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How nature-positive are you? The impact of evolving biodiversity and nature requirements on the real estate sector

How nature-positive are you? The impact of evolving biodiversity and nature requirements on the real estate sector


    In this briefing we explore how the treatment of nature-related risks and opportunities (NROs) is shifting within the real estate sector and what this means for UK property investors, funders, developers and occupiers.  We consider the impact on sustainability reporting and investment and development decisions. 


    A number of nature-related changes have coincided recently. They highlight how nature has risen up the corporate agenda and how sustainability reporting is responding. 

    • In December 2022 the Kunming-Montreal Global Biodiversity Framework (GBF) was agreed. It is the nature-related equivalent to an international climate change agreement. The GBF requires signatories to take measures to encourage and enable business to monitor, assess and transparently disclose their risks, dependencies and impacts on biodiversity.
    • The Taskforce on Nature-related Financial Disclosures (TNFD) published the final versions of its disclosure recommendations and guidance. TNFD is a risk management and disclosure framework to assess organisations' dependencies and impacts on nature, the nature-related risks and opportunities (NROs) material to them, and to support disclosures as part of their annual reports (see TNFD makes major contribution to sustainability reporting landscape).
    • The International Sustainability Standards Board (ISSB) published its first two sustainability disclosure standards (SDSs) in June 2023, and consulted this summer on producing further SDSs including on biodiversity, ecosystems and ecosystem services (BEES) (see ISSB publishes first standards on sustainability and climate disclosures).
    • The UK government announced in September 2023 that it will introduce the biodiversity net gain (BNG) requirement in January 2024 . Developers will be required to deliver a minimum increase of 10% net positive biodiversity for the local environment when building new housing, industrial or commercial development.

    Summary of the TNFD Recommended Disclosures

    The TNFD's fourteen recommendations are grouped according to the four Taskforce on Climate-related Financial Disclosures (TCFD) pillars (that is, governance, strategy, risk management and metrics & targets). Eleven of the TNFD's recommendations mirror those of the TCFD together with three additional recommendations. For a summary of the recommendations, see TNFD makes major contribution to sustainability reporting landscape.

    The TNFD suggests a double materiality approach to reporting. The TNFD references the EU Sustainability Reporting Standards' definition of double materiality1 which includes two interrelated concepts: impact materiality and financial materiality:

    • Impact materiality considers the actual or potential impact (positive or negative) of the business, its products services and value chain on people and the environment over the short, medium and long-term.
    • Financial materiality determines the sustainability matters that will trigger, or could reasonably be expected to trigger, material financial effects on the organisation including its development, financial position or performance, cash flows, access to finance or cost of capital over the short, medium or long-term.

    Although the status of the TNFD is currently voluntary, many organisations including global financial institutions are starting to carry out nature-related assessments and reporting. The expectation is that organisations will be able to start reporting on the recommended disclosures by 2026 based on their 2025 financial years.

    The UK government has said it will consider how the recommendations should be incorporated into domestic policy and legislation and, like the TCFD, the TNFD's recommendations may become mandatory for large UK companies.

    How does the new BNG requirement interact with sustainability reporting?

    The Environment Act 2021 introduced a mandatory BNG requirement in England that comes into effect on January 2024 for most development and for small sites from April 2024. The BNG requirement will take effect as a pre-commencement planning condition attached, or deemed to be attached, to any planning permission granted after the BNG requirement comes into effect unless an exemption applies.

    The aim of the requirement is to deliver improvements to the natural environment through habitat creation or enhancement after avoiding or mitigating harm as far as possible.

    Developers must submit a biodiversity gain plan to be approved by the local planning authority before the development can begin. The BNG increase can be met by onsite biodiversity improvements, offsite improvements or the purchase of biodiversity units from landowners or credits from the government.

    The BNG requirement, and the achievement and maintenance of biodiversity gains for affected developments in England, may become matters which will need to be included in sustainability or TNFD-aligned reporting that is required of developers if such matters are considered to be material.

    What do the TNFD disclosure recommendations mean for the real estate sector?

    Summarised below are some of the key impacts that the TNFD's disclosure recommendations are expected to have on the property sector.

    Extended thinking and reporting

    Developers and property investors are already familiar with assessing the impact of developments on habitats and species (for example, through habitats assessments and environmental impact assessments needed to obtain planning permission). 

    However, the double materiality aspect of the TNFD (i.e. the need to assess not just the impact of the business on nature, but also the material financial effects on the organisation) expands how these issues have been treated to date. The need to assess and report on NROs across the business will also be an expansion of this issue into all areas of corporate activity, elevating nature-related issues from a site-level concern to a management and board-level issue.  In Australia, Pollination and the Commonwealth Climate and Law Initiative have published a 'joint memorandum of opinion' on nature-related risks and directors' duties, which asserts that under Australian law, "Directors of companies should at least identify the company's nature-related dependencies and impacts, and consider potential risks this may pose to the company.  Directors who fail to consider nature-related risks could be found liable for breaching their duty of care and diligence." The opinion cites research by the Swiss Finance Institute and the European Governance Institute, which concluded that following the UN Biodiversity Conference (COP 15) "firms with larger corporate biodiversity footprints lost value".

