An Investor’s Guide to Nature and Biodiversity Risks and Impacts

The biodiversity crisis shares drivers and impacts with the climate crisis. Despite this, many investors have only recently become aware of its severity and its connection to business and finance. Market participants must address biodiversity loss urgently because the two crises require parallel and mutually reinforcing efforts.

Investors can start their biodiversity journey now, addressing both risks and impacts from investee companies with a comprehensive approach, and start tracking progress.  Despite data and model challenges, frameworks for management exist, regulatory pressure is growing, and models are improving. Data limitations should no longer be an excuse for inaction.

Biodiversity among the living organisms on our planet is declining rapidly, and human activity is the primary cause. This loss presents an existential threat to both nature and humanity. Additionally, it poses a significant risk to businesses and investors, as more than half of the world’s economic output relies to a high or moderate extent on nature. This dependence encompasses essential resources like air, water, food, and medicine.

Many companies rely directly or indirectly on nature for their operations, while simultaneously contributing to its degradation. The actions of one company can escalate risks for others within the ecosystem. For example, the food industry depends on a diverse array of plants and animals for agricultural services. However, the global food system, which involves converting ecosystems for crop production, is a significant driver of biodiversity loss.

In response to this crisis, some policymakers have initiated efforts to develop reporting frameworks. Additionally, business-led initiatives like the Taskforce on Nature-related Financial Disclosures (TNFD) have introduced voluntary frameworks aimed at addressing biodiversity-related risks and impacts.