameworks such as Science-Based Targets for Nature (SBTN) to set specific, actionable and validated goals. To support transition planning and measuring progress, the TNFD has released two discussion papers, outlining a roadmap to upgrade market access to decision-useful nature-related data and setting out draft guidance on nature transition planning for corporates and financial institutions.
- Focus on High-Impact Areas
Prioritise areas where your impact on biodiversity is greatest. For instance, agriculture businesses should focus on enhancing soil health and reducing pesticide use, while construction companies should ensure new developments contribute to ecosystem restoration.
- Leverage Finance and Incentives
Explore green finance options and tax incentives to support biodiversity efforts. Green bonds, sustainability-linked loans and responsible tax can offset transition costs while driving meaningful impact.
As the regulatory landscape in the UK and EU evolves, taking a proactive approach to integrating nature into your decision-making shows foresight and leadership. Meeting biodiversity regulations and leveraging sustainable finance opportunities will be critical to maintaining compliance and driving growth in a nature-positive economy. By prioritising action and aligning with biodiversity frameworks, you can future proof your operations and contribute to global ecosystem restoration and protection.
Get in touch
Hemantha Perera Trevelyan and the team are happy to discuss points raised in this article to support your financial, strategic and operational decision making.
¹ The Green Finance Institute, Biodiversity Net Gain (BNG) Guidebook