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Freshfields Sustainability

| 4 minutes read

Nature and biodiversity reporting – live legal risks

On 2 November, the inaugural TNFD & Biodiversity Risk Reporting Conference took place in London. The conference brought together professionals across numerous sectors, including financial services, to discuss the practical challenges of biodiversity and nature reporting. This blog summarises some of the key takeaways, focussing on Freshfields’ session at the conference on live legal risks in the context of biodiversity and nature. 

Key themes

Throughout the day, it was clear that the work that companies and financial institutions have done on climate reporting has paved the way for similar efforts on biodiversity, with significant impetus towards voluntarily reporting in line with the recommendations from the Taskforce on Nature-related Financial Disclosures (TNFD). Many participants expressed the view that biodiversity and nature reporting would develop more quickly than climate reporting, with some explaining they did not move as fast as they could on climate risks and reporting, and will move more quickly on nature. 

Many participants expressed the view that reporting on nature-related impacts and dependencies in line with TNFD would become mandatory in the short to medium term.  However, it was clear that the sophistication of companies and financial institutions’ biodiversity and nature policies and readiness for reporting at the moment varies significantly.  Some explained that they wished to begin reporting as early as possible in order to ensure they have appropriate mechanisms in place before it becomes mandatory, while others are already obliged to report in a different (albeit more limited context), for example, for the Corporate Sustainability Reporting Directive (CSRD).

The scale of the practical challenges faced by participants was a recurrent theme of the conference.  For example, participants highlighted the challenge of unravelling complex nature dependencies on top of an existing high volume of ESG reporting. They observed the challenges of identifying and mapping nature and biodiversity impacts generally (particularly on a portfolio basis), of making assessments with limited data, the subjective nature of some of the assessments, and the likelihood that it will be harder for companies and financial institutions to demonstrate progress on reducing impacts quickly, compared to emissions reduction, for example.

Litigation and regulatory risks 

As with climate and other areas of ESG, levels of litigation risk can be directly affected by changes to the scope of both voluntary reporting and breadth of reporting requirements. Companies can expect regulators and potential litigants to scrutinise any public statements and commitments they make, as well as those they don’t make. During the conference, Freshfields presented a session on the live legal risks in a nature and biodiversity context:

  • Vanessa Jakovich opened the Freshfields panel discussion and considered the introduction of the TNFD Framework from a macro-reporting level, placing it into the historical setting of existing disclosure frameworks including the well-known Equator Principles, used in project finance. Vanessa contextualised the wide range of more recent European and international reporting mechanisms which contain nature-based obligations, including the Sustainable Finance Disclosure Regulation, CSRD, Corporate Sustainability Due Diligence Directive, the International Sustainability Standards Board Framework and the UK Sustainability Disclosure Standards. Her introduction explored the general familiarity that the finance industry has with reporting on individual projects but highlighted the difficulty businesses face given the large number of reporting frameworks all targeting similar aims using differing standards, and the challenges of reporting on a portfolio basis. 
  • Simon Duncombe described the changing environment of nature-based litigation, noting that the increasing number of mandatory and voluntary nature-based reporting obligations in recent years will require a far more detailed understanding of a company’s relationship with nature. He observed that public reporting has naturally led to additional scrutiny from key stakeholder groups (customers, investors, regulators and NGOs) and has the effect of sharpening the quality of reporting as stakeholder feedback is received, but comes with an associated risk of nature-based litigation or regulatory action. He then set out some of the current trends in biodiversity litigation, the potential drivers for claims and the different avenues through which they are being be applied around the world.
  • Anthea Bowater addressed the specific litigation risks for financial institutions. She explained that although they have not been prevalent, biodiversity-related cases have been brought against financial institutions for a number of years in different forums, including in the context of complaints under the OECD Rules.  She explained that historically, cases that alleged that banks, asset managers and pension funds had failed to identify and/or mitigate the nature and biodiversity impacts of particular projects, clients or investments were not successful. Anthea then explored some of the more recent cases, which tend to use specific legislative hooks, some of which have been successful. She explained the specific dynamics of the litigation in this area for financial institutions, including that the litigation is all brought for strategic purposes and to force a change in corporate policy rather than for damages.  

    Anthea closed the discussion with some practical guidance to help mitigate the risks of nature and biodiversity-based litigation. 

Concluding remarks 

Nature and biodiversity reporting is clearly an area of challenge for companies and financial institutions, and the many questions following Freshfields’ session demonstrated the careful balancing act that is required to both forge ahead with an ambitious nature strategy while mitigating the legal risks of doing so in a balanced way. 

We were reminded that non-financial risks do, ultimately, have a financial impact and, in fact, that the expression ‘non-financial’ is a misnomer in this context as the risks being reported have significant potential for financial impact even if they have not yet been quantified with meaningful certainty. 

Finally, it is important to recognise the opportunities that biodiversity and nature reporting poses. Some participants at the conference were already able to explain the positive steps that their companies had taken in this area leading to evolution and innovation. In terms of financial institutions, it was clear that there has already been strong engagement from the asset management community, with many positive stories about investors using their influence to obtain better outcomes from companies. 

Overall, the high level of engagement and the robust discussions at the conference demonstrated the depth of thought that is being given to nature and biodiversity matters and the serious attention they are now being given – a positive trend that, hopefully, will continue.


energy and natural resources, environment, financial institutions, global, litigation, regulatory