How can we connect net-zero to nature positive?

 

Need to know •    This is the launch issue of CLIC™ convictions: a quarterly deep-dive exploring sustainability topics through the lens of Lombard Odier's proprietary framework: the transition to a Circular, Lean, Inclusive and Clean economy.  •    There is growing awareness about the urgent need to include nature preservation in the global sustainability agenda as evidenced by the creation of the Taskforce on Nature-related Financial Disclosures (TNFD) on similar lines as the Taskforce on Climate-related Financial Disclosures (TCFD). •    Still emulating the TCFD framework isn’t easy. That’s because nature-based risks are more complex and difficult to capture than carbon risk. Investors need to rely on a fresh approach and a novel toolkit to overcome this challenge.

 

Spotlight on nature

When royalty and the world’s second-richest man find themselves on the same side, you know the world is changing. At COP26 in Glasgow, His Royal Highness the Prince of Wales and Amazon founder Jeff Bezos drove home the same message that resonated worldwide – for the good of the humanity and the economy, nature cannot be taken for granted anymore.

Before the summit, nature had been overshadowed by climate change on the world’s sustainability agenda, despite its role in contributing more than half of the global GDP at US$ 44 trillion¹. The G7 meeting in June this year, however, changed that narrative by endorsing the Taskforce on Nature-related Financial Disclosures (TNFD) and re-iterating that climate change and biodiversity were two sides of the same coin. This was followed by the increasing recognition of the role of nature-based solutions in combating climate change at COP26.

 

The TNFD: following in the TCFD’s footsteps?

The TNFD is a framework fashioned similarly to the Taskforce on Climate-related Financial Disclosures (TCFD). Just like the TCFD calls for companies and financial institutions to report and act on climate data, the TNFD urges companies to report and act on evolving nature-related risks².

While still a work in progress, the TCFD has clearly had a seismic impact on the investment world. Will the TNFD be able to achieve for nature what the TCFD is for climate change?

 

New approaches needed for nature-positive investing

Answering this isn’t easy. Being a nature-positive investor is arguably more complicated than investing for net-zero, given the breadth of risks beyond carbon exposure and lack of existing metrics and data required to understand them. It necessitates a new approach.

What does it entail? What toolkits can investors rely on? And more importantly, what actions can investors take now to adapt to nature-related risks and seize opportunities while awaiting for the TNFD framework, which isn’t expected until the second half of 2023?

We answer these questions and more in the launch issue of CLIC™ convictions, a new quarterly publication in which we explore sustainability topics through Lombard Odier's proprietary framework: the transition to a Circular, Lean, Inclusive and Clean economy.

 

The full report is available for download by clicking on the download button.

Discover more about our Natural Capital strategy here.

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