Several weeks after the release of the fourth and final draft of the Taskforce on Nature-Related Financial Disclosures' framework, the body’s co-chair discusses what the TNFD means for investors, how it can be used, the ample data that is available, and why there is an immediate need for investors to address biodiversity loss.

Nature has always been the economy’s most important asset and addressing the challenge of biodiversity for asset owners has never been more critical. But how do we collectively move from much-needed conservation to addressing this existential challenge at greater scale? The answer may lie in developing a thriving natural capital market, helping investors shift capital flows away from businesses and projects that degrade the natural environment and towards regenerative and circular initiatives.

The Global Biodiversity Framework achieved at COP15 in Montreal was a historic moment in the fight to halt and reverse biodiversity loss. A key problem, though, is that the value of nature resists easy quantification, which means markets end up undervaluing it. That’s why the next crucial step is for governments to set clear guardrails and incentives to help make the scale of required investment a reality. There are promising examples of where this is already happening. Where and how could more government action be useful? 

The first hurdle for investors looking to incorporate biodiversity objectives into portfolios is accessing data that is accurate, relevant and reliable.  The EU’s coming Due Diligence Directive and Single Access Point are two initiatives designed to standardise asset owners’ data acquisition and improve disclosure by investee companies. How are the regulatory and supervisory angles around biodiversity being put into play?

A series of case studies of investors putting biodiversity to work from both a risk and a fiduciary perspective.

PensionDanmark has invested in an innovative technology to place 3D-printed reefs at the base of one of its sea-based wind farms.  The reefs will help to revive the area’s cod population, boosting the carbon storage capacity of the ecosystems associated with it.  The asset owner will explain how they plan to measure their success and how it will look on their balance sheet.

The food system is inextricably linked with biodiversity and natural capital. Investors will want to understand the impact of their investee companies so that they can make decisions on par with their biodiversity goals. The Financial Markets Roadmap for Transforming the Global Food System is designed to help investors focus their strategic allocation, engagement and stewardship activity, while analysing the potential harms arising from the current food system and the trajectory it will take if a business-as-usual approach continues.

Nest, the UK government’s £25bn + defined contribution fund has been an early adopter of responsible investment practices.  Today’s presentation addresses their management of natural capital risks and opportunities across the portfolio, covering the research, data and investment approaches used to help identify and manage risks, engage with fund managers and help allocate to new investment opportunities.