“Urgent” Corporate Action Needed to Tackle Nature Risks
Firms are failing to deliver on materiality assessments, with knowledge gaps representing major stumbling blocks for reporting, Nature Action 100 says.
Nature Action 100’s (NA100) first benchmark of focus companies’ disclosures has found that more “urgent and ambitious” action is essential to address financial risks emerging from their nature-related impacts and dependencies.
The investor initiative – which has more than 220 investor participants representing almost US$30 trillion in AUM – named the 100 companies it would prioritise in key sectors to tackle the major drivers of nature loss caused by corporates last September. These 100 firms collectively have a market capitalisation of more than US$9 trillion.
The NA100 Company Benchmark results showed that the majority of companies are in a nascent stage of addressing their nature-related impacts and dependencies. Just one company had disclosed evidence of a comprehensive materiality assessment of nature-related dependencies, impacts, risks and opportunities, while only 13 companies had so far made “sufficient” disclosure progress on any assessment-related benchmark metrics.
Overall, the new benchmark provides a snapshot of corporate disclosures on nature across eight key sectors including biotechnology and pharmaceuticals, food, forestry and paper products, and metals and mining. NA100 stressed that action in these sectors is vital to achieving global goals of reversing nature and biodiversity loss by 2030, as outlined in the Global Biodiversity Framework (GBF) being discussed this week at COP16.
The GBF requires private sector finance flows to be aligned with its aims, meaning there needs be increased backing for nature positive activities and a reduction in the sector’s negative impacts. According to the UN Environment Programme, private nature-negative finance flows amount to US$5 trillion annually, 140 times larger than the US$35 billion of private investments made in nature-based solutions.
“By providing a comprehensive and comparable view of companies’ progress on nature action, the Nature Action 100 Company Benchmark enables constructive, action-oriented, and ultimately, measurable dialogue between investors and the focus companies,” said Emine Isciel, Head of Climate and Environment at Storebrand Asset Management and member of Nature Action 100 Steering Group. “The benchmark sets a new standard and roadmap for investor engagement on nature, adding important momentum on investor action to support the implementation of the GBF.”
The benchmark assessments will be used to inform NA100 signatories’ engagement with companies. In March, NA100 launched a guide to help investors to strengthen engagement with portfolio firms and prioritise nature-related impacts and dependencies stemming from sector-specific activities.
“Major hill to climb”
According to NA100, “very few” corporates have disclosed how they are quantifying their impacts and dependencies or the locations where these are occurring. This raises concerns that they are leaving their operations and value chains exposed to growing risks and accelerating costs associated with nature decline.
The benchmark report also highlighted areas for progress, with more than two-thirds of companies (68) disclosing a commitment to protect nature, including 46 firms whose commitments extended through their value chains.
Almost half (47) of firms had also disclosed targets to avoid or reduce their impact on nature, with 37 of these presenting strategies for achieving these.
“Companies have a major hill to climb, [but] investors – and companies – now have a better, more comprehensive understanding of where companies are on this journey. said Stephanie Pfeifer, CEO at the Institutional Investors Group on Climate Change.
Peter van der Werf, NA100 Steering Group member and Head of Active Ownership at Dutch asset manager Robeco, said that the benchmark’s launch provides a “clear structure” to signal the level of ambition, disclosure, and strategies investors expect from companies to mitigate their impacts and dependencies on nature.
“We anticipate this benchmark will help form a new market standard that advances the global effort to stem nature loss,” he added.
Nature reporting obstacles
Last week, the Nature Tech Alliance launched a report which said gaps in understanding between science, businesses and investors needed to be overcome to improve corporate reporting on biodiversity.
The report, based on inputs and interviews with 18 large corporates, found that a lack of corporate decision-maker and investor understanding is hindering nature-positive growth, with many “struggling to grasp complex nature-related data”. It also said the gap between scientific insight and corporate and investment intelligence was slowing the adoption of nature-positive strategies.
It also highlighted data fragmentation, recommending companies use a unified data platform for consolidating internal and external data on nature-related risks and opportunities, claiming it would help firms overcome a “fragmented and inconsistent data landscape that has limited action”.
The alliance was created in January by environmental consultant ERM, Salesforce, and tech companies Planet and NatureMetrics to develop an integrated toolkit covering nature-related reporting and strategy.
“Companies are starting to access various forms of biodiversity data but struggle to unify them across supply chains, geographies, and portfolios, prevent[ing] a comprehensive view of their impact and dependencies on nature,” Pippa Howard, Chief Strategist at NatureMetrics, told ESG Investor.
However, she added that despite the “substantial” challenge of fragmented data, there is technology to convert data into “clear metrics that enable effective decision-making across whole business portfolios”. Howard also called on investors to promoting nature-positive strategies within their portfolios, encouraging companies to adopt innovative technologies to overcome data-related issues.
The Taskforce on Nature-related Financial Disclosure, which has published guidance for disclosure by corporates and financial institutions is looking to tackle nature-related data challenges with a Nature-related Data Public Facility (NDPF) inspired by the emissions-focused Net Zero Data Public Utility. On 26 October, the TNFD also released a development roadmap for a NDPF.
The roadmap looks to enhance market access to high quality nature-related data, as well as support corporates and financial institutions in understanding their nature-related dependencies and impacts. There is a public consultation period for the proposed roadmap which closes on 17 January 2025.
Last week, the TNFD said the number of companies and financial institutions committed to voluntary reporting in line with its recommendations now exceeded 500.
Tony Goldner, Executive Director at the TNFD, told ESG Investor there needs to be “step change” in investment across the nature data value chain to meet the “significant challenge” in upgrading the quality of nature data.
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