Biodiversity Risks & Opportunities

Human activity has significantly altered three-quarters of land and two-thirds of marine environments. [1] One million species are facing extinction.[2] Half of global GDP depends on nature at some level.[3] The world’s ecosystems are on the brink of collapse.

Resource extraction, industrialization, agriculture, urbanization, and pollution are among the human activities that have significantly altered the environment. Forests, wetlands, and oceans absorb 5.6 gigatons of carbon yearly.[4] But as the health of those ecosystems deteriorates, nature’s ability to absorb greenhouse gases will further diminish and the consequences will be catastrophic.

Agriculture is threatened: global GDP dependent on nature includes 75% of food crops relying on animal pollination and 50% of crops at risk due to soil erosion.

Technology is threatened: battery innovation, data farms, and the physical infrastructure for AI depend on rare earth minerals, gold, water, and energy.

Every industry across all sectors is at risk: biodiversity underpins many critical natural systems, from recycling nutrients in the soil to pollination to absorbing enough atmospheric carbon to keep temperatures tolerable.

Uniting Global Ambitions

A global threat requires a global response and already, some regulatory efforts are in place. The EU Deforestation Act, the EU’s Corporate Sustainability Reporting Directive, and Article 29 in France require biodiversity disclosure to highlight impacts and dependencies on ecosystems. Investor-driven initiatives such as the Finance Sector Deforestation Action (FSDA), the Finance for Biodiversity Foundation, Nature Action 100, and PRI Stewardship Initiative on Nature set expectations for how companies should assess and manage biodiversity risks and impacts. And investors like Boston Common AM have been engaging global companies on issues like deforestation for decades.

Last November, I represented Boston Common at COP15 in Montreal, joining the Finance for Biodiversity Foundation delegation in advocating for the Kunming-Montreal Global Biodiversity Framework. Ambitious goals and targets resulted, including the 30×30 pledge, which designates 30% of the Earth’s land and oceans as protected areas by 2030, and Target 15, which aims to improve disclosure and thus reduce negative biodiversity impacts by companies.

A new report by the UN University’s Institute for the Environment and Human Security released in late October highlights six key risk tipping points threatening earth systems essential for human life:[5]

  • Accelerating extinctions
  • Groundwater depletion
  • Mountain glacier melting
  • Space debris
  • Unbearable heat
  • Uninsurable future

The paper clarifies that current actions by governments and business leaders are insufficient. For example, 21 of the world’s 37 largest aquifers—the major drinking water sources for over 2 billion people—are being depleted faster than they can replenish, with 70% of aquifer withdrawals going to agriculture. In this example alone, the food and water supply are at risk for ¼ the earth’s population. The report, a must-read for CEOs, corporate executives, and policymakers, advocates for transformative systems-level change with a long-term sustainability focus. It takes an integrated approach to address risk causes and drivers, essential for reversing biodiversity loss and addressing most earth systems tipping points.

Educating Investors and Companies

Earlier this year, I helped the International Corporate Governance Network (ICGN) draft a Biodiversity Action Toolkit, which guides investors on assessment tools, definitions, and stewardship opportunities. In the days following COP 15, ICGN published its Viewpoint on Biodiversity as a Systemic Risk, which outlined key questions for companies and boards on biodiversity risks and impacts. Regardless of the tools they use, companies should rely on the Task Force for Nature-related Financial Disclosures (TNFD) guidance and LEAP methodology as essential starting points with over 240 investors and companies already piloting it.

LEAP helps companies interface with nature, evaluate dependencies and impacts, assess risks and opportunities, and develop necessary responses. The TNFD proposes for boards and management to align action and disclosure (governance, strategy, risk, impact management, metrics, and targets). TNFD will focus on guidance for 18 priority sectors in 2024.

Still missing are necessary steps for corporate boards and management to become biodiversity competent by assessing and acting across the value chain, partnering with industry players and stakeholders, using public policy engagement to support biodiversity protection, and aligning political and lobbying activities (direct and indirect). Just as the Paris Agreement called for boards to be climate-competent, companies today must become nature-competent.

As the world convenes around COP28 UAE (November 30 – December 12), the focus is on integrating biodiversity into essential climate action. Using recently issued recommendations and available information, companies and corporate boards can begin reversing nature loss by better understanding their role in promoting ecosystem resilience and signing onto commitments like Target 15 and the 30×30 pledge. And investors can hold companies accountable, keeping them better informed and prepared for the coming decade with all its challenges and opportunities.

 

Ms. Compere is a Managing Director and Head of Stewardship and Engagement at Boston Common Asset Management.

[1] https://www.ipbes.net/global-assessment

[2] https://www.icgn.org/biodiversity-systemic-risk-10-game-changers-board-directors-and-stewardship-teams

[3] https://www.msci.com/our-solutions/climate-investing/biodiversity-sustainable-finance

[4] https://www.msci.com/our-solutions/climate-investing/biodiversity-sustainable-finance

[5] https://interconnectedrisks.org/

 

Published On: November 29, 2023Categories: Thought Leadership