Biodiversity and Corporate ESG Strategy

Biodiversity is the variety of life on Earth, and it is vital for the health and well-being of humans and the planet. Biodiversity provides us with essential services, such as food, water, medicine, pollination, climate regulation, and cultural values. However, biodiversity is under threat from human activities, such as land use change, pollution, overexploitation, and climate change. According to the Global Assessment Report on Biodiversity and Ecosystem Services, published by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) in 2019, around one million animal and plant species are threatened with extinction, and the rate of biodiversity loss is accelerating.

The loss of biodiversity poses significant risks and challenges for businesses and financial institutions, as well as opportunities and responsibilities. Businesses and financial institutions depend on and impact biodiversity in various ways, such as through their operations, supply chains, products, services, investments, and customers. Biodiversity loss can affect their profitability, reputation, resilience, and competitiveness, as well as their contribution to the Sustainable Development Goals (SDGs) and the Paris Agreement. Therefore, it is crucial for businesses and financial institutions to monitor, assess, and disclose their impacts, dependencies, and risks on biodiversity, as part of their environmental, social, and governance (ESG) strategy.

In 2023, the world adopted a new global framework for biodiversity, called the Global Biodiversity Framework (GBF), at the 15th meeting of the Conference of the Parties (COP 15) to the Convention on Biological Diversity (CBD) in Montreal, Canada. The GBF sets out four goals and 23 targets for 2030 to achieve the vision of living in harmony with nature by 2050. The GBF also calls for businesses and financial institutions to align their actions and disclosures with the GBF, and to support its implementation and monitoring.

In 2024, biodiversity will become a more prominent and integral aspect of corporate sustainability, as more stakeholders, such as investors, regulators, customers, employees, and civil society, will demand transparency and accountability from businesses and financial institutions on their biodiversity performance. Businesses and financial institutions that integrate biodiversity into their ESG strategy will not only reduce their risks and liabilities, but also enhance their opportunities and benefits, such as innovation, differentiation, value creation, and stakeholder engagement. Biodiversity will also become a key driver and indicator of ESG performance, as well as a source of competitive advantage and leadership.

The importance and benefits of biodiversity for businesses and financial institutions

In a world increasingly driven by sustainability and environmental consciousness, biodiversity has emerged as a critical factor for business and financial success. Biodiversity, the vast array of life on Earth, is not just an ecological concept; it is the foundation upon which our economy thrives.

Biodiversity is not just about pretty landscapes or exotic species; it's about the fundamental services that ecosystems provide, services that are essential for human well-being and economic prosperity. These services include:

• Clean air and water: Forests, wetlands, and other ecosystems act as natural filters, purifying the air we breathe and the water we drink.
• Climate regulation: Ecosystems play a crucial role in regulating the Earth's climate, absorbing carbon dioxide and mitigating the effects of climate change.
• Soil fertility and pollination: Healthy ecosystems support the formation of fertile soils and provide pollination services for crops and natural vegetation.
• Pest and disease control: Natural predators and parasites help to keep pest and disease populations in check, reducing the need for harmful pesticides and protecting agricultural yields

These services are also known as ecosystem services, and they have an estimated value of $125 trillion per year, according to a study by The Economics of Ecosystems and Biodiversity (TEEB) in 2010.

Businesses and financial institutions depend on and benefit from biodiversity and ecosystem services in various ways, such as:

• OperationsBiodiversity and ecosystem services provide businesses and financial institutions with inputs and resources, such as raw materials, energy, water, and land, that are essential for their operations and production. For example, agriculture, forestry, and fisheries depend on biodiversity for crops, livestock, timber, and fish. Pharmaceuticals and biotechnology depend on biodiversity for genetic resources and compounds. Tourism and recreation depend on biodiversity for scenic landscapes and wildlife attractions.
• Supply chains Biodiversity and ecosystem services provide businesses and financial institutions with stability and resilience in their supply chains, by reducing the risks and costs of disruptions, shortages, and volatility. For example, biodiversity and ecosystem services can help maintain soil fertility, water quality, pest control, and pollination, which are crucial for agricultural production and food security. Biodiversity and ecosystem services can also help buffer against extreme weather events, such as floods, droughts, and storms, which can damage infrastructure and disrupt transportation and communication.
• Products and servicesBiodiversity and ecosystem services provide businesses and financial institutions with opportunities and advantages in their products and services, by enhancing their quality, value, and differentiation. For example, biodiversity and ecosystem services can help businesses and financial institutions develop new and innovative products and services, such as biodegradable packaging, biomimetic design, and nature-based solutions. Biodiversity and ecosystem services can also help businesses and financial institutions meet the demand and preferences of their customers and clients, such as organic food, natural cosmetics, and green finance.
• InvestmentsBiodiversity and ecosystem services provide businesses and financial institutions with returns and rewards in their investments, by increasing their profitability, reputation, resilience, and competitiveness. For example, biodiversity and ecosystem services can help businesses and financial institutions improve their financial performance, by reducing costs, increasing revenues, and enhancing returns. Biodiversity and ecosystem services can also help businesses and financial institutions improve their non-financial performance, by enhancing their brand image, stakeholder relations, and risk management.These are some of the ways that biodiversity and ecosystem services provide value and benefits for businesses and financial institutions. However, these values and benefits are often not fully recognized, measured, or accounted for, and they are often taken for granted or externalized. As a result, businesses and financial institutions may not fully appreciate or capture the value and benefits of biodiversity and ecosystem services, and they may also underestimate or overlook the risks and challenges of biodiversity loss.

The Time to Act Is Now

The loss of biodiversity is a global crisis, but it is also an opportunity for businesses and financial institutions to demonstrate leadership and innovation. By embracing biodiversity, these organizations can not only protect the environment but also create a more sustainable and prosperous future for all.

Here are some simple steps that businesses and financial institutions can take to incorporate biodiversity into their operations:

• Assess their biodiversity footprint: Identify the impacts of their operations on biodiversity and develop strategies to mitigate those impacts.
• Support sustainable practices: Source products and services from companies that are committed to biodiversity conservation.
• Invest in biodiversity conservation: Support projects that protect and restore ecosystems.

Biodiversity is not a luxury; it is a necessity. By protecting and enhancing biodiversity, businesses and financial institutions can secure their own long-term success while creating a healthier and more sustainable planet for generations to come.

Reference

https://www.statista.com/topics/7463/esg-and-impact-investing/

https://www.statista.com/topics/10953/top-down-environmental-social-and-corporate-governance-implementation-worldwide/