Bridging the gap between short-term asset managers’ and long-term universal owners’ diverging views remains a challenge, explains Carol Adams, Chair of the GRI’s Global Sustainability Standards Board.
The natural environment provides the backbone of economic activity, and nature is an essential source for goods and services. At the same time, biodiversity is declining at an unprecedented rate, threatening many of the ecosystems on which businesses and societies depend for their livelihood.
Such were the words of Snorre Gjerde, Lead Investment Stewardship Manager at Norges Bank Investment Management (NBIM), as he evidenced the need for a better view of companies’ exposure to biodiversity risk and their impact on nature, speaking at an event hosted by the Global Reporting Initiative (GRI).
The event marked the launch of the GRI’s latest reporting standard, focused on biodiversity impact disclosures. Launched last month, GRI 101: Biodiversity 2024 is an updated and expanded version of its predecessor – GRI 304: Biodiversity 2016.
Aiming to support companies as they meet growing demands from stakeholders, the new standard introduces more transparency on supply chains, location-specific impact reporting, new disclosures on direct drivers of biodiversity loss, as well as reporting requirements for societal impacts.
“One of the biggest challenges that was communicated through the [industry] feedback, was how to identify the most significant impacts in the supply chain,” Carol Adams, Chair of the GRI’s Global Sustainability Standards Board (GSSB) and accounting professor at Durham University Business School, told ESG Investor. “That’s because it involves asking other organisations for their own disclosures, which in some cases can be very significant.”
The launch of GRI 101 also responds to some alarming reports, with the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services having recently warned that biodiversity was declining in every region globally, while the World Economic Forum reported that 50% of the global economy was under threat due to biodiversity loss. Although GRI standards are among the most widely used for sustainability reporting, only 40% of companies report on biodiversity globally, a 2022 KPMG survey of 5,800 entities showed.
The revised biodiversity standard builds on key developments in the field of natural capital conservation and valuation, such as the UN Kunming-Montreal Global Biodiversity Framework (GBF), the European Financial Reporting Advisory Group’s EU Biodiversity Standard (ESRS 4), and the targets for nature set by the Science-Based Target Network (SBTN). It is also aligned with recommendations from the Taskforce on Nature-related Financial Disclosures (TNFD).
“We hear the same message from many investors – both on the taskforce and within the TNFD forum – that a breadth of the finance sector now recognises the materiality of this [issue],” said TNFD Technical Director Emily McKenzie, also speaking at the GRI event. “There’s an understanding of the importance of impacts and dependencies on nature, and of the fact that biodiversity is a critical characteristic that creates risks and opportunities to companies and to investors’ portfolios.”
Although those concepts have become more widely acknowledged, their understanding now needs to be matched with appropriate metrics and indicators. “We still see a gap on the measurement of the state of nature, with a lack of consistency and alignment,” McKenzie added. “That, humbly, is an area for all of us and the community to make further progress on.”
Similarly, Gjerde said the financial community was increasingly waking up to the biodiversity challenge, and trying to understand its interplay. “But we really do need the standards and toolkit, such as the TNFD or the GRI,” he added. “We see these as really important conduits to access this information, but also for other market participants to utilise in their decision-making.”
These are the challenges that the GRI aimed to respond to as it developed standard 101, due to be formally implemented in January 2026. Its principles were developed through a multi-stakeholder process, which involved the appointment of a technical committee involving representatives from the business, civil society, investor, labour, and mediating institution communities.
“This multi-stakeholder approach is absolutely critical when it comes to sustainability reporting,” said Adams. “We want to make it so that we’re drawing on the best minds, the best expertise and a wide range of perspectives, to come to a consensus on what’s needed.”
The importance of partnerships and collaborations is embedded in the UN Sustainable Development Goals (SDGs), and as such, is also crucial for standards that address companies’ impacts on those goals, she added.
The biodiversity standard was also informed by a public comment period that ended early last year, having received 122 responses from organisations and individuals around the world – 12% of which were investors.
