Setting targets without mandatory disclosure path “counterproductive” and risks greenwashing, non-profit warns.
Ahead of this weekend’s Group of 20 (G20) meeting in New Delhi, global non-profit disclosure platform CDP has called on members to follow through on COP15 commitments with the introduction of mandatory nature-related disclosure policies.
At the Kunming-Montreal COP15, 193 countries pledged to adopt the Global Biodiversity Framework (GBF). The framework notably included Target 15 which requires governments to encourage companies and financial institutions to disclose their risks, dependencies and impacts on biodiversity along their operations, supply and value chains, and portfolios by 2030 at the latest.
The countries to commit to the GBF included 19 of the G20 members, with the US being the only member country not to agree to the GBF having not attended COP15 in December last year.
Despite these commitments, a report by disclosure platform CDP has found that only Brazil, the EU, Singapore and Indonesia have implemented or are working on implementing any biodiversity-related requirements.
Helen Finlay, Global Associate Director of Policy Engagement at CDP, told ESG Investor that it “hopes to see G20 leaders commit to high-quality mandatory disclosure”.
“Simply setting targets without mandatory disclosure of the path to achieving them would be counterproductive and could lead to greenwashing,” she added.
Slow to grow
In its report, CDP said that biodiversity-related disclosure across the G20+ is “in its infancy”, with only four of the G20 members having biodiversity-related disclosure requirements that are “sufficiently aligned” with a set of high-quality mandatory disclosure (HQMD) principles created by the non-profit.
It noted that current biodiversity disclosure requirements lag behind those for climate and water. CDP said that disclosure requirements across jurisdictions suffer from “considerable discrepancies”, as well as gaps in definitions, comparability, accessibility, and assurance of the disclosed information that must be addressed by policymakers and regulators.
Ahead of COP15 more than 400 businesses and financial institutions backed calls for mandatory disclosure on nature. These calls were not answered, with a number of observers in Montreal accusing the framework being “watered down” due the word ‘mandatory’ being excluded from the GBF.
Pietro Bertazzi, Global Director for Policy Engagement and External Affairs at CDP, said that despite “significant movement” towards widespread mandatory climate-related financial disclosure in recent years, the “lack of ambition” from most G20 policymakers on nature-related disclosure is “disappointing”.
“Science has left no room for doubt: climate and nature must be tackled together and a lack of action and sufficient data on nature from real economy actors has severe ramifications,” he added.
Finlay noted that last year’s G20 summit saw policymakers fail to reach any agreement on mandatory disclosures. This year, Finlay is calling for policymakers to introduce “comprehensive and holistic” environmental disclosure policies and regulations that address climate change, water insecurity, and biodiversity loss across the G20.
A report by data and research provider Sustainable Fitch said that the EU has been one of the “most proactive” jurisdictions in “translating [nature-related] aims into legal requirements” through the introduction of the Nature Restoration Law.
It also said that the EU is one of the jurisdictions already introducing mandatory biodiversity reporting standards (subject to a materiality assessment), with recent announcements by global bodies such as the Group of Seven (G7) “indicat[ing] that others are likely to do so in the coming years”.
Improving consistency and interoperability
In May, G7 leaders gathered in Japan to reaffirm their commitment to addressing biodiversity loss and nature degradation by pledging to submit their GBF-aligned targets this year or before COP16 in 2024.
Leaders also reiterated their support for the Taskforce on Nature-related Financial Disclosures (TNFD) framework.
The TNFD’s voluntary, integrated framework has been leveraged in recent biodiversity-related corporate disclosure standards, including the International Sustainability Standards Board (ISSB), European Sustainability Reporting Standards (ESRS) – which underpin the EU Corporate Sustainability Reporting Directive (CSRD) – and Global Reporting Initiative (GRI).
“As nature-related disclosure requirements are developed, it will be critical that regulators ensure consistency and interoperability of disclosure regimes across jurisdictions,” Finlay said.
CDP noted that the UK has indicated that it is considering making TNFD-aligned disclosures mandatory, which would mirror its upcoming 2025 requirement for entities to disclose against climate risks, opportunities and emissions in line with the Taskforce on Climate-Related Financial Disclosures (TCFD).
Issues around nature data are frequently cited as a barrier preventing greater and more in-depth nature-related disclosures. The TNFD has moved to tackle this problem and is in the process of creating a nature-related public data facility with the goal of improving the availability, quality and comparability of state of nature data.
“The TNFD provides a valuable foundation for regulators and standard setters across jurisdictions to build on, ensuring a holistic approach to environmental disclosure, in harmony with our HQMD principles,” Finlay added.
CDP has developed ten principles for HQMD and called on G20 members to adopt them. The non-profit says the principles will support policymakers in addressing “key gaps” in their current regulatory approach.
“We expect that these HQMD principles will not only increase the quantity of disclosures but also the quality of information reported,” she added.