Biodiversity & Natural Capital
In recent years, concerns about rapid loss of biodiversity and its alarming consequences have reached a tipping point, prompting nations around the world to take decisive action.
In the Law:
In December 2022, COP15 produced the Global Biodiversity Framework (GBF) as a precedent for biodiversity preservation and restoration efforts. In response, the Australian Government unveiled its Nature Positive Plan (NPP), outlining their commitment to safeguarding our natural wonders.
On top of the NPP, Australia now has the Nature Repair Market Bill 2023 and a Consequential Amendments Bill. These Bills establish a framework for a voluntary nature repair market (i.e. “a market for biodiversity”), intended to encourage investment in long-term nature restoration, and rewarding landholders for their contribution for enhancing and protecting the land.
In the Company Boardroom:
There are increasing biodiversity-related reporting expectations for companies. The Taskforce on Nature-related Financial Disclosures (TNFD) is due to release its financial disclosures framework in September 2023, which will detail how to identify and assess nature-related risks and opportunities.
These changes are anticipated to lead to the pricing of nature-positive (and negative) initiatives and actions as commodities. Companies will need to consider how their operations, supply chains, and products/services interact with the natural environment and identify ways to minimise negative impacts or capitalise on positive ones.
In the Investment Houses:
Forward-thinking asset owners are hoping to utilise the upcoming upswell from society on nature-related commitments to lead vs. their peers in this new(ish) market. For these investment houses to do this, they must place requirements onto their investee companies (listed or unlisted) to provide biodiversity-related case studies or data up the chain.
Additionally, investment houses who have set strong ESG or responsible investing commitments will be reviewing each investment they make for its impact on nature and biodiversity. As per all ESG topics, the companies that have not disclosed much on these topics may be disadvantaged in attracting new forms of capital.
Our View:
Very soon, nature will have a newfound significance in corporate boardrooms across the majority of the mid-to-large cap world. Similar to climate change-related reporting requirements, small-cap companies will likely be given a couple of years grace period to educate and catch up.
Nature (again, just like climate change) feels difficult to value and incorporate into financial analysis. The guidelines around this should help, however we envision companies and investment houses alike may require a bit of upskilling.
We are keen to see the adoption of the Nature Repair Market in Australia as it offers the opportunity to mobilise support for a nature-positive future. We love our unique natural habitat; we welcome a collective effort to protect and preserve it!
For additional information on this important topic or ESG assistance, contact us today at info@anabranchesg.com.au
