Biodiversity: The next frontier in corporate sustainability

Biodiversity is rapidly becoming a focus for companies and regulators alike. But how can organisations effectively start to address biodiversity risks and impacts? 

To promote dialogue and the exchange of ideas, Nordea has held a series of sustainability network events across its four Nordic home markets, focused on the biodiversity theme. A recent event for large corporate and institutional clients in Denmark highlighted the urgent need to build capacity, understanding and tools to tackle the issue.

The complexity of biodiversity

While companies’ sustainability efforts have largely focused on climate change, with its quantifiable metric of CO₂ emissions, biodiversity presents a more complex challenge. It involves multiple factors, such as species richness, genetic diversity and ecosystem health. Unlike climate change, which affects all regions globally, biodiversity impacts and solutions can vary greatly by location and ecosystem. 

“What we really need is a simple story and illustration of biodiversity so people understand what we’re talking about,” said Anna Flysjö, Chief Climate and Nature Specialist at Arla, in her presentation at the Nordea event.

While emerging, the frameworks for measuring and reporting on biodiversity impacts are less developed and standardised than those for climate change. Initiatives such as Science-Based Targets for Nature and the Taskforce on Nature-related Financial Disclosures (TNFD) are some of the key places companies can turn to for guidance.

“A lot of methodology and tool development still needs to be done,” Anna-Karin Modin-Edman, Strategic Biodiversity Expert at Nordea, told the audience.

The role of the financial sector

Regulators, such as the European Central Bank (ECB), have increased pressure on banks to address biodiversity risks. Nordea published a thematic guideline on biodiversity in 2023, and recently expanded its Green Funding Framework to enable green funding of qualified biodiversity-related projects. The bank is also exploring biodiversity credits – an instrument allowing companies or individuals to invest in environmental projects that enrich biodiversity.

From the investor perspective, Ole Buhl, Head of ESG at the Danish pension fund ATP, questioned the current ability of investors to help solve real-world problems related to biodiversity: “The willingness is there, but there are no universal metrics for the financial materiality of biodiversity. So investors currently find themselves in a situation where we know what the solution looks like, but we don’t yet have the metrics to pinpoint the problems that need to be solved.” 

Despite these challenges, key financial players have started taking steps to channel funding towards biodiversity initiatives. Goldman Sachs Asset Management recently launched a biodiversity-focused fixed income fund, believed to be the first in the world. While the universe is small, with around 150 issuers, Isobel Edwards, Head of Green, Social and Impact Bond Research, expects growth as biodiversity gains traction. 

“Biodiversity is getting more focus. More data is becoming available. We expect to see more biodiversity-related bonds coming to market, and we think the universe will grow in the next couple of years,” she said.

Corporate actions on biodiversity

One company taking concrete actions on biodiversity is Denmark-based Arla. The dairy company has implemented initiatives including restoring semi-natural pastures, conducting nature checks on farms and piloting regenerative farming methods. 

“We thought climate change was complex, but nature is at least 10 times more difficult,” said Arla’s Anna Flysjö, emphasizing the need for metrics and tools. “Data is the currency at the moment. We need to have the evidence to be able to tell the story.”

While it is still early days, the development of standardised metrics, financial solutions and practical corporate initiatives will be crucial in the coming years. As Anna-Karin Modin-Edman from Nordea emphasised, it's about building capacity, understanding, and using available tools while supporting clients in their transition efforts. With increasing regulatory pressure and growing awareness, biodiversity is set to become an integral part of corporate strategy and risk management in the years ahead.