Fast reading
- A profusion of mandatory and voluntary frameworks has created confusion for companies and investors.
- When engaging with companies our priority is for them to reduce negative impacts on biodiversity throughout their value chain.
- Sound and consistent understanding of nature-related terms will strengthen and align communication between companies, investors and other stakeholders.
At COP15 in December 2022, the Kunming-Montreal Global Biodiversity Framework (GBF) catapulted nature and biodiversity into the spotlight. Since then, a number of mandatory and voluntary frameworks have sprung up, to help improve companies’ understanding of nature-related issues in their operations and value chains. Unfortunately, the proliferation of these frameworks, and the similarity of their names, can create confusion for companies and investors alike.
Voluntary frameworks include the Taskforce on Nature-related Financial Disclosures (TNFD), the Science-Based Targets for Nature, the Global Reporting Initiative, and the IFRS Sustainability Disclosure Standards. Mandatory frameworks include the EU’s Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD).[1]
As companies, governments, and non-governmental organisations began implementing these nature-based frameworks, it became clear that there was a lack of consistency in the nature-related definitions. Inconsistent definitions may lead to investor confusion, misinterpretation by companies, greenwashing, or a diminishment of the value of the terms. Also, companies may not have a clear understanding of the nature-related disclosures sought by investors, or may fail to identify and assess their own nature-related issues to the extent required.
In 2024, nature-related issues will continue to be a priority for engagements across certain sectors including food and beverage, mining and chemicals.
Nature and biodiversity are two distinct terms
While the terms nature and biodiversity are inextricably linked and are often used interchangeably, they have different meanings and it is important for companies to be clear on the distinction.
Nature includes living things, such as plants, mammals, including humans, invertebrates such as insects, worms and crustaceans, and micro-organisms such as fungi and bacteria. It also includes non-living features, such as soil, rocks, water, temperature, wind patterns, landforms such as mountains and lakes, and topography. Collectively, these have become known as environmental assets.
Biodiversity is the variety and abundance of living things in nature, which is heavily influenced by the diversity of non-living features. For example, variations in topography, ground cover and rocks determine the availability of resources such as sunlight, water, oxygen, and minerals, creating different microclimates and microhabitats that support many different life forms. These stocks of environmental assets, some of which are renewable, have become known as natural capital.
The positive relationship between nature and biodiversity creates robust, resilient ecosystems and provides benefits referred to as ecosystem services. These include pollination, food and fibre production, water regulation, climate regulation, and physical and mental well-being. But unchecked economic activity leads to nature loss,[2] and ecosystems begin to fracture, creating a more homogenous, less productive natural world.
What does this mean for engagements?
When engaging with companies our priority is for them to reduce negative impacts on biodiversity throughout their value chain. We may also ask them to ensure that their activities have a net positive impact on biodiversity, or at the very least, no net loss. Variations of these terms have proliferated and include net gain, net positive, net neutral, biodiversity net positive, and biodiversity net gain. Only net gain is a defined term under the Convention of Biological Diversity.
Nature positive has recently emerged as a science-based and measurable global goal for nature and society. It is reflected in the GBF, which aims to halt and reverse biodiversity loss by 2030, with a longer timeframe out to 2050 for restoration. However, this restored picture of nature has become murkier as businesses, governments, and civil society have used nature positive in a wider context, moving away from its original intent. The clear, hopeful essence of the phrase may be driving its popularity, but it should also be seen as a mechanism for impactful change. To that end, the Nature Positive Initiative was launched in 2023 to preserve the transformative and measurable actions that underpin this global goal.
In 2024, nature-related issues will continue to be a priority for engagements across certain sectors including food and beverage, mining and chemicals. We will continue to ask companies to assess and disclose their nature-related impacts, dependencies, risks and opportunities in line with the TNFD recommendations. Sound and consistent understanding of nature-related terms, such as nature, biodiversity and ecosystem services, will strengthen and align communication between companies, investors and other stakeholders.
We expect companies to use the insights from their TNFD assessment to inform the development of strategies, roadmaps and targets to address their nature-related risks and impacts. Again, a deeper understanding of the range of goals and targets available will enable companies to make informed decisions about their approach. A common language will facilitate more effective direct and collaborative engagement, such as through Nature Action 100, and support collective action to halt and reverse biodiversity loss in this decade.
Adopted definitions for nature-related engagements
Below, we have set out a series of nature-related terms, along with our adopted definitions. This will strengthen engagement and support companies when they attempt to integrate nature and biodiversity into their business strategies. It should also reduce the risks associated with the continued use of inconsistent terminology. In arriving at these definitions, we considered how various frameworks, organisations, and governments have defined these nature-related terms and have adopted those that will provide both clarity and consistency.[3]
Nature – This is the natural world, with an emphasis on the diversity of living organisms, including people, and their interactions among themselves and with their environment. [4]
Biodiversity – The variability among living organisms from all sources, including terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are a part. This includes diversity within species, between species, and of ecosystems.[5]
Environmental asset – The naturally occurring living and non-living components of the Earth, together constituting the biophysical environment, which may provide benefits to humanity.[6]
Ecosystem services – The contributions of ecosystems to the benefits that are used in economic and other human activity.[7]
Natural capital – The stock of renewable and non-renewable natural resources (eg plants, animals, air, water, soil and minerals) that combine to generate a flow of benefits to people.[8]
Natural capital accounting – This is an umbrella term covering attempts to use an accounting framework to provide a systematic way to measure and report on stocks and flows of natural capital. It covers accounting for individual environmental assets or resources, such as water, minerals, energy, timber or fish, as well as accounting for ecosystem assets, such as forests or wetlands, biodiversity and ecosystem services.[9]
Net gain – Companies may target no net loss of biodiversity or a net gain of biodiversity, relative to a predetermined baseline – also referred to as net neutral and net positive goals, respectively. The mitigation hierarchy comprises four broad steps – avoiding, minimising, remediating and offsetting.[10]
Nature positive – This is a global societal goal to halt and reverse nature loss by 2030 on a 2020 baseline, and to achieve full recovery by 2050.[11]
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1 In May 2023, the Science-Based Targets Network (SBTN) released the first corporate science-based targets for nature. The European Commission adopted the Corporate Sustainability Reporting Directive in July 2023. The Taskforce on Nature-related Financial Disclosures (TNFD) finalised its framework in September 2023. The Global Reporting Initiative (GRI) published its revised biodiversity standard in January 2024. The International Sustainability Standards Board (ISSB) continues work on its biodiversity disclosure requirements.
2 The TNFD defines nature loss as the loss and/or decline of the state of nature. This includes, but is not limited to, the reduction of any aspect of biological diversity eg diversity at the genetic, species and ecosystem levels in a particular area through death (including extinction), destruction or manual removal. Taken from the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (2019) Global Assessment Report on Biodiversity and Ecosystem Services.
3 These adopted definitions are subject to change given the rapid development in this area.
4 TNFD Glossary adapted from Díaz, S et al (2015), The IPBES Conceptual Framework – Connecting Nature and People
5 TNFD Glossary citing the Convention on Biological Diversity (1992) Article 2
6 TNFD citing United Nations et al (2021) System of Environmental-Economic Accounting – Ecosystem Accounting
7 TNFD citing United Nations et al (2021) System of Environmental-Economic Accounting – Ecosystem Accounting
8 TNFD citing Capitals Coalition (2016) Natural Capital Protocol
9 System of Environmental-Economic Accounting – Ecosystem Accounting (2021)
10 Convention on Biological Diversity (2022)
11 Nature Positive Initiative
