The financial risks from loss of biodiversity are often overlooked by investors, and regular assessments by businesses are crucial for sound decision-making by investors, according to JPMorgan Asset Management. The investment community needs to reframe the impact of nature-related risks on the financial performance of businesses, said Tomomi Shimada, the company’s lead sustainable investing strategist for Asia-Pacific in an interview. “Most companies are now already routinely reporting on carbon emissions , [but] maybe not so much on water consumption or land degradation,” said Shimada. By 2030, the decline of biodiversity and ecosystems could cost around US$2.7 trillion annually, or 2.3 per cent of global gross domestic product, with poorer countries being hit the hardest with a GDP drop of more than 10 per cent, according to the World Bank’s “The Economic Case for Nature” report in June. Biodiversity loss ranks third among the top global risks by severity over the next decade, behind climate action failure and extreme weather, according to a survey of nearly 1,000 experts and leaders in the World Economic Forum’s “Global Risks Report 2022” released in January. While nature-related risks are not as easy to measure as climate change metrics like carbon emissions, it is important that they are regularly identified, assessed and disclosed by businesses, said Shimada. “By having those regular assessments and disclosures, it will help to prevent mispricing or [investors] having an inaccurate understanding of how much capital buffer there is in the long-term impacts [of nature-related risks]. I think that’s crucial as a starting point.” Over half the world’s gross domestic product, or US$44 trillion of economic value, is at immediate risk as a result of nature loss , according to the “Nature Risk Rising” report published by the WEF in 2020. However, stalling this loss and making investments with “nature-positive” outcomes could create new business opportunities worth US$10 trillion annually and create 395 million jobs by 2030, the WEF said. “Having comparable data is crucial for investors to feel comfortable in making a decision based on biodiversity,” said Shimada. The reporting framework being developed by the Taskforce on Nature-related Financial Disclosures (TNFD), an initiative first announced in July 2020 to enable organisations to report and act on evolving ecological risks, would definitely help the investment community to consider biodiversity more proactively, she said. The TNFD last month released the first beta version of a framework for market consultation, and has said it plans to deliver the final version in September 2023. Recognising the linkage between climate change and nature loss, the framework aims to build on work done by the Task Force on Climate-related Financial Disclosures (TCFD) , in response to calls from market participants for a consistent approach to sustainability reporting, the TNFD said when it released the beta version. The TNFD framework could be used as a practical starting point for financial institutions to engage with companies on their biodiversity approach, and to make risk assessments and map exposure to biodiversity loss, said Katarina Heissenberger, senior ESG analyst at Swedish fund manager Swedbank Robur. She was speaking at a webinar on April 12 co-organised by the United Nations Environment Programme Finance Initiative and the Finance for Biodiversity Foundation. “As a global investor, we do want to see a consistent framework being applied. We’re really hoping that the TNFD can proceed to have the detailed framework laid out sooner rather than later,” said Shimada. “Climate change is an area [the investment community] has already been speaking about, but it’s just one aspect of the environment’s natural ecosystem, and biodiversity is really what we have begun to focus on, and I think will continue to be the focus throughout this year. “Hopefully we will see more progress made this year, especially on the policy front. But we can’t just wait for those policies to come out, investors do need to take action.”