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Nature is in decline. Katie Leach, Head of Nature, Lloyds Banking Group and Jennifer Burrett, Director, Sustainability & ESG Finance, Lloyds Bank Corporate & Institutional, explore the importance for businesses to embed nature considerations into the work that they do and to assess their nature related risks and opportunities in their operations and in their supply chains.
Just three in every 100 UK businesses currently monitor nature risks1, yet more than half of global GDP – $58 trillion of value generation – is moderately or highly dependent on nature and its services2. In a UK context, an assessment has shown that 13 of the 18 sectors in the FTSE 100 have production processes that have high, or very high, material dependence on nature3.
Therefore we know that businesses, or indeed any of us, couldn’t operate without nature and the ecosystem services it provides, such as natural raw resources, pollination, flood prevention, water quality and disease control. However, nature is in decline.
Wildlife populations have fallen by an average of 69% since 1970 and some species have suffered declines of as much as 95%4. A quarter of our assessed plant and animal species are threatened by human actions5, a million species face extinction6 and we are cutting down 2,400 trees a minute7. The UK is one of the most nature-depleted countries in the world, ranked in the bottom 10%8.
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As countries, individuals and businesses, we therefore need to act. We must not only halt the decline of nature but reverse it. Businesses need to understand how they depend on nature and how they impact on nature too.
The specific locations of businesses’ operations and supply chains are important when considering these impacts and dependencies; they differ enormously from place to place. Businesses need their nature strategies to be grounded in location-based plans.
Opportunities amid the challenges
While the outlook is concerning, nature decline presents the business world with many opportunities. These include investing in nature-based solutions (such as tree planting for flood management and seagrass meadows as coastal defences) and nature tech (for example eDNA and satellite monitoring).
Some corporates are leading the way and embedding nature into their strategy and priorities. They recognise that addressing the decline in nature is not only the right thing to do, but something they must do; it is an opportunity.
More business leaders are increasingly recognising the need to act for nature. Paul Polman, Business Leader, Campaigner and Former CEO, Unilever, interviewed as part of the Save Our Wild Isles Business films (created by RSPB, WWF and National Trust), comments that “increasingly we’re starting to understand that this is probably one of the biggest opportunities that we’re sitting on this century. The costs that we are incurring as a result of destruction of biodiversity is significantly higher than what it would cost us to prevent the issues in the first place and that makes it such an attractive business opportunity for all of us.”
Also discussed in the Save Our Wild Isles Business films is the John Lewis Partnership nature strategy, where they highlight the importance of having science-based targets for nature. “Unless we set credible, ambitious targets that we can be judged against, we won’t make fast enough progress,” says Sharon White, the Partnership’s Chair. “So we’ve set some incredibly ambitious targets for how we as a retailer, both encourage greater biodiversity but also be really thoughtful about how we protect nature in our supply chains.”
Some companies have also begun to embed their nature strategies into sustainable finance. For example, The Hill Group has a biodiversity net gain (BNG) target in its loan facility. Its BNG performance, among other targets, will result in an adjustment to the margin depending on performance against the targets set.
Importantly, nature can also deliver positive outcomes for climate change strategies. Climate change and nature are different sides of the same coin and are intrinsically linked, meaning we can’t solve one of them without the other. As nature is destroyed, the carbon it was storing is released into the atmosphere, contributing to climate change. When nature is protected and restored, carbon is captured within the ecosystem, taking greenhouse gases directly out of the air. So, businesses must not neglect their climate strategies when designing and implementing nature strategies; the two should be addressed together. Nature opportunities can support positive climate outcomes too.
“The costs that we are incurring as a result of destruction of biodiversity is significantly higher than what it would cost us to prevent the issues in the first place and that makes it such an attractive business opportunity for all of us.”
Paul Polman, Business Leader, Campaigner and Former CEO, Unilever
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How can businesses help solve the decline in nature?
The WWF, the National Trust and RSPB, alongside Silverback Film productions commissioned a series of four films to highlight the relationship between businesses and nature, exploring business impacts, the importance of financial sector action, and nature relationships in the food, farming and marine sectors.
What can businesses do now?
Businesses must incorporate nature into their business plans and climate strategies and set science-based targets for nature.
- Businesses can start assessing their relationship with nature by mapping the location of their business activities both in their direct operations and supply chains. They need to assess their nature-related impacts and dependencies at these different locations, and therefore consequently determine their nature-related risks and opportunities. The Taskforce for Nature-related Financial Disclosures (TNFD), very similar to the Taskforce on Climate-related Financial Disclosures (TCFD) but focused on nature rather than climate, published its v1.0 framework in September 2023. This framework supports businesses to manage, measure and disclose their nature related risks and opportunities.
- Once businesses have completed a nature assessment, they can design a transition plan for how to manage their impacts and dependencies on nature, and how to measure and monitor their progress. Setting nature targets is an important part of this exercise, and ensuring these targets are science-based, ambitious and time-bound is essential. The Science Based Targets Network (SBTN) is a helpful resource to support businesses with setting science-based targets for nature. It is similar to the Science Based Targets initiative (SBTi) but focused on nature rather than climate. It has released guidance on parts of its framework and is piloting its nature target validation process.
Lloyds Bank’s Sustainability and ESG Financing team
Lloyds Bank’s Sustainability and ESG Financing team is dedicated to supporting clients with their sustainability strategies, including access to finance and structuring sustainable finance solutions. Our team of 30 professionals can help to build understanding of the importance of addressing nature in both direct operations and supply chains. The team can share insights and education on upcoming nature policies and frameworks such as the TNFD and SBTN, evolving regulation and stakeholder expectations, and support the embedding of nature targets into finance. The team would be delighted to discuss this crucial topic with you. Please get in touch.
“It’s fantastic that Lloyds Bank Corporate & Institutional are taking the nature crisis seriously. We know the financial sector has a fundamental role to play in addressing biodiversity loss, through all areas of business, whether it’s by setting nature-positive criteria for financial decisions, or directly funding nature restoration.”
Beccy Speight, Chief Executive of the RSPB.
Beccy continues: “The direction has been set, and we now need to see this translated into action, both at Lloyds Bank and in the wider financial sector. With the release of Science Based Targets for Nature (SBTN) and the framework from the Taskforce for Nature-related Financial Disclosure (TNFD) this year, it will become easier for businesses and financial institutions to take action and continue to build the momentum to reduce risk and maximise opportunity in the face of the dual nature and climate crises.”
Sources
1. UK businesses monitoring nature risks – ONS
2. Global GDP dependent on nature – PWC
3. UK sector dependence on nature – UN Environment Programme
4. Living Planet Report 2022 – WWF
5. Biodiversity in the UK – UK Parliament
6. Species Extinction Rates – UN Report
7. Deforestation stats – World Animal Foundation
8. UK biodiversity – Save Our Wild Isles report
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