While climate change dominates the headlines, nature loss also poses a serious risk to businesses. With the UN Biodiversity Conference approaching, it’s time for the private sector to face up to the challenge. We spoke to three KPMG biodiversity experts, Orlaith Delargy, David Greenall and Carolin Leeshaa to find out more.
Biodiversity is declining faster now than at any time throughout human history. This depletion of nature is causing specific and broader systemic risks for the economy and even the stability of global financial system.
Businesses don’t often realise, however, that nature loss is more than an abstract concept, but has real-life economic and social impact.
“Most CEOs – and indeed most people on the street – could explain the climate crisis in a few sentences,” says Orlaith Delargy, Associate Director and Biodiversity lead EMA, KPMG in Ireland. “But for biodiversity and nature loss, we are not there yet. I think a lot of people would struggle to define biodiversity, why it matters, and how it links to our prosperity and wellbeing.”
At COP27 a clear bridge was established between nature and climate.
Time is running out to protect nature
With biodiversity and ecosystems under more pressure than ever, governments are uniting to establish goals aimed at halting and reversing nature loss.
On December 7, delegates from around the world will gather in Montreal, Canada, for the UN Biodiversity Conference, also known as COP15. They hope to achieve a Paris-style agreement for nature — a new Global Biodiversity Framework, including goals for the next decade and beyond.
The agreement could see governments aiming to become “nature positive” by 2030, meaning no net loss of nature by 2030 and full recovery by 2050.
Nature and climate: Two sides of the same coin
The biodiversity COP follows closely after the climate COP, which met most recently in Egypt from November 6 to 18. There is increasing understanding of how these two issues are inextricably linked, as biodiversity can help us to mitigate and adapt to climate change, while climate change and changes in land use drive biodiversity loss.
We increasingly see how these strands are interconnected, with biodiversity mitigating climate change, but climate change and changes in land use driving biodiversity loss.
“At COP27 a clear bridge was established between nature and climate,” says David Greenall, Global Managing Director, Climate Risk, Decarbonization & Resilience, KPMG International. “Calls were made for leaders to better integrate nature into the global response to the climate crisis.”
While climate change cannot be tackled by reversing biodiversity loss alone, says Greenall, “achieving Net Zero by 2050 won’t be possible without nature”.
Ecosystems such as forests, oceans, lakes, grasslands, and wetlands, currently absorb about 20 percent of global greenhouse gas emissions. But these benefits are being damaged by deforestation, agricultural and other land-use practices.
Nature not only plays a critical role in mitigating the causes of global warming, it also can help buffer its impacts and reduce disaster risk and vulnerability.
Understanding the risk to business
The more biodiversity loss our planet suffers, the higher the potential impact for everyone - including businesses.
“While both climate change and biodiversity loss are key material risks for businesses, biodiversity could be viewed as a bigger financial risk to businesses at the moment, simply due to the fact that approaches to assessing climate risks are more mature and advanced,” says Carolin Leeshaa, Natural Capital & Biodiversity Global Lead, KPMG International.
Yet, biodiversity is in many ways more complex than climate change, in part due to the fact that there is no single metric by which to measure it.
“We need to get much better at what I call ‘valuing nature's value’,” says Greenall. “Many of the benefits provided by nature and ecosystem services are not currently reflected in the market prices of goods and services. Therefore, they’re often neglected or undervalued when it comes to making the business case for investing in nature.”
Furthermore, the costs of environmental damage due to business activity are largely externalised and are not reflected in corporate balance sheets.
This accounting issue is being addressed through global initiatives such as the Taskforce for Nature-related Financial Disclosures (TNFD). The TNFD is a market-led, science-based and government backed initiative with the mission to develop and deliver a practical and consistent risk management and disclosure framework to enable corporates and financial institutions to assess, manage and report on nature-related risks and opportunities.
The ultimate objective of the TNFD is to re-direct the global flow of capital away from activities that harm nature and towards activities that benefit nature. Companies are encouraged to pilot the beta framework and provide feedback to the TNFD to make the framework fit-for-purpose for industry. The final version of the framework is due to be released in September 2023.
Meanwhile, COP15 will look at another important issue for the private sector: how to reduce, redirect or eliminate harmful subsidies that damage biodiversity.
“We spend $1.8 trillion per year on subsidies that enable nature loss, making the situation worse, and causing risks for businesses and financial institutions, because they distort prices,” says Delargy. “We're actually financing our own extinction.”
Companies are increasingly seeking to better understand their nature-related risks and opportunities to make better, nature-smart decisions.
What can Irish businesses do?
There's a huge opportunity for Irish businesses to act, says Delargy. “They must consider how and where their own activities up and down the value chain are directly or indirectly enabling nature loss, and then they can take rapid action to reduce these pressures."
In fact, companies both in Ireland and globally are increasingly recognising how important biodiversity and protecting nature is to their business, says Leeshaa.
“They want to understand how they can assess their biodiversity risks across their value chain or their investment portfolio, how they can incorporate these with their related climate risks and where the opportunities are.”
Stakeholders aren’t just asking for investment in climate change and biodiversity, she says, they’re demanding it. And with the regulatory landscape rapidly evolving, businesses that engage now on biodiversity will be well equipped to deal with these evolving expectations.
Meanwhile, there is growing pressure from within Irish society to change the status quo, if needs be by anchoring the rights of nature in the constitution.
We can see biodiversity rising up the agenda in Ireland, with the Citizens’ Assembly and a new National Biodiversity Plan on the way. Now is the time for the private sector to step up.
Constitutional rights for nature in Ireland
On November 27 the Citizens' Assembly on Biodiversity Loss in Ireland voted overwhelmingly to recommend a referendum to amend the Constitution with a view to protecting biodiversity.
The assembly argued the Irish government has failed to adequately fund, implement, and enforce existing national or EU legislation and therefore an amendment is required that would confer:
- a constitutional right to a clean, healthy, safe environment
- a right to a stable and healthy climate
- the rights of future generations to these or other environmental rights.
The proposed constitutional change would also recognise nature as a holder of legal rights, comparable to companies or people.
From talk to action - get in touch
We understand the challenges and opportunities that biodiversity presents to businesses. If your business is looking to move from talk to action, talk to us to find out more about how we can help. We'd be delighted to hear from you.
Contact our team
KPMG in Ireland
Natural Capital & Biodiversity Global Lead
Global Managing Director, Climate Risk, Decarbonization & Resilience, KPMG International