“We make sure the standards are truly global in their outlook and include views from other stakeholder constituencies: investors need to know what their thinking is, as that affects the long-term success of their organisation,” Adams explained. “There’s been a very close collaboration between our standards division and the TNFD over the two-year period of this standard being revamped.”
A critical part of developing the standard was to understand the most significant impacts in relation to biodiversity, so that companies and investors alike could better identify risks and opportunities in relation to those.
“Understanding the biggest impacts, and managing and reporting on them, is an essential step that is required under GRI 3,” said Adams. “This is an approach that the EU has also taken. Having talked to quite a few partners in Big Four [accounting] firms, they all say you have to start by talking to stakeholders and identify their most significant impacts.”
Standard 3 is part of the GRI’s universal standards, and provides step-by-step guidance for organisations on how to determine material topics – referring to their most significant impacts on the economy, environment, and people – including human rights impact.
Members of the investment community have welcomed the GRI’s chosen approach for the new biodiversity standard.
“Given the link between nature and value creation, there is also a direct link to the value of companies in our portfolio,” said Gjerde. “That makes it crucial for us to understand what companies that we own depend on, but also their impact on nature. It’s not enough to just understand – we also need to know how to manage these exposures in practice.”
NBIM, the world’s largest sovereign wealth fund, currently owns shares in around 9,000 companies spread across 70 different markets, according to Gjerde. Having this type of information at a scale that reflects the diversity of its investments, is an invaluable tool.
“It really allows us to compare and contrast companies across the portfolio, identify which ones are leading and ahead of the pack, and which ones are lagging,” Gjerde added. “This ultimately forms the basis for better decision-making – whether it’s investment decisions, how to adapt your portfolio from a risk-management perspective, or to how we engage with companies to drive them in this direction.”
Aligning means and goals
As part of its ongoing work of developing sustainability reporting standards for a variety of stakeholders, the GRI has been engaging with regulators and with other global standard-setters.
In particular, it has had numerous exchanges with the International Sustainability Standards Board (ISSB), established under the aegis of the IFRS Foundation, which last year released its two inaugural sustainability disclosure standards – IFRS 1 and 2.
The IFRS Foundation and the GRI recently released a summary of interoperability considerations for companies reporting on greenhouse gas (GHG) emissions using both sets of standards.
“Our conversations with regulators and standard-setters give us input into what they are looking for, what they’re interested in, and also helps us to inform them about what we do, why we do it and why it’s important to investors,” Adams explained. “We spend a lot of time developing interoperability tables, which require bilateral discussions with organisations and can take a lot of time.”
But although such interactions are key to develop a coherent global baseline on sustainability reporting, they do not always bring the hoped-for results.
“As various standard-setters may have a different skew of investor types responding to their consultations, they might reach different outcomes, which is not an optimal situation for investors and other users of the information,” said Adams. “Even where disclosures and standards may look the same, if there’s little differences here and there, it increases the workload and the confusion. This is my concern about the short-term prospect of where this might go.”
While GRI standards are typically designed for corporates, who report to a wide range of stakeholders, they typically take a double-materiality approach to disclosures. Meanwhile, ISSB standards are more specifically designed for investors, and as such – take a single-materiality approach that focuses on enterprise value impacts.
“The thought of having two different sets of impact disclosures, where one is partial and directed and the other is ‘find your most significant’, does concern me – because they would come out different,” said Adams. “The IFRS Foundation has a mandate to look at investor-oriented reporting. The investors that we’re focusing on believe that reporting on the most significant impacts is important.”
A key factor at play is the different positions that investors may take depending on the overall nature of their investment strategy.
“There’s the narrow short-term asset manager view on the one hand, and the long-term universal owner view on the other, and both are thinking about impacts, risks and opportunities quite differently,” Adams explained. “How do we bridge this gap, is the big question. This is a difficult conversation, and it will have to get further as the ISSB thinks about what it’s going to do next.”