1064Recently, as public concern over environmental degradation in ecologically fragile regions has grown significantly, the author has observed a surge of questions surrounding “biodiversity”—how should biodiversity loss be defined, and how can its economic and social impacts and risks be quantified? Human society is deeply interdependent with nature, yet current ESG risk research related to natural capital—particularly in terms of risk quantification—remains largely focused on climate change. In reality, the degradation and fluctuation of natural capital could severely disrupt the stability of both society and the global economy. Biodiversity-related risks are not distant from corporate operations or daily human life.
Marking the 10th anniversary of the Paris Agreement, Carbonstop, drawing on its insights and practical experience in ESG risk management, presents an analysis of the current state and emerging trends of biodiversity issues. We have systematically reviewed key performance indicators (KPIs) used in mainstream sustainability disclosure frameworks to measure biodiversity and conducted in-depth case studies of advanced practices—both domestic and international—in quantifying biodiversity-related risks. This aims to provide enterprises with actionable references for more effectively assessing and managing such ESG risks, thereby strengthening their capacity to govern and mitigate nature-related risks.
Definition and Importance of Biodiversity
Biodiversity refers to the variety of life—the diversity of all living organisms across Earth’s ecosystems. According to the United Nations Convention on Biological Diversity (CBD), biodiversity encompasses three main levels: genetic diversity, species diversity, and ecosystem diversity.
Biodiversity plays a crucial role in maintaining the health and stability of ecosystems, primarily in the following ways:
- Maintaining ecological balance: High biodiversity enhances ecosystem resilience and resistance to external disturbances. Complex food webs and ecological relationships among diverse species help sustain dynamic equilibrium within ecosystems.
- Supporting resource provision: Biodiversity provides humanity with a broad foundation of resources, including food, medicines, and industrial raw materials. Many pharmaceutical compounds originate from plants and animals; thus, biodiversity loss directly threatens the discovery and development of future medicines.
- Delivering ecosystem services: Biodiversity underpins critical ecological functions such as air and water purification, soil formation and stabilization, and climate regulation—all vital for human survival and development. For instance, declines in pollinator populations and reduced ecosystem resilience exacerbate biodiversity loss, significantly impacting key economic sectors like agriculture and pharmaceuticals.
Although precisely quantifying the specific impacts of biodiversity loss on financial and economic stability remains challenging, several key risk transmission mechanisms have become increasingly clear, revealing how the degradation of natural systems can pose systemic risks to the economy and society through multiple pathways.
Global Developments and Current State of Biodiversity-Related Disclosures
As global ESG disclosure standards continue to converge and strengthen, efforts to harmonize and standardize ESG information—especially quantitative disclosures—are accelerating. Biodiversity-related disclosure practices are also rapidly evolving. Since 2024, the International Sustainability Standards Board (ISSB) has been actively advancing research on biodiversity, ecosystems, and ecosystem services (BEES). This initiative aims to: (1) assess corporate needs regarding biodiversity-related disclosures and evaluate how BEES-related risks and opportunities may reasonably be expected to affect enterprise value and prospects; and (2) explore effective approaches to meet BEES disclosure requirements, ensuring that the resulting information is decision-useful for investors and helps companies access resources more efficiently through ESG reporting. Meanwhile, the European Union’s Corporate Sustainability Reporting Directive (CSRD) explicitly mandates that, starting in 2025, most large companies must disclose their material sustainability impacts and dependencies. Against this backdrop, businesses and financial institutions face mounting pressure to systematically assess and mitigate their impacts on biodiversity.
Between 2022 and 2024, the World Benchmarking Alliance (WBA) completed its inaugural “Nature Benchmark,” evaluating and ranking 816 companies across more than 20 industries. The results revealed widespread blind spots: only 5% of companies assessed their impacts on nature, and fewer than 1% understood their dependencies on it. This gap is particularly acute and urgent given the ongoing evolution of regulatory requirements.
