What next after COP16? The need for action on nature
In November 2024, Accounting for Sustainability (A4S) and the Institute of Chartered Accountants in England and Wales (ICAEW) hosted an invitation-only roundtable for finance leaders. Participants considered the implications of COP16 on the finance and accounting community and discussed approaches for accelerating action on nature. The roundtable took place under the Chatham House Rule. This blog draws on the discussion and focuses on the importance of taking tangible and inclusive action towards meeting the goals of the Kunming-Montreal Global Biodiversity Framework.
Business presence at COP16 – and what comes next
The unprecedented size of the turnout from the business world – estimated to be around 3,000 participants – was just one of the features that made COP16, the 2024 UN biodiversity summit, a noteworthy event for the accounting and finance community. The Taskforce on Nature-related Financial Disclosures (TNFD) announced that it now had over 500 adopters and several key publications on nature and finance were launched. This progress sat alongside the disappointing level of public financing, which fell far below the US$20 billion of annual biodiversity funding that had been pledged.
As we look to the future, the participants of the post-COP16 roundtable convened by A4S and ICAEW agreed that what’s most needed now is real, concrete action on nature – including steps to address the barriers to action that businesses and investors face. This action needs to take place at multiple levels:
- Private sector organizations
- Accounting and finance profession
- Policy and regulation
Driving organizational change on nature
More and more businesses and investors are beginning to take steps towards understanding their nature-related dependencies, impacts, risks and opportunities. Tangible action, though, relies upon this understanding being integrated into strategy, business models and decision making throughout the organization. Such a shift is only possible with buy-in from the C-suite.
While some executives may already understand the materiality of nature-related risks and opportunities to the business, others may need to be persuaded of the imperative to act.
Building a business case for action will involve understanding and speaking to what is meaningful to the leaders of your organization. This could involve looking at financial or organizational resilience, highlighting key financial risks and opportunities and drawing on approaches such as natural capital accounting and scenario analysis. An understanding of your stakeholders is also important for your business case. Investor and regulatory pressures may be among the most convincing reasons for some to act, while others will be influenced by reputational risks and branding.
Once an organization has committed to act, transition planning is an important mechanism for planning out the concrete steps it will take to meet its goals on nature. The need for robust transition planning was a key theme at COP16: both TNFD and the Glasgow Financial Alliance for Net Zero (GFANZ) launched draft recommendations for consultation, with WWF publishing guidance shortly after. The Transition Plan Taskforce also put out an advisory paper earlier in 2024.
Nature transition planning will be most effective when organizations consider the interaction of climate, nature and social aspects from the beginning – even if they are not yet in a position to develop fully integrated transition plans. Awareness of synergies and trade-offs can help organizations to balance different aspects of sustainability in their planning and decision making. It is likely that we will see further developments in the direction of integrated transition planning over time.
Nature and the accounting and finance profession
One challenge organizations face is sourcing high-quality, measurable data that can support decision making and meet the need for credible and consistent reporting. While there is much that organizations can do to establish strong controls over the data they have access to, cooperative action in the wider accounting and finance community is needed. Consensus over data and measurement frameworks can support organizations by establishing clear, cross-sector expectations around data and its use.
In this area, TNFD recently published a draft roadmap for enhancing market access to robust nature-related data. The growing nature tech industry also has potential for supporting greater data accessibility, which can feed into collaborative approaches and guidance.
Corporate interest in biodiversity credits – and their potential as a source of capital for nature restoration projects – is also prompting discussion within the accounting and finance community. In the absence of regulated markets, the possibilities and challenges of a voluntary market for offsetting are likely to continue to be an area for debate. Nature is inherently local, so there is a real challenge in finding suitable mechanisms for offsetting highly localized organizational impacts.
The accounting and finance community can also play a role in developing and systematizing approaches to accounting for nature within the profession, such as natural capital accounting. There is potential for exploring ways in which accounting practice can support transition planning and other more forward-looking approaches. Accounting bodies in particular have scope to engage across the profession, looking at how accountancy may need to evolve if it is to provide a strong foundation for a sustainable future.
Throughout all of these discussions about what the accounting and finance profession can do, and its future, transparency and inclusion will be vital. Specific attention needs to be given to bringing marginalized voices from within and beyond finance into the conversation, with a meaningful position at the table. At COP16, a subsidiary body was established to give Indigenous peoples and local communities a permanent role in decision making. Business and finance discussions in the private sector should also include these key groups, who are most negatively affected by nature and biodiversity loss.
The need for policy and regulatory action
Business leaders consistently noted that policy frameworks, market incentives and regulatory change are essential for creating the enabling conditions for the organization-level and professional-level action that is needed. Uncertainty around these areas, on the other hand, will constrain the ability of businesses and investors to act and reduce the appetite for change in the accounting and finance profession. The urgent need to address nature and biodiversity loss means that we can’t afford such uncertainty.
Much of this clarity of direction can be expected to come from National Biodiversity Strategies and Action Plans (NBSAPs) – which signatories to the Convention on Biological Diversity have committed to developing – and national-level transition plans. These should be supported by science-based pathways that feed into policy instruments and incentives. Unfortunately, 170 countries missed the deadline for submitting their NBSAPs. Others submitted their plans after the deadline, with the total standing at 44 parties out of 196 by the end of COP16. At the time of writing, the UK had not yet submitted its NBSAP, but plans to do so in 2025.
In our roundtable discussion, it was suggested that the targets set out in NBSAPs can be the basis for financial policy levers. For example, tax incentives could be tied to organizational contributions to national targets, such as the UK’s ‘30by30’ commitment to “protect 30% of land and sea for nature by 2030” (in line with the global target set at COP15). Tax and regulatory mechanisms could be used to incentivize adoption of nature-based solutions, support a structure for voluntary or market-based biodiversity offsetting, and increase accounting and reporting on nature, including organizational transition planning.
The path ahead
The need to halt and reverse nature loss – the ultimate goal of the biodiversity COPs – has never been more pressing. As we move forward from COP16, we need collective commitment across all sectors and levels of the global economy. Businesses, investors and the wider accounting and finance profession have a vital part to play, supported by policy and regulatory frameworks. Each of these elements is essential to ensuring that the value of nature is reflected in decision making across the private sector, so that nature can flourish well into the future.
Collaborating to accelerate action on nature across the profession
A4S and ICAEW continue to collaborate to equip accounting and finance professionals with the knowledge and skills to ensure they are part of the solution.
A4S is currently developing a Nature Guidance Series. The series is designed to give finance teams the practical guidance and tools they need to take action on nature within their organizations – empowering finance teams to play a vital role towards shaping a nature positive economy that supports long-term value creation. The first guidance in the series, The Business Case for Nature, is available now and offers clear steps and practical tips for developing the business case for your organization. Our Nature page provides more information about further A4S resources on nature.
ICAEW recognizes the key role that professional accountants can play in tackling the nature crisis and enabling the organizations they lead and advise to respond. A recent report – Nature is Everyone’s Business: The GAA’s Progress and Pathway to 2030 – outlines the efforts that ICAEW and its international partners in the Global Accounting Alliance (GAA) are taking to help accelerate collective progress, in line with the goals and targets in the Global Biodiversity Framework.
The GAA will also be launching a Starter Guide to Nature for Accountants in early 2025. This guide will help accountants (in business and practice) understand why nature matters to them in exercising their professional responsibilities and enable them to start to embed nature into their day-to-day practices.
You can find further information on ICAEW’s work on nature and biodiversity here.
