The Mid-Market and Biodiversity: Learnings from Davos and COP28

“Nature’s ability to provide the goods and services on which we depend is being undermined, presenting enormous risks to prosperity.” Henry M. Paulson, US Treasury Secretary.

The challenges about writing an up-to-date blog on a shiny area of sustainability, is to keep up with the large amount of information produced. It seems that information around nature based capital and TNFD grows astronomically by the day. Yet, a new year requires a new view and review of sustainability issues, as well as fresh or updated strategies. In the first blog in our series around TNFD we looked back. This blog will review what the emphasis around biodiversity which was discussed at COP28 and Davos and offer some recommendations for our Mid-market clients. This piece may touch on the development of interest around biodiversity and how TNFD monitors and manages biodiversity risks, and how this interest may be driven by powers beyond interest in biodiversity.

Nature-related disclosures are insufficient, on its’ own, to address the nature crisis. TNFD should be seen as one tool among many aimed at addressing societal issues as a whole. COP28 quickly followed by the World Economic Forum (WEF) in Davos continued the discussion around biodiversity and nature-related risks. There is a real movement to raise the importance of biodiversity to the level of climate change (and thus the climate crisis).

The Global Reporting Initiative (GRI) has recently launched indicators on biodiversity, effectively enhancing the understanding of ESG indicators and KPI to include specificity around biodiversity. Indeed, the public consultation continues until the end of February 2024 on the nexus of biodiversity and climate change.

Biodiversity on the ground at COP28

Biodiversity gets its special day at COP, sometime towards the end of the second week of the conference. ‘Nature, Land and oceans day’ in Dubai has delivered some positive outcomes – noticeably, not only pledges but also some new financing towards forests, mangroves, and ocean.  The Joint statement on Climate, Nature and People signed by the parties also acknowledges the intricate connections of all three elements.

Outside of the main conference, large side-events held in Dubai have been the main networking site for corporates and financial sector attendees. At these conferences, statements on ‘climate change’ accompanied by a mention of ‘AI’ could have easily competed with ‘climate-nature’ nexus. Although the connection is well understood by the business community as a high-level concept, the complexity of biodiversity risk landscape makes it a really challenging topic to dive into and progress. Especially for companies that are just about getting a grasp on their decarbonisation journeys. (Anna Korneeva: BDO Audit).

With so much guidance and so many frameworks, and so much buzz coming out of COP28 and Davos around nature, the addressing of nature within the confines of business development and growth can seem overwhelming. The end goal is to report and measure business relevant outcomes. In principle, what can a company do to effectively address nature within the scope of business development? 

A clear way forward is to recognise the work that TNFD has done.

Nature should only be addressed in concert with climate change. Therefore, corporate strategy for climate change is interconnected to policy and practical solutions for nature. Addressing net zero targets requires a dual approach, climate and nature. What is clear is climate change targets, such as Net zero, may be impossible to be achieved without taking nature and nature-based solutions into account as it is evident that creative and innovative nature-based solutions are seen as a strategic lever to both the mitigation and adaptation impacts of climate change. Clearly, it is important to defend the interdependency of nature in climate action.

The actionable approach that BDO recommends, given where mid-market companies find themselves on their ESG and sustainability journey, is to leverage data that is already collected and to take a systematic approach to nature-based risk management. In principle, to have actionable progress on nature-based corporate issues, particular to the mid-market is to: 

1. Find a framework that fits and use universally understood definitions, metrics and taxonomy. TNFD clearly fits this requirement but can be daunting at first glance. 
2. Be transparent around scope of disclosures. In addition, clearly link company growth and nature-based targets. 
3. Learn from climate-based data that may already be collected. In some cases, the collection of climate data can directly inform nature-based solutions. The pathway to transparent and robust climate data can be reflected for nature-based data; from science, to voluntary, to mandatory climate reporting. This can serve as clear guidance for the nature-based road map.
4. Take a systematic approach, recognising that opportunities and risks are not necessarily restricted to one aspect of sustainability and ESG. Risk mitigation is only one aspect, as is risk adaptation. Taking this approach allows opportunities and risks to be addressed in concert, ergo, working smarter not harder in addressing wider ESG and sustainability issues.
5. Look to use already established ESG data more broadly to inform opportunities that can arise from contributing to a nature positive world.

Given the growing information load on TNFD, BDO UK continue to update clients on the latest legislations. Our Sustainable Finance team focusses on supporting and driving services for sustainable debt instruments (Green, Social, Sustainability, etc. (GSS+) bonds/loans), which incorporate all issues within the green, social, sustainability, blue and impact space.