“Biodiversity and finance: Managing the double materiality”

On behalf of Bundesamt für Naturschutz (BfN), Frankfurt School’s International Services (IAS), together with its partners WWF and Climate Company prepared the new report ”Biodiversity and finance: Managing the double materiality”.

The publication targets primarily financial institutions and emphasises biodiversity risks and dependencies in the light of EU regulations. The content is, however, relevant to all of us considering the outcomes of the 15^th UN Biodiversity Conference CBD – COP 15 in December 2022. The conference closed with a new global agreement on biodiversity, the “Global Biodiversity Framework, (GBF)”. A key goal of the agreement is to put at least 30 per cent of the world's land and sea under effective protection by 2030. The aim is to stop biodiversity loss by 2030 and embark in the restoration of degraded ecosystems. The transformation of economic activities continues to be the focus when thinking about biodiversity conservation and sustainable use. Diverse studies have revealed how businesses contribute to the unprecedented biodiversity loss and how, at the same time, such loss impacts the performance of companies – the double materiality principle.

The new report “Biodiversity and finance: Managing the double materiality” contributes to the understanding and managing of biodiversity-related physical and transition risks that should enable financial institutions to avoid losses and reputational damage. EU regulations on biodiversity relevant to the financial sector are analysed, such as the EU Taxonomy on sustainable activities, the Corporate Sustainability Reporting Directive (CSRD) and the Sustainable Finance Disclosure Regulations (SFDR). International guidelines, including the recommendations of the Taskforce for Nature-related Financial Disclosure (TNFD) are highlighted. They are applying a four-pillar approach – governance, strategy, processes/risk management and metrics – for institutions to manage risks and opportunities.

Moreover, the report acknowledges that to manage the double materiality of biodiversity loss effectively, financial institutions need to go beyond regulation, and illustrates how to do it in simplified steps. The reader will find exemplary initiatives, literature and business opportunities that could be capitalised on to enable financial institutions to turn the tide and positively impact nature.