Disclosure Requirements for Biodiversity-Related Information:
- ESRS (European Sustainability Reporting Standards): ESRS E4 “Biodiversity and Ecosystems” sets detailed disclosure requirements covering a company’s impacts on and dependencies on biodiversity, related risks and opportunities, and policies and actions taken to protect biodiversity.
- CDSB (Climate Disclosure Standards Board): Its framework encourages companies to integrate climate and natural capital information into mainstream financial reports, emphasizing its relevance to understanding enterprise value. (On January 31, 2022, CDSB officially merged into the IFRS Foundation.)
- SASB (Sustainability Accounting Standards Board): SASB specifies industry-specific metrics related to ecological impact for sectors such as engineering and construction services, shipping, and hotel accommodation.
- GRI (Global Reporting Initiative): GRI 101: Biodiversity requires companies to disclose significant impacts on biodiversity across their operations and supply chains, including habitat protection, restoration, and management measures.
- CDP (Carbon Disclosure Project): Since 2022, CDP’s questionnaire includes a dedicated Nature & Biodiversity module, requiring companies to disclose their biodiversity management strategies, impacts on and dependencies on ecosystems, and associated risks and opportunities.
- MSCI: Within MSCI’s environmental pillar, “Biodiversity & Land Use” is a key issue, assessing companies’ negative impacts on biodiversity and their risk management capabilities.
The Taskforce on Nature-related Financial Disclosures (TNFD), a global initiative, provides a framework for governments, businesses, and financial institutions to identify, assess, and disclose nature-related impacts, risks, and opportunities. In September 2023, TNFD released its final recommendations to help stakeholders better manage and disclose nature-related risks and opportunities. The framework offers a foundational definition of “nature,” dividing it into four realms: terrestrial, marine, freshwater, and atmospheric. Given the distinct functions of these realms, significant differences exist across regions, biomes, and ecosystems.
TNFD seeks to integrate nature into corporate governance and strategic decision-making, guiding global capital toward activities that generate positive outcomes for nature. Its recommendations combine risk management with disclosure mechanisms to help companies address nature-related risks such as deforestation, habitat destruction, species extinction, drought, and land-use change—thereby enhancing overall disclosure and response capabilities.
Source: Recommendations of the Taskforce on Nature-related Financial Disclosures
Identification and Assessment of Biodiversity Risks
The core of biodiversity risk identification and assessment lies in understanding the two-way relationship between business and nature: how enterprises depend on ecosystem services to operate (dependencies) and how their activities impact natural capital (impacts). The ultimate goal is to pinpoint the specific geographic locations and value chain stages where these dependencies and impacts occur and to quantify their potential financial implications to inform strategic decisions.
Compared to the relatively mature and standardized methodologies for climate risk assessment, biodiversity risk assessment faces more complex, multidimensional challenges. A key difference is that climate risk centers on a single metric—carbon dioxide equivalent (CO₂e)—which unifies the warming effects of different greenhouse gases into a globally comparable standard and target system (e.g., net-zero emissions). In contrast, biodiversity is a multidimensional concept encompassing genes, species, ecosystems, and functions, which cannot be reduced to a single “biodiversity equivalent.” This fundamental distinction creates three major practical challenges:
- Diverse metrics: The ecological value of destroying one hectare of tropical rainforest differs vastly from that of destroying one hectare of wetland. Unlike carbon emissions, these impacts cannot be simply aggregated, making it difficult for companies to set unified targets or evaluate overall performance.
- High spatial specificity: Biodiversity impacts are highly dependent on specific locations and ecosystem types, requiring assessments at the level of each operational site and supplier location—unlike climate risks, which are inherently global.
- Data barriers: Critical data on species distribution and population trends are often scarce, fragmented, and costly to obtain—far less mature and standardized than carbon emission factor databases—posing significant obstacles to comprehensive and accurate risk assessment.
