Probability: High.

Financial Impact: Mixed.

The role of nature and biodiversity is gaining attention as a critical area for companies to address in 2024. According to S&P Global, only around a third of Europe’s most prominent companies have set targets to address deforestation and protect biodiversity ¹. Allowing nature to degrade further poses significant business risks, such as supply chain disruptions, reputational risks, regulations, access to resources, and financial liabilities; therefore, companies are expected to address this in the coming years. The World Economic Forum estimates that over half of the world’s $ 44 trillion economic value in 2019 was moderately or highly dependent on natural resources². Healthy ecosystems play a crucial role in absorbing greenhouse gas emissions, keeping global temperatures lower, air quality, and freshwater quantity, among other ecosystem resources, and mitigating the effects of storms and floods.

The recent Taskforce on Nature-related Financial Disclosures (TNFD) final recommendations for nature-related risk management and disclosure publication aims to help inform better decision-making by companies and capital providers on nature and biodiversity-related risks, opportunities, dependencies, and impacts, as well as to contribute to a shift in financial flows towards nature-positive outcomes and the achievement of global biodiversity and ecosystem preservation goals. 

The International Sustainability Standards Board (ISSB) of the IFRS Foundation has already announced that the TNFD recommendations will inform its future standard setting³, and the environmental disclosure platform CDP stated that it plans to align its global disclosure platform with the TNFD framework⁴. Expect companies to disclose their nature-related financial risks in the following years.

Companies should prepare for these changes by:

• Assessing and Disclosing Nature-related Risks and Impacts.
• Adopting TNFD Recommendations for Reporting and staying informed about the IFRS Foundation and its commitment to integrating TNFD recommendations into future standard setting.
• Integrating Nature into Strategic and Capital Allocation Decisions.
• Educating employees about the importance of nature and biodiversity conservation. Foster a culture of environmental responsibility within the organization.

Sources:

1. https://www.spglobal.com/esg/insights/biodiversity-is-still-a-blind-spot-for-most-companies-around-the-world ↩︎
2. https://www.weforum.org/press/2020/01/half-of-world-s-gdp-moderately-or-highly-dependent-on-nature-says-new-report/ ↩︎
3. https://www.ifrs.org/news-and-events/news/2023/09/issb-congratulates-tnfd-on-finalised-recommendations/ ↩︎
4. https://www.cdp.net/en/articles/media/cdp-announces-intention-to-align-with-tnfd-framework-and-drive-implementation-across-global-economy ↩︎