Biodiversity and your business

This week, we are taking a break from our heatmap updates and sharing some thoughts after attending a webinar on biodiversity hosted by the Mexican Counsil for Sustainable Finance.

The world is increasingly recognizing the crucial role biodiversity plays in supporting the global economy. The alarming decline in global biodiversity – with a 73% drop in the Living Planet Index from 1970 to 2020 – highlights the urgent need for us to give this a deeper thought. Ecosystems and species are deteriorating at unprecedented rates, especially in Latin America and the Caribbean.

Why is this relevant for your business?

Biodiversity protection is crucial for businesses because it ensures the long-term sustainability of the ecosystems that provide essential resources and services. Healthy ecosystems contribute to the availability of raw materials, regulate climate, purify water, and pollinate crops—all critical for various industries.

Thus, with the loss of biodiversity, businesses face multiple risks. This includes physical risks (since biodiversity loss leads to more natural disasters and even water scarcity), regulatory risks (stricter environmental laws), market risks (as stakeholders realize how relevant this is), and reputational (from environmental incidents like the BP oil spill). All of them can have financial consequences.

Biodiversity reporting

Addressing biodiversity loss requires systemic changes across multiple sectors. And to start, we first need to understand where we are standing. The Taskforce on Nature-related Financial Disclosures (TNFD) is transforming how businesses report biodiversity risks by encouraging transparency and aligning with global frameworks like COP15’s Global Biodiversity Framework. This approach helps guide capital toward nature-positive outcomes.

ISSB is also working on a standard that addresses biodiversity impacts and risks. This should over time lead to a better picture of who has mapped this and is working to manage the topic appropriately.

We understand that many companies are only just starting to grasp the complexities of reporting on climate-related risks. This has been a steep learning curve, requiring businesses to integrate climate risks into their financial planning, assess physical and transition risks, and communicate this clearly to stakeholders. Now, with the rising importance of biodiversity, companies are being called to expand their scope even further. Reporting on biodiversity risks presents new challenges, as the science that surrounds it (and the knowledge across management teams on this topic) is less mature, the metrics are still evolving, and the impact of biodiversity loss can be more localized and harder to quantify.

This may seem daunting, but it’s important to view it as a long-term issue rather than something requiring an immediate solution. While it might not be something you need to have fully figured out by tomorrow, it’s definitely worth investing time in understanding thoroughly over time. Developing a solid grasp now will better position you to navigate future challenges and opportunities effectively.

I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.

Best,

Marimar

CEO, Miranda ESG