Regional and international disclosure frameworks should enhance cooperation to minimise the risk of “biodiversity leakage”, a German Federal Ministry of Finance official has warned.

Speaking during a conference hosted by the German government, Esther Wandel, head of the division for investment funds and sustainable finance at the German finance ministry, called on major nature-related disclosure standards to jointly address the risk of activities harmful to biodiversity being moved from highly regulated to lightly or non regulated areas.

“We know the term carbon leakage. There’s also the risk of biodiversity leakage. If we have a strongly regulated area, things might move somewhere else,” Wandel said.

If not properly addressed, the lack of balance between environmental regulations could lead corporates to relocate some of their activities, diverting damages to biodiversity, she explained.

“It’s good if the European Union does something, but there’s an international issue, and we need an international playing field and international work on that area,” Wandel said.

In January, a study carried out by researchers at Germany’s Theunen Institute found that environmental policies under the EU Biodiversity Strategy (EUBDS) are bound to negatively impact biodiversity in other areas of the world.

“This would not be helpful for the end goal,” Wandel said. “We hope the ISSB will work closely with the Taskforce on Nature Related Financial Disclosures.”

The ISSB Sustainability Disclosure Standards FRS S1 and IFRS S2 came into effect in January, integrating TNFD work into its guidelines.

The task force recommendations, set to be adopted by at least 320 companies worldwide within the next two years, also informed the Global Reporting Initiative (GRI) standard 101, released in late January.

“If you’re an international company, at the moment, you’re facing an increasing number of disclosure requirements every year,” said the CEO of the think tank Climate & Company, who participated in the panel.

“These requirements are not aligned yet. We need frameworks and initiatives such as GRI and TNFD that can help us harmonise that.”

At the EU level, the first disclosures under the bloc’s Corporate Sustainability Reporting Directive (CSRD) are expected next year.

“We’re in an initial phase,” said Sven Gentner, head of unit for asset management at the European Commission. “We don’t have all the support functions for the small and medium sized enterprises. We don’t have all the tools online.”

“We must pass the message that not everything has to be 100% from day one. This is a big step. We’ve given a lot of flexibility, and companies should also make use of that. If we push it too far, we’ll have a big problem in this initial phase.”

Some experts emphasised the limits of the CSRD requirements, dubbed “not very consistent”, compared to the TNFD recommendations.

By Sergio Colombo – sergio@carbon-pulse.com

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