Biodiversity is the variety of all the organisms that occur naturally in an area and the interactions that occur between them. The definition includes the number of species, their genetic variation and the diversity of natural habitats and ecosystems. Human activities in recent decades have affected not only the planet's climate but also the integrity of natural habitats and ecosystems. The main pressures include land use change (e.g. deforestation, intensive monoculture, urbanization), direct exploitation such as hunting and overfishing, climate change, pollution and the spread of invasive non-native species. Biodiversity is declining faster today than at any time in human history. The loss of natural habitats and species richness poses a specific and wide systemic risk to the economy, even to the stability of the global financial system. Its decline has fundamental consequences, as biodiversity contributes to clean air, fresh water, good quality soil, and the pollination of crops. Or, for example, it helps to reduce the impact of natural hazards.

Although the topic has not yet become as widely recognized as climate change and greenhouse gas emissions, the problem is not less important. Companies subject to the Corporate Sustainability Reporting Directive (CSRD) will have to apply the European Sustainability Reporting Standards (ESRS). The ESRS E4 standard sets out disclosure expectations specifically for sustainability activities related to biodiversity and ecosystems. However, businesses often fail to understand biodiversity in the context of their own day-to-day business operations and the risk linked to its loss, and fail to recognize the real economic and social impact it has on them.

KPMG helps companies and financial institutions to understand their risks related to biodiversity and natural capital and to develop their strategies and transition plans accordingly. We also support our clients in the development of related reporting processes, including linked risk analysis.

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