New assessment underlines business impacts and dependencies on biodiversity, calls for comprehensive and rapid realignment of finance flows.
The publication of the ‘IPBES Business and Biodiversity Assessment’ marks a pivotal moment in the alignment of finance flows with nature goals, necessitating changes to government policy as well as the strategies of investors and corporates.
Unveiled at the 12th plenary of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) in Manchester last week, the report strengthens the scientific case that biodiversity loss is a financially material systemic risk that cuts across sectors, asset classes and geographies.
For asset owners and the wider finance sector, the message is clear: nature underpins long-term financial resilience and shareholder returns.
“Nature loss represents a potentially material financial risk,” said Bruno Gardner, Head of Climate and Nature at UK pension provider Phoenix Group, noting the IPBES assessment’s call for clear sectoral pathways. “Without credible pathways, our customers risk becoming increasingly exposed to the potential impacts of nature loss.”
Economic reality
Economic exposure to nature loss is becoming increasingly clear. More than half of global GDP is estimated to depend on ecosystem services, while biodiversity decline increasingly threatens supply chains, physical assets and long-term investment returns.
The IPBES assessment urged an immediate and comprehensive realignment of finance flows with nature to address these risks. In 2023, there were US$7.3 trillion in finance flows harmful to nature, of which private finance accounted for US$4.9 trillion, compared with US$220 billion directed to conservation and preservation.
Accelerated action is needed for countries to meet the goals of the Kunming-Montreal Global Biodiversity Framework (GBF) – namely reverse biodiversity loss by 2030, and achieve “living in harmony with nature” by 2050. Key components include conserving at least 30% of land, inland waters and marine areas by 2030, and mobilising US$200 billion per year from all sources. Progress will be reviewed at COP17 in Armenia in October.
The IPBES assessment set out detailed recommendations for policymakers on creating an enabling environment, including aligning fiscal policies with biodiversity goals, mandating frameworks that aid biodiversity conservation, requiring central bank coordination to encourage positive outcomes, and improving education and awareness around sustainability.
IPBES also called for adoption of regulatory and voluntary mechanisms to factor biodiversity into financial decision-making, mobilisation of public and private capital, development of new financial instruments, use of metrics and accounting methods to evaluate and disclose impact on financial materiality, and investment into supportive tools.
Meanwhile, businesses were encouraged to advocate for supportive policies, use established frameworks and promote transparency, and collaborate with stakeholders on standards, policies, data collection and disclosure. All parties were encouraged to involve Indigenous People and local communities in decision-making processes.
Risk and resilience
Emine Isciel, Head of Climate and Environment at Norwegian asset manager Storebrand, said the IPBES assessment reinforced the systemic nature of biodiversity risk for investors. “Even companies that might seem far removed from nature… directly or indirectly depend on ecosystem services,” she said.
Dr Vian Sharif, Founder of nature data provider NatureAlpha, said it highlighted an evolving understanding of business resilience within financial markets. “Increasingly nature is being named as a critical contributor to resilience,” she said, warning that businesses failing to take urgent action on nature risk “jeopardising their futures”.
For investors, diversification offers limited protection. Analysis by the Finance for Biodiversity Foundation (FfB) found the most impactful sectors – including energy, materials, agrifood and utilities – account for a significant share of biodiversity pressures across listed markets.
But investors’ ability to compare companies or reallocate capital effectively is hampered by disclosure levels, with fewer than 1% of listed companies currently reporting on biodiversity risks or dependencies in a consistent way.
Carlota Garcia-Manas, Head of Climate Transition and ESG Engagement at UK asset manager Royal London Asset Management, said the inherently place-based nature of biodiversity loss creates practical difficulties for action by investors in public markets. “For topics that are very location-based, considerations are much easier from a real assets point of view,” she said. “They become a lot more complicated in secondary markets.”
To improve identification of risks and impacts, the assessment emphasised improved spatial analysis, supply-chain transparency and science-led collaboration. “IPBES’ focus on location-specificity points to a future in which financial risk becomes increasingly geospatial,” said Sharif.
Imperfection over inaction
Despite prevailing data gaps, asset owners and managers have made progress integrating biodiversity into investment processes, notably since the GBF was adopted in 2022.
This is partly supported by the evolution of voluntary reporting frameworks. The Taskforce on Nature-related Financial Disclosures (TNFD) was noted by IPBES as a core reference point for investors assessing nature-related dependencies and risks. The International Sustainability Standards Board (ISSB) is expected to play a growing role in embedding nature disclosure into global financial reporting, once the TNFD framework is incorporated into its standard-setting process.
“I see a very clear correlation between the IPBES report and TNFD in the importance of location, impacts, dependencies, risk and opportunities,” said Storebrand’s Isciel, noting that standardised disclosure remains limited but essential for investors.
Nevertheless, IPBES 12 reiterated the need to move forward in addressing biodiversity risks, impacts and dependencies despite imperfect data.
“Don’t let the perfect be the enemy of the good. Just go ahead. Start with small steps,” was a key message, recalled Garcia-Manas.
For asset owners, that means identifying material exposures using the best available tools – combining sector analysis with location-specific data – even if methodologies continue to evolve. Publishing disclosures with clear caveats, she added, can help organisations avoid paralysis caused by fear of greenwashing accusations.
The IPBES assessment insisted that existing methods, knowledge and datasets are already sufficient to begin integrating nature into investment decision-making.
Stewardship focus
Stewardship programmes are expanding to include nature and biodiversity concerns alongside climate transition, with investors increasingly engaging companies on land use, water stress and pollution risks. Many are also beginning to incorporate Indigenous Peoples and local communities, recognising that local knowledge can improve risk assessment and outcomes.
“It is positive that the IPBES assessment emphasises the need for businesses to engage with scientific research, in conjunction with knowledge from Indigenous Peoples and local communities,” Sharif noted.
RLAM’S Garcia-Manas said biodiversity is increasingly factored into existing climate engagement strategies rather than treated as a standalone theme. “We had already embedded just transition and nature into the questions we were asking companies,” she said, describing a holistic approach that considers climate, nature and social dimensions together.
The FfB recommends that asset owners review asset manager mandates to ensure alignment with nature strategies, set realistic engagement targets and collaborate through initiatives such as Nature Action 100 to increase impact.
Against a backdrop of geopolitical uncertainty, many investors viewed the IPBES assessment as a reminder that fundamental principles remain.
“The economics and the science haven’t changed,” Garcia-Manas says. “The politics may, but the other elements of the equation haven’t.”
With IPBES 12 providing evidence that the science is clearer, the tools improving and investor expectations evolving, the challenge for businesses and policymakers is execution.
