A version of this article first appeared in Property Week on 11 March 2022 – click here to read (subscription required).
The related crises of climate change and biodiversity loss present the greatest threat not only to the integrity of our environment but also to our economies, to peace and to security. Despite being of equal gravity, climate change, and the integration of climate-related factors into business, has dominated the conversation, the legislation and aspirations towards better business. This is because the impact of climate change has human-facing consequences in the form of floods, wildfires, severe winds and droughts.
In the coming years, biodiversity and the protection of our natural capital will play an increasingly important role in business in recognition of the fact that our economy is underpinned by the health of our ecosystem. Continual degradation of our natural capital will have profound economic effects that must be addressed.
Legal and regulatory regimes for biodiversity are in their infancy, but likely to expand rapidly in the near future. No doubt, biodiversity buzzwords will become as common in boardroom discussions as net zero targets, climate reporting and carbon offsets. The current landscape for the incorporation of biodiversity into business comprises mainly investment decisions and targets, spatial planning and agricultural production.
In France, the 2021 introduction of ‘Article 29’ saw the first mandatory disclosure regulation on biodiversity impact. In October 2021, the UK Government published its Roadmap to Sustainable Investing, which builds on the 2019 Green Finance Strategy. As part of the Sustainability Disclosure Requirements (SDR) regime, firms will be required to report against the UK green taxonomy. This regime is heavily based on the EU's Sustainable Finance Disclosure Regulation and Taxonomy Regulation.
In line with the EU's regime, the UK Green Taxonomy, which aims to clearly set out the criteria which specific economic activities must meet to be considered environmentally sustainable, explicitly lists the protection and restoration of biodiversity and ecosystems as a key environmental objective. It is expected that these regimes will become mandatory for most companies by 2025.
In addition, the Government intends to make disclosures aligned to the Taskforce on Climate-Related Financial Disclosures mandatory across the UK economy by 2025.
The UK planning landscape for new developments has been dramatically altered by the new Environment Act 2021 requirements. The Act sets out the UK's post-Brexit environmental protection framework against the backdrop of the closing of COP26 and an increasing focus on the role that the planning system can play in tackling the environmental crisis. The Act seeks to address the effects of climate change and biodiversity. It introduces a 10% biodiversity net gain requirement for all new developments in England, although this would not take effect until the issue of further regulations which are not expected until 2023. It also requires the development of local nature recovery strategies, which will feed in to the development of a national nature recovery network.
Although planning law is country-specific, we expect that, in line with the trend towards integration of biodiversity risk and regeneration into business generally, similar requirements may follow internationally.
The UK's agricultural sector is also undergoing significant change. Brexit has meant the withdrawal of subsidies provided to farmers through the EU's Common Agricultural Policy. The UK Government intends to replace the current subsidies with the Environmental Land Management (ELM) scheme. From 2024, farmers will receive payments based on their delivery of environmental benefits, one of which is thriving plants and wildlife, shifting the subsidy regime from one that is arguably damaging the environment to one that seeks to enhance it.
The ELM scheme is being piloted on select farms and estates. Criticism of the new schemes have highlighted the lack of detail available to help farmers transition, and a lack of clarity in relation to quantifying their contribution to the environment.
Biodiversity is everyone's business, and businesses must be prepared for the imminent legal and regulatory regimes that are soon to be implemented around the world.
Join the conversation on 15 March 2022 when we will be hosting "Incorporating Biodiversity Into Business: The legal, practical and commercial implications of new regulatory regimes". You can register your interest here.
Alexander Rhodes is Head of Mishcon Purpose and Anita Rivera is Head of Planning at Mishcon de Reya.