Climate disclosure is becoming the norm across the global economy, part of annual governance cycles and increasingly reflected in regulation. At the same time, there is a growing understanding of the need to expand beyond climate to mainstream disclosure on nature. To achieve this, action is needed by all stakeholders. The Biodiversity Plan, agreed at COP15 in 2022, made this clear by requiring governments, businesses and financial institutions to start their biodiversity disclosure journey.
As the pioneer of nature disclosure, CDP stands ready to empower both governments and the private sector to implement biodiversity disclosure. While disclosure is one part of The Biodiversity Plan, its implementation holds the key to unlocking other aspects including unlocking financial resources. Let’s unpack how.
Biodiversity protection is fundamental to financial stability
US$44 trillion of economic value generation – more than half of global GDP – is moderately or highly dependent on nature and therefore exposed to nature loss. [1] Almost all (85%) of the world’s largest companies (S&P Global 1200) have a significant dependency on nature across their direct operations.[2]
The increased use of scenario analysis has enabled a better understanding of the potential impacts of nature degradation on financial stability. Water-related risks could constitute 7–9% of global GDP potentially at risk. Risks to agriculture are also significant, estimated at around 14–18% of output at risk from water-related risks and potentially 12% of output at risk related to pollinator decline.[3] This correlates with findings that individual firms at the center of the global food supply system could lose up to 26% of their value by 2030, with a sector average hit of over 7%.[4]
Biodiversity disclosure policies are fundamental for the effective implementation of The Biodiversity Plan
The Plan contains multiple targets and goals, including the requirement for large and transnational businesses and financial institutions to disclose biodiversity impacts, dependencies and risks. The aim ultimately is to reduce negative and increase positive impacts on biodiversity (Target 15), as well as to substantially and progressively increase the level of financial resources from all sources, including by leveraging private financial resources (Target 19).
Ahead of their meeting at COP16 this October, governments are required to update National Biodiversity Strategies and Action Plans (NBSAPs), which outline how governments aim to achieve global targets at a national level. Governments are also encouraged to work on financing strategies to achieve NBSAPs. Ultimately, they will finalize the Monitoring Framework to track progress towards the 2030 goals and targets.
Biodiversity disclosure policies and regulations are fundamental to enabling sustainable business activities, as they require businesses to better understand how their direct operations and supply chains are dependent on and impact the natural environment. It is also the basis for improving capital allocation, as biodiversity data can strengthen investors’ ability to price-in nature-related risks and opportunities and enable the integration of an entity’s full environmental impacts into financial decision-making.
Disclosure policies and regulations should build on CDP’s Principles for High Quality Mandatory Disclosure (HQMD).[5]
Considering the importance of biodiversity disclosure policies and regulations in reducing negative and increasing positive impacts on biodiversity, as well as unlocking private capital, governments and regulators should implement high-quality mandatory disclosure that focuses not just on financial risks and opportunities, but encompasses environmental impacts and dependencies too, going beyond climate (CDP HQMD Principle 1).
CDP data makes this need clear. With disclosure on nature continuing to lag behind climate, voluntary action alone is no longer enough. In 2023, over 23,000 companies disclosed on their climate performance through CDP, while only 3,800 disclosed on water security and around 1,100 on forests. Less than a quarter of companies responded to all of CDP’s biodiversity questions. While 30% of reporting companies say they have board-level oversight and policies and commitments related to biodiversity, only 7% are actively measuring their impacts and dependencies. Financial services data tells a similar story, with 85% reporting assessing exposure to climate risk, while just 20% assessed exposure to wider nature risks.
To facilitate the translation of disclosure into tangible actions, governments should ultimately include robust time-bound transition plans in disclosure requirements, outlining how companies and financial institutions will transition to business models with a 1.5°C trajectory and nature-positive outcomes (CDP HQMD Principle 6).
Disclosure of integrated climate and nature transition plans can support achieving Targets 15 and 19. By disclosing their plans, companies can outline roadmaps on how they aim to manage biodiversity impacts, inform investors of their strategies towards a net-zero, nature-positive world and unlock private capital to support their transition.
CDP’s environmental disclosure data and platform will support governments in implementing and monitoring NBSAPs.
- As the only independent global environmental disclosure system, CDP can support governments in rapidly scaling the adoption of impactful, high-quality frameworks and standards across the global economy, supporting the implementation of Target 15.
Historically CDP enabled the rapid adoption of climate disclosure by businesses and FIs by aligning with the TCFD recommendations. As a result, mandatory climate-related financial disclosure that is partially or fully aligned with the TCFD is fast on track to becoming the norm across G20 countries.[6] CDP is now contributing to the rapid adoption of nature-related aspects of environmental disclosure by aligning with impactful, high-quality global and jurisdictional-level standards such as the GRI Biodiversity Standard and the TNFD recommendations. In 2024, CDP achieved partial alignment with the TNFD and intends to maximize its alignment with the disclosure framework.
- As the TNFD framework contains important elements of nature transition plans, CDP’s ongoing work to maximize its alignment with the TNFD will also contribute to the preparedness of the private sector to develop nature transition plans, unlocking private capital for biodiversity in support of NBSAPs.
- CDP can provide insights, tools and tailored information to enable governments to track their environmental goals in line with the Biodiversity Plan, thereby supporting monitoring efforts for example on Target 15. CDP collects data on organization’s process for identifying, assessing, and managing biodiversity dependencies, impacts and risks through our corporate questionnaire.
- CDP’s 2024 reporting window opens on June 4. This year, we’re inviting all disclosing companies to report biodiversity data for the first time, providing policymakers with even more and better biodiversity data. Learn more about corporate disclosure through CDP in 2024.
Footnotes
1. Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy (World Economic Forum)
2. How the world’s largest companies depend on nature and biodiversity (S&P Global)
3. The Green Scorpion: the MacroCriticality of Nature for Finance (Environmental Change Institute)
4. Assessing the financial impact of the land use transition on the food and agriculture sector (Race to Zero)
5. Mandatory environmental disclosure (CDP)
6. Mandatory environmental disclosure (CDP)