LEAP-ing your environmental strategy forward by integrating nature

Nature should be included within your DMA. This not only means evaluating how nature impacts your organisation financially, but also how your activities affect nature and biodiversity. A robust DMA should encompass the entire value chain - including underwriting and investments -  and consider a wide range of potential DIROs. 

Nature-related risks and opportunities should be managed through your existing enterprise risk management (ERM) framework. This involves identifying relevant DIROs, assessing them based on likelihood and magnitude, and prioritising them according to your organisation’s materiality thresholds. While the overall process remains consistent, identifying nature-specific IROs may require additional nuance. However, internationally recognised frameworks exist to support organisations. We recommend using the LEAP approach (Locate, Evaluate, Assess, Prepare) as outlined in our previous article, to guide this process. Organisations must focus on what is material, but maintain visibility on any emerging risks. 

Nature-related risks can, and should, be incorporated into climate scenario analysis (CSA). The amount of detail and integration of nature within your CSAs should be proportionate to how material the risks are, as evaluated through the risk assessment process. CSA can also help to inform these assessments to enhance accuracy. At a minimum, nature should be considered in scenarios where it has the greatest impact: CSAs used to inform the risk identification and assessment processes and CSAs involving forest fires, drought or flooding should explicitly account for nature-related drivers and consequences. 

Nature underpins climate mitigation and transition planning. Healthy ecosystems are vital for net zero as they absorb carbon and regulate temperature. As such, protecting and restoring nature is essential to any credible transition plan. The Transition Plan Taskforce (TPT)  definition of a transition plan already includes the need to protect and restore nature. Furthermore, the UK Government has been seeking feedback on whether nature should be included alongside climate considerations. Governments, regulators, and standard setters are waking up to the fact that a credible transition plan includes nature and organisations should act early and integrate it now. 

One of the most significant challenges in managing nature-related DIROs is the availability and quality of data. Most organisations are unlikely to have robust, accessible, and nature-specific data readily available for analysis. For instance, nature-related assessments often require location-specific information - something not typically captured in standard due diligence or client onboarding processes. This challenge is not unique to nature; it mirrors broader climate data issues, such as the need for more granular emissions data to support accurate carbon accounting. As such, nature-related data should be incorporated into existing data improvement strategies. This includes engaging with stakeholders across the value.

One area where organisations may have to start from scratch is building a suitable suite of tangible metrics and KPIs that are simple to monitor and report. Unlike climate, where CO₂ is a unified metric, nature and biodiversity has a complex range of different indicators and metrics, reflecting the complexity of different ecosystems. Developing KPIs, baselines, and credible transition pathways for nature will take time and careful consideration.