NBIM Issues Document about Biodiversity Framework
Norges Bank Investment Management (NBIM) issues a document to comment on the biodiversity framework proposed by the Global Reporting Initiative (GRI) and put forward suggestions for modification.
As the world’s largest sovereign wealth fund, NBIM currently manages more than $1.2 trillion assets. As a long-term asset owner, NBIM’s return depends on the sustainable development of economy, environment and society.
NBIM considers biodiversity as an essential issue in the future, and the importance of biodiversity has been widely recognized. In the natural risk plan launched by the United Nations Environment Program, the risks caused by the loss of biodiversity are divided into three parts, namely, the impact of the company on biodiversity, the risks caused by the company’s dependence on biodiversity in its business activities, and the potential risks of the company’s operation in biodiversity areas.
NBIM’s View on the GRI Framework
NBIM believes that the financial materiality of biodiversity is gradually strengthening, and GRI’s biodiversity framework will play a more important role for long-term investors (Asset Owners). At the same time, the biodiversity framework developed by GRI needs to be coordinated with other sustainable reporting standards in order to reduce conflicts in the implementation process.
For example, the Task Force on Nature-Related Financial Disclosures (TNFD) is developing a risk management and disclosure framework covering land, water resources, ocean and atmosphere. TNFD also plans to identify and prioritize the most important biodiversity impacts for the company. NBIM recommends that GRI’s biodiversity framework be consistent with TNFD.
GRI has previously cooperated with International Financial Reporting Standards (IFRS) to create interrelated disclosure methods. The coordination between different standards can reduce the duplication of reporting, ensure the comparability and consistency of the company’s disclosure in the field of biodiversity, and provide valuable information for stakeholders.
Challenges in GRI Biodiversity Framework
NBIM believes that GRI has introduced supply chain impact reporting into the biodiversity framework, which can help companies identify the most influential impacts. However, it is difficult to obtain data from upstream and downstream of the supply chain, and companies often lack direct influence on their business partners. In this case, it is difficult for companies to measure and report the drivers and impact sites of each kind of biodiversity.
NBIM suggests that GRI can refer to the LEAP method (Locate, Evaluate, Assess, Prepare) developed by TNFD to provide voluntary guidance on natural risks for the company, so as to help the company determine the priority of biodiversity. Many companies have a large number of scattered locations in the supply chain, and it is necessary to determine the priority of biodiversity in practical applications.
NBIM believes that the priority of biodiversity should base on the frequency, time and degree of impact, as well as regulatory policies in relevant jurisdictions. GRI can also refer to the relevant methods of the Intergovernmental Science Policy Platform on Biodiversity and Ecosystem Services (IPBES) to determine priorities.
Other Suggestions by NBIM
In addition to supply chain and biodiversity priorities, NBIM also puts forward suggestions on the impact in the GRI framework. The GRI framework focuses on negative impacts and biodiversity loss in terms of impacts, but the actual impacts also include positive impacts (such as the positive role of companies in protecting biodiversity). NBIM recommends that GRI incorporate positive impacts into the final framework.
NBIM also believes that GRI should also consider the links and feedback between climate risks and natural risks. For example, TNFD states in the disclosure guidelines that companies should “describe how the natural and climate risks coordinate and promote each other, as well aa the trade-offs between them”.