    It is worth noting that it is likely to be more challenging to measure and monitor biodiversity and nature-related impacts as compared to climate-related impacts. For businesses with many resource inputs, it will be a complex and time-consuming task to track these impacts back through multiple supply chains.

    Impact on real estate portfolios

    As nature-related reporting takes off, the information that is generated alongside that relating to other sustainability issues could result in portfolios being ranked as regards their biodiversity impact. Property companies will need to consider whether the property they are holding is having a negative impact on their nature-related or wider sustainability reporting. Consideration of the nature-impacts of specific holdings will become a strategic issue that affects performance and potentially value. In the same way that the market expectation is that there will be a 'greenium' for EPC A/B properties, we may also see a similar split in values between nature positive properties and the rest.

    Increased transparency on nature-related risks will change financing decisions

    As the number of property companies that make nature-related financial disclosures increases, this will give investors and funds a much clearer picture on nature-related impacts across the real estate sector. Increased transparency from nature-related reporting will allow banks and other financing entities to factor NROs into their financing decisions.  An example of this is the 150 financial organisations have signed the Finance for Biodiversity Pledge, which commits them to call on global leaders and to protect and restore biodiversity through their finance activities and investments. Signatories agree to assess their biodiversity impacts, set targets, and report on biodiversity matters before 20252.

    The NRO disclosures will support the due diligence needed for banks to change their lending practices and valuations to support a shift towards nature positive outcomes. Banks and other financing entities are likely to ask for more information on the nature-related impacts of a property to support their investment decisions 3. Early adopters of the TNFD may find that this reporting helps access to finance.

    Increased transparency on nature-related risks will change occupier decisions

    As large corporates that occupy much of the commercial office stock in the UK become subject to nature-related reporting requirements, they will want to occupy buildings that have a positive impact on nature. 

    They will want to work with landlords and developers whose sustainability values and portfolio are aligned with their own values and targets. The sustainability due diligence that is undertaken when deciding on premises is likely to increase. Large occupiers are likely to develop their own nature-related criteria, which must be met for them to lease or buy a property. These will also be driven by the financing that they might require. It is envisaged that more nature positive properties will benefit from better access to finance and potentially cheaper finance.

    Emergence of a new asset class

    As organisations start to focus on managing nature-related risks and, in England, the BNG requirement takes effect, regenerating land into wetlands, rewilded land and forestry etc becomes increasingly attractive as a way for developers and occupiers to demonstrate effective management of nature-related risks and deliver against BNG targets. The UK Government's March 2023 Nature Markets Framework4, describes the principles for developing high-integrity markets to enable land managers and farmers to attract investment in natural capital and aims to contribute to the development of this asset class.

    What can property companies do to get ahead?

    1. Understand the TNFD disclosure recommendations and stay abreast of the development of nature-related disclosure requirements.
    2. Start data collection processes. This is particularly key for developers as, aside from nature-related impacts relating to development sites, the construction products used by supply chains will also have nature-related impacts.
    3. Put NRO management on the board agenda and ensure it is appropriately resourced.
    4. Understand the specific measures that can be put in place to protect and improve biodiversity at commercial properties (for example, green roofs, living walls, pollinator spaces, bat boxes, bird boxes, and repurposing buildings at the end of existing use). Build baseline biodiversity data for sites. Build baseline biodiversity data for portfolios. Earth observation (satellite data) is becoming a relatively low cost, objective method for baseline surveys.
    5. Amend supply chain contracts to require suppliers to provide data on biodiversity and nature impacts and to minimise those impacts. Consider how such clauses can be monitored and enforced.
    6. Consider data collection obligations and wider obligations on tenants in leases relating to biodiversity and nature-related impacts, and how to minimise those impacts and protect and improve biodiversity.
    7. Carry out a BNG screening report on land that may be developed or to assess the potential for land to generate BNG units. ESG Data providers such as Landmark Information Group have launched specific biodiversity reports, which allow an overall BNG plan to be prepared at an early stage.


    The play-book for NROs is being developed at pace and the evolution of the biodiversity and nature-related reporting landscape is well underway, which could significantly change how the real estate sector is financed and valued. As we are seeing with climate change and the transition to net zero emissions, capitalising on the opportunities and effectively managing material risks is inevitably going to require leadership, vision and resource allocation.

    1. See section 3.3-3.5 of Annex 1 to the Commission Delegated Regulation (EU) .../... supplementing Directive 2013/34/EU of the European Parliament and of the Council as regards sustainability reporting standards - Corporate Sustainability Reporting Directive (
    2. See Signatories - Finance for Biodiversity Foundation.
    3. See the Investor Expectations launched by Nature Action 100 in June 2023 (Nature Action 100 releases investor expectations to support urgent corporate action on nature loss – Nature Action 100). Although, the property sector is not one of the eight key sectors that are deemed to be systemically important in reversing nature and biodiversity loss by 2030, it is likely that the number of sectors will be expanded over time and that finance organisations will apply the expectations to companies in other sectors when they engage with them.
    4. HM government, Nature markets framework, 30 March 2023.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


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