Therefore, biodiversity assessment cannot replicate the established path of climate risk. It requires companies to adopt a portfolio of metrics and rely more heavily on geospatial analysis, proxy indicators, and technological innovation to address its inherent complexity.
To address these challenges, TNFD proposes the LEAP approach (Locate, Evaluate, Assess, Prepare)—a systematic methodology for identifying, assessing, managing, and disclosing nature-related risks and opportunities.
Source: TNFD, Carbonstop
Moreover, leading international sustainability disclosure frameworks widely reference a range of biodiversity assessment and measurement tools to guide businesses and financial institutions in systematically identifying, quantifying, and managing their impacts on, dependencies on, and risks related to nature. These tools fall into the following categories:
01 Focusing on impacts on ecosystems/habitats/land cover
- Global Biodiversity Score (GBS) for footprint and dependency assessment
- Corporate Biodiversity Footprint (CBF)
- Biodiversity Footprint for Financial Institutions (BFFI)
02 Focusing on species-level impacts
- Species Threat Abatement and Restoration (STAR) Metric
- Environmental Profit & Loss (EP&L)
03 Inferring biodiversity impacts through indirect environmental pressure data
- Product Biodiversity Footprint (PBF): Bridges the gap between Life Cycle Assessment (LCA) and ecology, enabling product comparisons for eco-design and offering solutions addressing the five drivers of biodiversity loss defined by Multilateral Environmental Agreements (MEAs)
- Environmental Profit & Loss (EP&L): Quantifies, monitors, and communicates the annual environmental footprint across a company’s entire value chain
04 Monitoring changes using primary biodiversity data
- Biodiversity indicators for extractive industries
05 Other measurement tools
- Biodiversity Impact Assessment (BIA)
- Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE)
- Water Watch: Assesses the relative impact of corporate activities across sectors on global water resources
Case Studies
Dutch insurer a.s.r. demonstrates leading practice in biodiversity risk management by leveraging geospatial analysis to precisely locate ecosystems upon which its insured assets and investment portfolios depend—or which they may impact—such as identifying assets near biodiversity-critical areas.
Building on this, a.s.r. actively collaborates with specialized institutions to integrate biodiversity considerations into insurance product design (e.g., coverage for ecological restoration projects) and investment decision-making processes. It has also published a standalone “Climate and Biodiversity Report,” transparently disclosing its risk management outcomes and targets to the public. These actions mark a shift for insurers—from traditional risk bearers to proactive ecological stewards who use data-driven tools to prevent and manage nature-related risks.
Source: Climate and Biodiversity Report a.s.r. 2023
Mengniu Dairy, as a representative of China’s dairy industry, has developed a systematic framework for biodiversity conservation that integrates strategy and action across its entire value chain. In 2024, Mengniu further made history by releasing the dairy sector’s first TNFD-aligned report at COP16, pioneering the integration of nature-related risks into corporate disclosure and governance systems. To assess its nature-related impacts, Mengniu utilized the ENCORE database recommended by TNFD to evaluate the impacts and dependencies of its business activities on nature. It then applied the Capitals Coalition’s materiality assessment criteria to prioritize identified impacts and dependencies, providing a basis for targeted risk management measures.
These practices have not only earned Mengniu the highest AA rating in its sector from MSCI ESG but also offer a replicable “industrial ecologicalization” model for global businesses—demonstrating a complete pathway to transform biodiversity from a challenge into a core competitive advantage through precise hotspot identification, quantified environmental targets, and upstream-downstream collaboration.
Source: China Mengniu Dairy Company Limited Nature-Related Disclosure Report 2023
Carbonstop’s Exploration and Solutions
Leveraging years of deep expertise in sustainability and carbon management, the Carbonstop team has successfully extended its core capabilities into the field of nature-related risk management, offering professional biodiversity risk assessment and disclosure solutions. Grounded in clients’ strategic needs, we integrate international frameworks and methodologies—such as TNFD—to systematically
support enterprises throughout the entire process, from biodiversity risk identification and assessment to disclosure.
