The economy and nature are interconnected. As we continue to witness the loss of nature, risk associated with businessacross sectors increase. These risks will ultimately have a tangible effect on the financial sector. At the same time as the risk levels are elevated, significant opportunities arise for nature positive business activities. We help financial sector operatives in mapping the risks and opportunities regarding nature, producing data, managing responsible investment portfolios and developing green loans and investment products. We are at the forefront of implementing standards trusted by the market, such as the Taskforce on Nature-related Financial Disclosures (TNFD).
Nature impacts and risks are most prominent in sectors that directly rely on nature and its ecosystem services, such as agriculture, forestry, food and textile industries, energy production, and construction. We help the financial sector operatives in recognising, managing, and reporting on the nature and climate risks associated with their lending and investment portfolios. These risks are typically divided into physical risks, transition risks, and systemic risks.
We are developing risk assessment and land-use adaptation strategy methodoligies actively as part of our ongoing projects, such as Precilience.
Most of the world’s monetary currents are directed at businesses that degrade nature. We assist the financial sector in identifying business opportunities that enhance nature and offer sustainable profit opportunities. Opportunities are typically found either by supporting the reduction of negative nature impacts in current loan or investment portfolios or by strategic changes in products, services, markets and investments. These can include funds with businesses whose nature-related risks or impacts are below a designated level, or loans with prices or premiums directly reflecting the impact a business has on nature.
We utilise the TNFD framework in our work. Using the TNFD approach we can resolve, by focusing on economic impacts and numbers, how the changes in nature affect business operations. The assessment is executed in four steps, following the LEAP-process:
Luontoa, in collaboration with The Biodiversity Consultancy and Sitra, is delivering training for financial sector professionals on the implementation of the TNFD framework.
There is more data concerning nature impacts than is believed. In addition, new data sources and AI have opened new opportunities to effectively generate and manage data. In our work we utilise international databases concerning nature impact assessments, including EXIOBASE and LC-IMPACT, as well as companies’ own accounting data. Furthermore, we create new geographic information data depicting nature impacts using satellite imagery and AI together with our partners.
Data on nature impacts is also used to calculate nature footprint.
The approach to assessing nature impacts in accordance with the TNFD framework helps adapt to nature-related regulations. The TNFD supports data collection in line with the EU’s Corporate Sustainability Reporting Directive (CSRD), as the TNFD’s LEAP approach is integrated into the ESRS standards. The TNFD promotes transparent reporting and improves decision-making, even for organizations not covered by the CSRD. The TNFD’s recommendations are also aligned with other current and upcoming frameworks and standards, such as the Science Based Targets for Nature (SBTN), which provides concrete guidance for setting science-based nature targets. The TNFD’s recommendations also influence the development of voluntary standards, particularly the upcoming ISSB nature standard.
The EU Taxonomy, Sustainable Finance Disclosure Regulation (SFDR) and CSRD form the basis for EU’s sustainable finance framework. The CSRD reports provide a significant part of the sustainability-related disclosures as required by the SFDR – e.g., with companies required to provide sustainability related disclosures related to e.g., greenhouse gas emissions, biodiversity and nature impact. For the purposes of ensuring access to data and information necessary to draw inputs to effective disclosures as required by the SFDR, financial market participants would benefit from supporting companies in addressing their direct data compilation and reporting requirements, as required by the CSRD.
The EU Taxonomy and SFDR together are aimed at establishing measures to aid the channeling of capital into more sustainable investment opportunities. The EU Taxonomy provides a classification framework for sustainable economic activities. These activities are further being reported on through the CSRD and used as input to the sustainable finance disclosures under SFDR.
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