Nature-focused regulations start to get serious

Over recent years, we have published a number of whitepapers examining the relevance of land, freshwater and oceans as they relate to climate neutrality
Today, we explore the rising tide of nature-related regulation which will mark the start of a series of nature-focused whitepapers to support investor understanding
Like climate before it, government, corporate and investor commitments relating to nature have picked up speed over the last few years
Nature-focused regulation, such as the European Commission’s Nature Restoration Law approved last month , are focusing on eliminating harmful practices, encouraging more sustainable activities and promoting nature-positive policies
The ambition is to radically transform the process of production and consumption, which includes moving away from the current linear model of take-make-waste to one which decouples economic growth from resource use
It also includes increasing protected areas on land and sea, eliminating deforestation, reducing chemical use across key sectors, cutting food and plastic waste, and ending the illegal trade in wildlife among others
Investors will require their investee companies to inform them of their transition plans to facilitate performance as well as progress transparency

Introduction

Nature can be defined^[1] as ecosystem services which focus on the value that living and non-living natural resources (the ‘stocks’) provide by supplying nature’s ‘goods and services’ (the ‘flows’) which provide value to businesses and society. The world’s biodiversity can therefore be considered as the living part of nature and acts not just as an important life support system, but, is the basis for the world’s well-being and prosperity. Urgent action is required since over the past half century a third of the world’s topsoil has been degraded, 32% of the world’s forest area has been destroyed and more than 85% of wetlands have been lost^[2].

From a net zero perspective, this is not sustainable even in the short term since terrestrial ecosystems such as healthy soils, forests and wetlands alongside marine ecosystems play a critical role in emissions reduction and removal. Without restoring nature and significantly limiting the negative impacts of economic activities on biodiversity, we will not be able to mitigate and adapt to climate change.

This paper outlines the steps investors are exploring to embed nature into their investment process as well as examining some of the major nature-based initiatives which have emerged across the public and private sectors. It then assess the ambition of nature-based regulation on at a global and regional level as well as nature-specific transparency requirements and taxonomies.