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Biodiversity and finance: managing the double materiality
FS-UNEP Centre / 7. Februar 2023
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Senior Projektmanagerin
Carola Menzel-Hausherr works as Senior Project Manager at the Frankfurt-UNEP Collaborating Center, which is embedded in the International Advisory Services. She has over 20 years of experience working with public and private sector organisations in the field of sustainable development and sustainable finance. As a Sustainable Finance Expert, she has built a strong track record in organisational development; adjusting organisational strategies, structures, processes and products and building in-house capacities (e.g. of financial sector institutions) to respond to market and investment needs and align with good practice (incl. fiduciary standards and safeguards). She holds an advanced degree in Business (MBA), coupled with a Bachelor in Public Administration degree.

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On behalf of Bundesamt für Naturschutz (BfN), Frankfurt School’s International Advisory Services (IAS), together with its partners World Wide Fund For Nature (WWF) and Climate Company, prepared the new report ”Biodiversity and finance: Managing the double materiality”.

The importance of biodiversity for the real economy

The publication primarily targets financial institutions and emphasises biodiversity risks and dependencies in light of EU regulations. The content is, however, relevant to all of us considering the outcomes of the 15th UN Biodiversity Conference CBD – COP 15 in December 2022. The conference closed with a new global agreement on biodiversity, the Global Biodiversity Framework (GBF). A key goal of the agreement is to put at least 30 per cent of the world’s land and sea under effective protection by 2030. The aim is to stop biodiversity loss by 2030 and embark on the restoration of degraded ecosystems. The transformation of economic activities continues to be the focus when thinking about biodiversity conservation and sustainable use. Diverse studies have revealed how businesses contribute to the unprecedented biodiversity loss and how, at the same time, such loss impacts the performance of companies – which is known as the double materiality principle.

Biodiversity and the financial sector

The new report “Biodiversity and finance: Managing the double materiality” contributes to the understanding and managing of biodiversity-related physical and transition risks that should enable financial institutions to avoid losses and reputational damage. EU regulations on biodiversity relevant to the financial sector are analysed, such as the EU Taxonomy on sustainable activities, the Corporate Sustainability Reporting Directive (CSRD) and the Sustainable Finance Disclosure Regulations (SFDR). International guidelines, including the recommendations of the Taskforce for Nature-related Financial Disclosure (TNFD), are highlighted. They are applying a four-pillar approach – governance, strategy, processes/risk management and metrics – for institutions to manage risks and opportunities.

Moreover, the report acknowledges that to manage the double materiality of biodiversity loss effectively, financial institutions need to go beyond regulation and illustrate how to do it in simplified steps. The reader will find exemplary initiatives, literature and business opportunities that could be capitalised on to enable financial institutions to turn the tide and positively impact nature.

Various tools are available for identifying biodiversity risks and setting institutional targets

Identifying and understanding nature-related risks is the underlying pre-condition for institutions to respond and mitigate those risks and contribute to the protection and conservation of nature and biodiversity. Various tools are available (or under development) and assist companies and financial institutions in this regard. For instance, the Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) tool provides insights into dependencies and impacts of different sectors and processes on natural assets, the Integrated Biodiversity Assessment Tool (IBAT) provides site-level data on local biodiversity values, while the Corporate Biodiversity Footprint (CBF), the Global Biodiversity Score (GBS), the Biodiversity Impact Analytics (BIA), the Biodiversity Impact Assessment Tool (BIAT) and Biodiversity Footprint Financial Institutions (BFFI) support the process of assessing companies’ (negative) impacts on biodiversity. The Science-based Targets Network (SBTN) is helping institutions define and act on science-based targets to manage their impacts on nature. The WWF’s Biodiversity Risk Filter and Water Risk Filter aim to facilitate this process and assist companies in identifying the highest priority areas concerning biodiversity and water. The Filter builds on and complements existing tools and data providers, especially ENCORE and IBAT.

Targets are relying on activities that contribute to biodiversity protection and conservation. Such activities can be found across sectors. Next to sustainable land management practice, different industries can apply resource-efficient and less polluting technologies and apply circular products and production methods that, on the one hand, can contribute to protecting nature and, on the other hand, save costs.

Enjoy reading the report and navigating relevant EU regulations, tools and recommended actions to manage the double materiality of biodiversity loss.

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