Green Finance Institute and Defra to work on nature-related financial risk estimates for businesses

The group will also work on adaptation definitions

The GFI claims the first-of-its-kind analysis will uncover the materiality of nature and how natural capital can impact financial decision making, with a focus on biodiversity loss and ecosystem degradation. The research will attempt to spell out the financial impact that nature could have on UK businesses and financial institutions.

The Green Finance Institute’s ‘Financing Nature Recovery UK’ report found that planned public spending on nature conservation and restoration in the UK for 2022-2032 is up to £97bn short of the levels needed to deliver commitments made by the UK Government and devolved governments.

However, the latest piece of work, which will be released in a report later this year, will uncover the UK’s natural capital stock and what risks it faces moving forward.

The analysis will be led by the GFI, supported by Defra and the Bank of England, and alongside the UN Environment Programme World Conservation Monitoring Centre and the Universities of Oxford and Reading.

The GFI’s chief executive Dr Rhian Mari-Thomas said: “When the costs of neglecting nature are revealed through this analysis, we will be able to see for the first time, the impact this will have on the UK economy, making it clear that conserving and enhancing the natural environment is the only intellectually coherent path to growth.”

The analysis will build on the UK Government’s support for the Taskforce on Nature-related Financial Disclosures (TNFD).

In March 2022, the TNFD unveiled the first iteration of its beta framework to help corporates outline and disclose nature-related risks and impacts in alignment with corporate reporting. The TNFD updated the framework twice that year.

One year on, the Taskforce unveiled the final draft of the framework. Organisations will have the chance to consult on the approach for the next 60 days, with the TNFD to then run pilot testing and publish the final version in September 2023.

The updated framework defines risk and opportunity assessments under the LEAP nature approach, including reducing disclosure sets from 15 to 14 and aligning the recommendations aligned with those of the Task Force on Climate-Related Financial Disclosures (TCFD).

Defra recently announced a new partnership with the UK National Standards Body, BSI, to kickstart a programme designed at overcoming the barriers to investing in nature.

The Nature Investment Standards Programme has officially been launched by the Government and BSI. Its overall task is to instigate a framework that will help funnel more investment into nature-based solutions and efforts to improve biodiversity.

The programme will lead to the creation of a new, consensus-based, UK-wide standards framework for nature. It will aim to scale up “high integrity markets” for private investments into nature, guard against the risks of greenwashing by improving transparency and data and ultimately improve nature recovery as the UK pushes toward its net-zero target for 2050.

Lord Benyon, Green Finance Minister, said: “A resilient and healthy natural environment is crucial to our economy, which is we are taking urgent action to reverse biodiversity loss and restore nature through our world-leading Environment Act. The private sector has a vital role to play and we are pleased to support this project, which helps UK companies and investors to understand the need to integrate nature into their decision-making processes.”

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