In 2021, the UK Government passed the Environment Act containing a series of legally binding targets that cover ecosystem restoration, species population, water quality, pollution, waste and protected areas.

In July 2024, the UK Government announced it will undertake a rapid review of its plan to meet these targets (known as the Environmental Improvement Plan). This followed an annual progress review highlighting the “dire state of the natural environment” and that the UK was not on track to deliver its legally binding targets to save nature.

From this review, the Government will develop a new, statutory plan to protect and restore its natural environment with delivery plans to meet each of its Environment Act targets. This will focus on cleaning up UK waterways, reducing waste across the economy, planting millions more trees, improving air quality and halting the decline in species by 2030.

As a signatory to the Kunming-Montreal Global Biodiversity Framework (GBF), the UK Government has committed to a range of international targets on nature and to publish a strategy for how it plans to meet them. The UK is among 196 countries that adopted the GBF in 2022.

The GBF framework outlines 23 targets for 2030 covering a broad range of actions including conservation, restoration, financing, disclosure, and impact reduction. Target 15 calls for ‘businesses [to] assess, disclose and reduce biodiversity-related risks and negative impacts’ and explicitly references the work of the TNFD. Target 19 calls for signatories around the world to collectively ‘mobilise $200 bn per year for biodiversity’ aligned with the goals of the TNFD framework to shift capital away from nature negative outcomes and towards positive outcomes.

The UK is required to publish its National Biodiversity Strategy and Action Plan (NBSAP) ahead of UN CBD COP16 in October 2024. The NBSAP is expected to lay out in detail the policies and actions the UK will take to ensure that it meets the targets of the GBF. NBSAPs are expected to integrate conservation and the sustainable use of biological resources into national decision-making (across sectors and policy).

The GBF’s 2030 targets and associated NBSAPs contribute to 4 long-term goals for 2050, including closing of the $700 billion per year biodiversity finance gap.

The UK is currently developing a Sustainable Disclosure Requirements (SDR) framework, containing a set of Sustainability Disclosure Standards (SDS) as well as transition plan and taxonomy components.

UK SDS are strongly aligned to ISSB standards. Through an SDR Implementation Update, the UK Government announced its aim to complete the ISSB alignment process by Q1 2025, and is expected to translate current climate reporting requirements in the UK from TCFD to IFRS S2 (which itself draws heavily from TCFD).

In April 2024, the ISSB announced that they are assessing “biodiversity, ecosystems and ecosystem services” (nature) as their next area of focus in standards development, drawing from the TNFD framework. The FCA’s response to the ISSB’s 2023 consultation on areas of focus was highly supportive of work on nature and biodiversity. In particular, they encouraged the ISSB to “leverage existing work that would enable the development of a standard quickly – notably the TNFD framework.”

With the framework in place to do so, the UK Government is expected to assess the suitability of any new ISSB standards (such as a potential future IFRS S3 focussed on nature) for use within SDR.

The 2023 revision of the Financial Services and Markets Act required financial regulators in the UK to give “due regard” to nature. Specifically, it included a revised clause (Part 1, 27c) stating “the need [for financial regulators in the UK] to contribute towards achieving […] section 5 of the Environment Act […] where each regulator considers the exercise of its functions to be relevant to the making of such a contribution.”

In effect, this requires all financial regulators in the UK (including the Bank of England, the Financial Conduct Authority and Prudential Regulation Authority) to utilise the tools at its disposal to support the achievement of the goals set out in the Environment Act. Regulators have until January 1^st 2025 to action this.

In parallel, the Bank of England (BoE) is working with the UK Government (via Defra), as well as NGFS and TNFD to build a “clearer picture of the nature-related financial risks facing the UK.” There is a growing body of evidence on the materiality of nature-related risks to the UK economy and the relevance to central banks and financial supervisors’ mandates, including publications from the GFI, NGFS and FSB.

In 2024, a report by the Green Finance Institute (GFI), which received direction from an advisory committee including the FCA, Defra and HM Treasury, highlighted that nature loss could cause GDP loss of up to 12% and an estimated £2-7 billion in losses for each of the seven largest Banks. This exceeds the impacts of both the 2008 global financial crisis and the COVID-19 pandemic.

The Network for Greening the Financial System (NGFS), of which the BoE is a member, considers nature as central to its mandate to preserve financial stability. In July 2024, the NGFS published two complementary reports on nature-related risks. The first report is a Conceptual Framework for Nature-related Financial Risks, which aims to guide policies and action by central banks and financial supervisors. The second report outlines the relevance of nature-related litigation to central banks, supervisors and the financial system, and includes legal cases concerning biodiversity loss, deforestation, ocean degradation, carbon sinks and plastic pollution.

Sabine Mauderer, Chair of the NGFS, and Member of the Executive Board of the Deutsche Bundesbank:

“The NGFS started its journey with a focus on climate risks. Yet, climate change and nature loss affect each other. Biodiversity is under threat worldwide, making it essential for central banks, supervisors and regulators to understand nature-related risks to the financial system..”

The Financial Sustainability Board (FSB) also released a report in July 2024 at request by G20 Finance Ministers and Central Bank Governors which details regulatory initiatives and investigates the perception of nature-related financial risks across financial supervisors. The analysis concluded that a “number of authorities” have regulatory and supervisory nature-related initiatives on the way in response to the “profound effects” of nature-related risks on the real economy and financial system.

Klass Knot, FSB Chair, President of De Nederlandsche Bank, Governing Council of the European Central Bank:

“As central banks and supervisors, we have every reason to be concerned because it’s an illusion to think we can preserve financial stability if this [nature] degradation continues.”

Over 15 central banks and financial supervisors have undertaken nature-related risk assessments, largely concluding that exposures to nature-related risks are material and recommending further assessment, including:

• European Central Bank
• De Nederlandsche Bank
• Banco de México
• Bank Negara Malaysia
• Banque de France
• Magyar Nemzeti Bank of Hungary
• Bank of England (unpublished)
• South African Reserve Bank (unpublished)

Five financial supervisors across emerging and advanced economies have issued supervisory guidance for financial institutions on the management of nature-related risks (with many more exploring the case to develop guidance):

• European Central Bank
• De Nederlandsche Bank
• Monetary Authority of Singapore
• Germany’s Federal Financial Supervisory Authority (BaFin)
• China Banking and Insurance Regulatory Commission