Climate change is more mature and understood as a business risk. Previously, climate change was viewed as an environmental externality, but this has shifted over the past decade to an environmental risk, and now a financial one. Biodiversity is arguably a fair way behind climate change on this curve.
Partly as a result of this immaturity, despite its similarities with climate change risk, understanding and managing biodiversity risk is different.
No single metric
While it is relatively simple for companies to calculate carbon emissions, measuring biodiversity can be complex and multi-faceted. There are two elements:
- The ways to assess the biodiversity value of ecosystems by measuring the number of endangered species or other appropriate metrics.
- Use this assessment to measure your impact of activities on biodiversity, such as the volume of pollinators to agriculture or ongoing clean river flows. These can be measured at different levels, such as corporate, site and project levels.
The TNFD framework should help businesses understand their biodiversity risks and opportunities, and how to disclose their performance. This could help shift global financial flows to nature-positive outcomes. While parallels with the TCFD are appropriate, organizations shouldn’t immediately expect the same level of guidance and precision in the tools that will be provided. A full market release of the framework is expected in the second half of 2023.
Offsets are not “like for like”
Offsets cannot make up for the loss of destroying ancient ecosystems containing rare species. Some biodiversity will always be lost in offset exchanges as no two areas of habitat or species populations are identical. Also, making biodiversity offsets meaningful can involve a long-term commitment to take full account of direct, indirect and cumulative impacts, geographically and over time. When it comes to managing biodiversity risk, priority should be given to avoiding and reducing the impact on biodiversity loss, and offsets should be considered as a last resort.
The need to take into account multiple values
Landscapes should be managed for productive, wilderness and cultural values. Protecting biodiversity doesn’t have to involve locking up land as wilderness. We can look into the deep knowledge of indigenous people to understand how these values can coexist.
The skill set
Biodiversity is an enormous multidisciplinary area, requiring companies to engage with a new type of capability – usually outside their comfort zone. Many of the conservationists brought on board by corporates today are former activists from the “other side.” This requires emotional maturity to overcome historical hostility and recognize that corporates and activists will have to work together to protect biodiversity. Non-Governmental Organizations (NGOs) and philanthropists typically work where there is market failure. Businesses should work with these stakeholders to understand the nature of the failure, so that they can help avoid introducing distortions as markets are developed.
To this final point, business should accept that there are only a few simple and straight-forward answers. For example, in agriculture, pesticides cannot just stop being used, if that could mean humans will starve. Instead, the industry should be encouraged to farm in a more biodiversity-supporting way — not just on hobby farms, but across big agriculture – replacing monoculture with polyculture farming practices. This will likely require collaboration from diverse stakeholders on an unprecedented level. Companies should welcome former adversaries into their boardrooms and earn their trust. Activists should avoid discrediting corporates and become part of the solution.