Myth busting in biodiversity

What gets measured gets managed, what is hard to measure can often get ignored.  This is the legacy of the complex topic of biodiversity … and also the paradox: we are all biophilics at heart – nature is literally in our DNA – but the relationship between biodiversity and the economy has always been challenging. 

Companies have long seen nature as a resource that only has a value if extracted. This is what natural capital is seeking to change, to see nature and biodiversity as a form of capital, without extraction.  And now the real estate investment industry is considering how its assets affect biodiversity and how it can contribute to improving it.   

This newly-found focus is entirely correct. As the World Economic Forum points out, “One million species are at risk of extinction in the coming decades – a rate tens to hundreds of times higher than the average over the past 10 million years.” 

But such change is often accompanied by misunderstanding, misinformation and misappreciation. As practitioners implementing biodiversity measures – as well as other ESG initiatives – in real estate, we observe two pernicious myths. 

Myth 1: Climate change and biodiversity are unconnected 

This myth suggests that each is a separate and competing theme. Some also suggest that biodiversity is not as important as climate change. 

This is demonstrably FALSE. 

It’s largely because the rise of ESG since the early 2000s, with a particular focus on carbon and climate change, saw an occlusion of biodiversity.  

For example, a real estate fund report would have a meaningful emphasis on ‘climate change’. It would include certain data – and highlight where additional data was needed. But there would be little or no mention of terms such as ‘biodiversity’ or ‘natural capital’ (the two can be used interchangeably).   

The deprioritisation of biodiversity would be writ large – literally – in real estate fund sustainability reporting. 

In the last year or two, more real estate fund managers have recognised the need to enhance and preserve biodiversity to mitigate climate change and future-proof their assets. Like so many other factors, biodiversity represents both risk and opportunity.  

Today, some funds: 

• Set biodiversity targets and disclose progress against them, 

• Promote safeguarding of trees, hedgerows and shrubs, water bodies, grassland, formally planted and wildflower areas, and 

• Create new habitats for birds and bats, while handling invasive species.   

 See also: Biodiversity: A theme of growing importance and investment opportunity 

Myth 2: The biodiversity frameworks are already in place   

This is also FALSE. But things are changing, One of the catalysts for change was the 2019 Taskforce for Nature-related Financial Disclosures (TNFD). Four years later, it created a framework on how to report nature related disclosures and biodiversity.   

Then, in June 2024 we received further draft guidance on the application of the core disclosure metrics to the real estate sector. So it is all still relatively new.   No-one is compelled to use the framework. It’s voluntary. There is no enforcement through regulation. Real estate ESG professionals hope the framework will become regulation in the coming years. We just don’t know exactly when. 

So, while it is untrue to say the frameworks are already fully in place, several governments, including the UK, have signalled their intention to consider adopting the TNFD Framework through domestic regulation. .  

Until then, the TNFD has committed to tracking voluntary market adoption with an annual status update report, which started in 2024.  So, what is now a voluntary framework become compulsory.  

Other biodiversity regulations are already in place. The Biodiversity Net Gain says developers in the UK must demonstrate their projects will boost biodiversity by at least 10%. They should also maintain this for 30 years or more, either on or off-site. The latter might include buying off-site biodiversity units on the market or buying statutory biodiversity credits from the government. The latter then reinvests this income into nature conservation projects. 

While biodiversity is a much more visual, visceral thing than climate change, it remains misunderstood as an investment consideration. This means sustainable investments in real estate must justify how they add to investors’ returns.

Still today, biodiversity related investments in real estate have the tendency to be considered as a cost, with a poor return on investment, leading to minor investments in that category. Instituting mandatory regulations around biodiversity might be the solution to incite asset managers to preserve and enhance biodiversity where needed across their portfolio.  

There is a long way to go, especially in the development of credits, but with regulation, education and practice, we should expect biodiversity to become a material consideration for real estate investors over the long run. In time, more investors should recognise the value of preserving and enhancing biodiversity – not merely to continue life on earth but also to help future-proof assets against the adverse effects of climate change.