The year 2022 ended on a high note for biodiversity at both a domestic and international level and 2023 continues building upon that momentum, with the elevation of biodiversity as a critical consideration in planning, development and economic decision making in Australia.
COP15 produced an international agreement in December 2022 called the Global Biodiversity Framework (GBF) which sets a baseline for biodiversity preservation and restoration. At around the same time and in response to an independent review, the Australian Government released the Nature Positive Plan (NPP). This plan outlines the Government’s proposed reforms to federal environmental laws with an emphasis on:
- delivering a nature positive regulatory framework which promotes restoration and regeneration rather than decline;
- improving transparency and integrity to a system that is seen as ‘broken’ by many stakeholders; and
- linking human rights, particularly Indigenous rights, with environmental protection. This is also a key component of the GBF.
In parallel, there is the development of a ‘common language’ of sustainability disclosures which continues to propel biodiversity into the corporate spotlight. For example, the standards developed by the International Sustainability Standards Board (ISSB) and the financial disclosures framework being developed by the Taskforce on Nature-related Financial Disclosures (TNFD).
This Insight looks at what Australian businesses should expect in 2023, how they can prepare and why these developments in biodiversity will impact a broad range of industries.
Global trends (Baselines implemented - 30:30 by 2030)
The GBF which, while not binding on States or corporates, sets the benchmark for biodiversity protection and the advancement of human rights. The targets seek to ensure biodiversity loss is halted and reversed and nature related benefits are shared equitably amongst vulnerable groups, particularly indigenous people. These include:
- restore 30% of degraded terrestrial, inland water, and coastal and marine ecosystems by 2030;
- conserve and manage 30% of terrestrial, inland water, and coastal and marine areas by 2030;
- halt extinction of known species, and by 2050 reduce tenfold the extinction risk and rate of all species;
- to ensure companies and financial institutions monitor, assess and disclose their risks, dependencies and impacts on biodiversity; and
- increase financial resources to implement national biodiversity strategies and action plans by 2030, mobilising at least US$200 billion per year.
An analogy has been made between the greenhouse gas emission targets agreed under the Paris Agreement and the GBF (the 30:30 objective of restoring, conserving and enhancing 30% of biodiversity and ecosystems by 2030), in that the targets will have the same positive and influential impact on policy development at an international and domestic level.
The GBF expressly recognises that its implementation must ensure indigenous peoples:
- rights and traditional knowledge associated with biodiversity (among other things) are respected, documented, preserved with their free, prior and informed consent (FPIC); and
- are able to fully and effectively participate in decision-making, including in accordance with the United Nations Declaration on the Rights of Indigenous Peoples and human rights law.
More broadly, many of the GBF’s goals and targets are directed to ensuring vulnerable groups – women and girls, indigenous peoples and others – share in the benefits of natural resources, and are not disproportionately impacted by their use.
Domestic trends (‘Nature Positive’ and the roadmap for environmental reform)
Australian environmental reforms are underpinned by an increasing recognition of the value of nature and its importance to human wellbeing, including to the Australian economy. There is recognition that these values should be taken into account in government decision-making. This is also a key aspect of the GBF noting that Target 14 calls for the “full integration of biodiversity” across policy, regulation, development process, and environmental assessment and impacts statements.
While certain elements of the NPP seek to improve the approvals framework and the mechanisms under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act), there are other proposed reforms that are relevant to the wider business community. In particular, the baselines and standards identified:
- elevate biodiversity as a key factor for the economy and recognise the value of biodiversity protection and promotion; and
- will influence business sustainability agendas and ESG risk management and reporting frameworks. These impacts may be direct or indirect, via supply chains.
Some key reforms include:
- developing National Environmental Standards which will be a foundational element of planning for environmental protection and also decision making, including EPBC Act assessments and approvals. For example, the standard for Matters of National Environmental Significance will underpin the development of regional plans which will be used to deliver environmental outcomes and will be relevant to the national environmental framework for the assessment and approval of projects;
- establishment of a federal Environment Protection Agency (EPA) which will be responsible for compliance and enforcement, publication of mandatory guidelines and importantly, project assessments and determinations (with the support of an advisory group;
- determination of project approvals by the EPA. The Minister will now no longer automatically determine approvals for projects that are ‘controlled actions’ under the EPBC Act. The Minister will however, retain ‘call in’ powers to determine EPBC Act approvals that are in the national interest. This particular reform focuses on improving the independence of decision making under the EPBC Act;
- accreditation of states and territories for ‘single-touch decision making’ for project approvals which will aim to streamline Commonwealth and state and territory environmental assessment and approval processes;
- commitment to First Nations partnerships, including development of National Environmental Standards and standalone cultural heritage legislation to replace the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth);
- requiring proponents for EPBC Act determined project approvals to publish Scope 1 and 2 emissions data and disclose alignment with Australia’s international and national obligations; and
- establishing a voluntary ‘Nature Repair Market’ that will sit alongside the carbon market.
Consultation on the proposed reforms is ongoing and will continue through the first half of 2023, with new legislation to be introduced by the end of 2023.
Corporate trends (financial disclosures and nature markets)
Once the final TNFD framework is released in September 2023, it is expected that this would accelerate the move toward mandatory disclosure of nature related financial risk by corporations and financial institutions. Organisations should not expect a staged approach to that mandatory disclosure requirement.
Relevantly, the Australian Government is a strong supporter of the TNFD and has already indicated, in its consultation paper on the climate-related financial disclosures framework (released in December 2022), that the framework will be expanded to capture biodiversity disclosures.
Sustainability and climate-related standards have been developed and adopted by the ISSB and are due to be implemented in the beginning of 2024. In particular, biodiversity and incorporating natural ecosystem considerations will form part of the disclosure standards.
The Australian Government is also developing the ‘Nature Repair Market’ which will facilitate investment by business in biodiversity through the purchase of biodiversity certificates created from eligible projects. This voluntary market will support the TNFD framework by allowing businesses to mitigate their impacts on nature in a meaningful, certain and transparent way.
These types of initiative are supported by the GBF and some have commented that the UN Biodiversity Conference goes some way to making nature a mainstream theme for investment and enabling opportunities in nature-based projects that can generate carbon credits or emerging voluntary nature credits (see comments from Climate Asset Management here).
What can businesses do now?
We will undoubtedly see more movement from the Australian government and regulators throughout the remaining part of 2023 as well as growing social expectations that all businesses are sustainably focused and moving towards becoming nature positive.
Businesses will benefit from first mover advantage by integrating biodiversity and human rights into their ESG risk management frameworks and positioning to take advantage of the economic opportunities presented by natural capital and nature markets in Australia and internationally.
Business can prepare now by implementing the following five actions:
- broadening the ‘E’ in an ESG framework beyond climate change to include biodiversity. This may, for example, take the form of adopting targets (aligned with the GBF). At the same time, reviewing the manner in which the ‘E’ and the ‘S’ in an ESG framework is managed and that any risks are de-siloed and integrated effectively into risk management processes;
- carrying out a risk assessment of biodiversity impacts and dependencies within the business. This may start with applying the TNFD framework to one component of the business. This type of introductory action will assist businesses to prepare and implement systems that can manage any financial risk disclosure requirements in the future (whether they be voluntary or mandatory);
- considering how the ISSB disclosure standards might be adopted by the business including the requirements for consideration of biodiversity and natural ecosystem matters;
- assigning responsibility within the business for developing an understanding of how structural reforms to environmental policy, management and objectives in Australia will impact the business and its operations; and
- identifying any opportunities that may arise as a result of implementing robust biodiversity conservation, for example, nature markets or sustainability linked loans.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.