The Ball Is Rolling: Upcoming Regulations And Business Benefits Drive Biodiversity Digital Solutions

The Ball Is Rolling: Upcoming Regulations And Business Benefits Drive Biodiversity Digital Solutions

In 2020, the World Economic Forum estimated that $44 trillion in economic value generation is at risk through the dependence of business on nature and related services. While much attention has previously been focused on carbon emissions and other climate-related financial risks, new standards, disclosures and frameworks on biodiversity are now emerging.

COP15 has played a strong role in adding momentum to the work of the Taskforce on Nature-related Financial Disclosures (TNFD), the ISSB’s upcoming inclusion of biodiversity and just transition in reporting standards, and the launch of the Global Biodiversity Framework. Nearly 50,000 European firms will be impacted under the EU’s SFDR and CRSD, which will require the disclosure of activities that negatively impact biodiversity from 2024. Currently, only 5% of businesses assess their impact on nature; these developments will increase that number significantly.

Firms need to act now or risk falling behind regulatory requirements. To navigate this complex reporting landscape, they will require data management, analytics and reporting capabilities to make biodiversity-guided capital investment and management decisions. Vendors are responding to the rapid emergence of these regulations and demand from corporates with product developments. For example, amid the growth in biodiversity-centred funds – amounting to nearly $1 billion in assets this year alone – ClarityAI has announced a partnership with GIST Impact to develop a biodiversity impact assessment and reporting solution product for investors. Similarly, MSCI plans to launch a new set of tools aimed at helping investors identify and screen firms at risk of contributing to biodiversity loss and deforestation. In January 2023, S&P Global Sustainable1 and the UN Environment Programme (UNEP) launched Nature Risk Profile, a new methodology aimed at enabling firms and investors to assess and analyse organizations’ nature-related risks, including both impact and dependence on biodiversity.

Beyond regulatory obligations, there are benefits for businesses to measure biodiversity and nature-related risks and opportunities. For example, analysis from an ISS ESG report states that firms that address ESG objectives and align their approaches with international standards are among the most profitable in their respective sectors. Organizations that streamline this data management internally, with the support of digital solutions, can focus attention on improving business operations. Essentially, executives and investors want to be able to identify long-term risk and value.

To learn more about nature-related risks and solutions read the following reports:

Strategic Focus: Navigating Nature-Related Risks

Tech Roadmap: Climate Risk Digital Solutions