January 23, 2025

United Nations Conferences Highlight the Link Between Biodiversity and a Thriving Economy – What Does This Mean for Corporate Financial Disclosures?

In late 2024, the global community gathered at key climate-related United Nations conferences. Although COP 29 on climate change in Baku, Azerbaijan garnered the most headlines as countries debated climate financing and carbon markets, two other conferences may have a more immediate impact on companies’ evolving climate-related disclosure requirements. COP 16 on the Convention on Biological Diversity (CBD COP 16) in Cali, Colombia, bolstered interest in disclosures of climate and nature impacts to support efforts to address nature losses around the world, and COP 16 on the Convention to Combat Desertification in Riyadh, Saudi Arabia, focused on land degradation and drought, further emphasizing a global consensus that nature losses threaten economic prosperity.

The growing global focus on biodiversity and nature losses presents risks and opportunities for companies in industries like agriculture, forestry, fisheries, or food and beverage that rely on natural resources. As regulatory requirements and stakeholder demands evolve, these companies and others should be prepared to gather, assess, and disclose information related to the impacts of nature losses on their businesses and operations.

A Global Consensus: Nature and Biodiversity Loss is as Critical as Climate Change

The world’s biodiversity is under significant threat. Wildlife populations are a key indicator of ecosystem health, and wildlife populations are not doing well. According to the World Wildlife Fund, the average size of monitored wildlife populations shrunk by 73% in the 50 year span between 1970-2020. The decline is particularly severe in resource-rich regions, with 95% of wildlife in Latin America and the Caribbean disappearing in that same period.  

In the United States, WWF estimates 39% of the wildlife population declined since 1970. As an example at the species level, the population of Chinook salmon on the Sacramento River declined 88% in that time. And, in Washington state as of 2022, five of fourteen salmon runs were “in crisis.”

Beyond environmental harms and negative health impacts, these significant nature losses threaten economic prosperity. A 2023 PwC report determined that more than half of the global GDP is highly or moderately dependent on nature. And, as of 2020, the World Economic Forum estimated that $2.1 trillion of the United States economy was dependent on nature .

Industries that heavily rely on natural resources are the most at risk from declines in ecosystem services, or the direct and indirect benefits provided by ecosystems. PwC identified five sectors most vulnerable to biodiversity loss: (1) agriculture; (2) forestry; (3) fisheries and aquaculture; (4) food, beverages, and tobacco; and (5) construction.

In response to threats of these losses to biodiversity and the economy, the EU and 195 countries signed the Kunming-Montreal Global Biodiversity Framework (GBF) in 2022. Often compared to the 2015 Paris Agreement on Climate Change, the GBF set ambitious targets for 2030, including protecting 30% of the world’s land and water and reducing harmful government subsidies. It also aims to mobilize $200 billion USD from both public and private sectors to protect biodiversity by that same year.  

The United States and the Vatican were the only UN counties that did not sign the GBF. Regardless, President Biden signed an executive order supporting the mission of protecting 30% of land in the United States by 2030. It is it is unlikely that the Trump administration will retain that commitment.

The Growing Focus on Biodiversity Impacts Businesses

Investors and consumers are increasingly focused on protecting nature and biodiversity. Ignoring the biodiversity crisis and failing to properly manage nature-related risks can have severe consequences—both for business and the environment.

To address investor and consumer concerns about nature and biodiversity, the Taskforce on Nature-related Financial Disclosures (TNFD) was established as a global reporting framework for corporate and financial institutions. The goal of TNFD is to help businesses understand the risks and opportunities arising from their dependence on nature and to disclose operations’ impacts to biodiversity and nature losses. According to TNFD, “mobilizing business innovation and private finance to halt and reverse nature loss and contribute to nature-positive outcomes will be a major source of new commercial opportunity and competitive advantage.” TNFD complements existing frameworks from the Taskforce for Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB), which many companies are already familiar with.

TNFD released two discussion papers at the biodiversity COP 16 in Cali. The first paper, entitled “Nature risk is financial risk,” assessed how mismanagement of natural resources results in material financial loss to companies. The second paper, “Shifting behavior to get to nature positive,” explores opportunities for the insurance sector, which is extremely vulnerable to climate risks, as recently evidenced by the Los Angeles wildfires.

Companies disclosing pursuant to the TNFD framework assess the risks of biodiversity and nature losses on their business operations, supply chains, customer base, and investments. These risks could include increased disease in agricultural crops, animal stocks, or managed forests as ecosystem protections break down, and the associated higher costs to protect against disease or blight. Or businesses could face significant risks if drought decreases or eliminates sources of hydropower, drinking water, or irrigation in key regions of operations. The framework also calls for disclosure of a company’s impacts on biodiversity and nature. In many cases, the business, environmental, and health impacts are clear. For example, PG&E filed for bankruptcy after the company’s inadequate tree maintenance resulted in wildfires that caused significant loss of life and billions of dollars in damage to infrastructure and habitat. 

As of now, over 500 organizations, including major companies from diverse industries like AstraZeneca, Bank of America, International Paper Company, and Mitsubishi Corporation have adopted the TNFD framework. Reporting pursuant to the TNFD framework is still voluntary for U.S.-based businesses, but several countries have already incorporated aspects of it into their regulatory regimes. The EU has integrated TNFD guidance into the Corporate Sustainability Reporting Directive (CSRD). And, starting this year, the UK will require companies to include biodiversity, ecosystems, and ecosystem services disclosures in their corporate filings based on the TNFD framework. Even companies that are not disclosing biodiversity or nature risks or impacts may be asked for relevant information from customers, investors, or other stakeholders.

Thinking Ahead – What Should Businesses Anticipate?

More companies are considering “nature in the boardroom” strategies, including, but not limited to, identifying nature-related financial risks, monitoring legal and fiduciary duties related to disclosing nature-related risks, and evaluating social and client expectations regarding biodiversity and nature impacts.

Companies that take early action to assess the risks and impacts of biodiversity and nature losses may be well positioned to meet evolving stakeholder demands. Even those companies not required to disclose nature-based impacts may receive inquiries from customers that are subject to voluntary or mandatory disclosure requirements. Moreover, because the TNFD framework is related to climate disclosure frameworks, it may be the model for future regulatory action in jurisdictions like California which have adopted extensive climate reporting requirements.

As with climate disclosures, tracking the full scope of nature and biodiversity impacts, including supply chain operations, can be challenging. Companies in resource-reliant industries or geographies facing significant nature losses should consider whether proactively understanding these impacts is a smart investment or regulatory strategy. And any company that is required to or elects to report biodiversity and nature impacts should be aware of the risks of disclosing such complex and potentially sensitive information. Ensuring consistency between corporate disclosures and other public statements found in marketing materials, regulatory comment letters, or lobbying actions is essential to avoid greenwashing claims and consumer protection issues.