Financial Services
Integrating Natural Capital into Finance
The erosion of natural capital through over-exploitation poses a significant risk to our society, economy and financial stability.
Scenario analysis indicates significant proportions of assets are at risk where lending or investment portfolios depend upon and impact nature and the ecosystem services it provides, such as in the construction, agriculture and food and beverage sectors.
TNFD and Natural Capital Risk
The objective of the Taskforce on Nature-related Financial Disclosures (TNFD) is to encourage and enable businesses and financial institutions to account for the impacts their operations and investments have on nature. Alongside TNFD, portfolio companies and clients are beginning to get ready to report under the related Corporate Sustainability Reporting Directive, (CSRD), European Sustainability Reporting Standard (ESRS), Science Based Targets Network and others. Similar to the Task Force for Climate-Related Financial Disclosure (TCFD), these disclosure regimes aim to include environmental and social factors in financial decisions and to make corporate sustainability reporting common, consistent and standardised.
As the materiality of nature risks and opportunities emerge, alongside reporting requirements, developing a strategy to address nature risks and opportunities is becoming a business imperative for financial institutions. Having been at the forefront of shaping, piloting and implementing the standards that the market relies upon today, such as TNFD’s State of Nature Metrics, and seminal standards that guide action on the ground such as IFC Performance Standard 6, we have a wealth of practical and scientific expertise to support clients to navigate this rapidly evolving space.
Assessing Nature-Related Risk and Opportunity for Banks, Asset Managers and Asset Owners
Our consultants help financial institutions develop their nature strategy starting with a materiality and exposure assessment, through to disclosures and the creation of specific nature actions and agendas.
Our understanding of nature risk and ability to identify and interpret data is founded in our delivery of nature strategies with high-impact and dependency sectors, such as mining, food and beverage, apparel, energy and manufacturing. From banks evolving policies and issuing green bonds, to investors engaging companies and managing responsible investment portfolios, we help clients to identify nature risk and opportunity.
We guide clients to:
How can we help?
We can help your organisation define and meet its nature and biodiversity goals.
Introducing Biodiversity Impact Assessment Framework (BIAF)
Identify and value their nature-related impacts, risks and opportunities.
Define the most meaningful and impactful actions to address within their portfolios to mitigate financial and reputational risk.
Define a stewardship and engagement strategy that reduces nature-related risks.
Design policies and procedures to ensure allocations deliver against nature-related goals.
Set measurable nature-related targets and milestones with companies.
Align their nature strategy with existing climate, ESG and sustainability objectives.
Get ready to disclose against frameworks including; TNFD, CSRD, ESRS and SFDR.
Building a Green Portfolio for Impact Investment, Private Equity and Nature-based Solutions (NbS)
Biodiversity is not a buzzword, it’s the foundation of healthy ecosystems which are vital pillars for resilient and growing economies.
Restoration of nature within planetary boundaries requires an additional estimated investment of $700 billion every year. Recognising the opportunity, investors are increasingly allocating funds to natural capital, seeking to conserve and restore nature or reduce negative impacts on biodiversity whilst generating business value. In pursuit of nature positive impact, investors can opt for green bonds and sustainability-linked bonds, or choose to invest in green finance through specific impact investment funds or ESG sustainable investment funds.
Green Finance
Identifying and selecting nature-positive investments can be challenging due to the diversity of potential impacts on nature, the still nascent standards guiding investor action and the fact that revenue streams are as yet relatively unproven. Due to our role advising on the emerging standards in the market, and our deep expertise working with businesses and investors on biodiversity since 2008, we can help clients navigate the risks and opportunities in this emerging sector.
Ensuring nature-positive considerations are integrated throughout the investment lifecycle from screening to monitoring is necessary to ensure the integrity of a green bond, impact fund or nature restoration project and to avoid reputational risk.
We can support investors to develop a clear investment mandate, define nature and biodiversity conservation or restoration criteria, and review the processes used to verify the environmental claims. This helps ensure capital is allocated to nature-positive initiatives that achieve their intended outcomes and deliver value.
We help clients to:
- Design effective screening and due diligence processes to evaluate the potential biodiversity impacts, both positive and negative, of a nature-based investment opportunity.
- Advise on biodiversity monitoring and management frameworks, enabling a diverse range of biodiversity impacts to be compared and reported consistently across a portfolio, and allowing a more diverse range of investments to be evaluated for their potential biodiversity benefits.
- Screen portfolios for nature-related risks and opportunities to verify alignment with the investment principles or client mandate and prepare for reporting in line with TNFD and other frameworks.
- Provide due diligence and feasibility assessments on nature-based solutions opportunities to evaluate the potential for biodiversity-based crediting frameworks or for biodiversity restoration.
- Review nature-based solution project design and delivery to verify carbon, biodiversity and social benefits.
- Establish metrics and KPIs that evaluate and monitor the positive biodiversity and social outcomes to align with disclosure frameworks, such as TNFD and ESRS/CSRD.
Project Finance Due Diligence for Development Banks and Equator Principles Banks
Development finance institutions and Equator Principles banks have for many years applied biodiversity requirements as a condition of investment. One of the seminal standards is IFC Performance Standard 6, a framework established by the International Finance Corporation to address biodiversity conservation and sustainable management of living natural resources.
We help clients to:
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Conduct biodiversity due diligence and monitoring.
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Understand and meet funding conditions for project development and preparation for IFC PS6 and other standards.
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Implement the mitigation hierarchy as a key framework to manage risk and achieve no net loss of biodiversity.
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Develop Biodiversity Management Plans (BMPs) to protect and enhance natural habitats impacted by development projects in the extractive and infrastructure sectors.
How can we help?
How can we help your organisation meet its nature and biodiversity goals?
Insights
Well-designed credit systems could help connect the surge in corporate interest in biodiversity with field-based conservation to unlock new and enhanced funding streams.
Written on behalf of IUCN, we prepared this paper as an input towards World Leaders’ Dialogues at the IUCN World Parks Congress 2014, convened by IUCN and the Rockefeller Foundation at the Bellagio Centre, Italy.
This study explores trends in the biodiversity commitments of Global Fortune 100 companies and firms which have made recent ‘net impact’ commitments. It reviews challenges to overcome in delivering equitable and positive outcomes and summarizes the key elements required for businesses to achieve nature-positive alignment.