Enhancing nature-related risk management for life sciences companies
In this guest blog, Valerie Pinkerton, UK TNFD & Transition Plans Lead at the Green Finance Institute, explores why nature-related risks are becoming increasingly important for the pharmaceutical and biotechnology sector. The piece highlights how frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) can help companies understand, manage and report on nature-related risks as expectations from investors and regulators continue to grow.
Nature risks are material and affect global businesses today
The pharmaceutical and biotechnology sector depends on natural inputs across the value chain, such as consistent access to freshwater for use in manufacturing processes and as an ingredient in products. Further, upstream inputs, development and manufacturing, and post-production and end-of-life treatment, all have impacts on nature. For example, some of the compounds used in pharmaceutical manufacturing are derived from commodities like palm oil, soy or sugarcane, which can drive negative land-use change impacts.1
Nature-related risks and opportunities in turn arise from an organisation’s dependencies and impacts on nature. For example, water stress or flooding can threaten supply chain resilience and increase input costs. In contrast, those market leaders that accelerate action on nature-related opportunities, for example, developing new, less harmful forms of chemical synthesis in drug production, can realise enhanced revenue and brand value.2
Risks and opportunities have financial effects for an organisation through changes to revenue, expenses and capital expenditure, access to and cost of capital, and carrying amount of assets and liabilities on balance sheets.3
Guidance to support businesses in integrating nature into decision-making:
In a response to growing evidence that nature is deteriorating globally,4 posing severe risks for businesses, capital providers, financial systems and economies,5 the TNFD was launched in 2021. Its mission was to develop and deliver a risk management and disclosure framework for organisations to report and act on evolving nature-related issues. The TNFD framework brings nature into the strategy, risk management and capital allocations of business and finance.
The development of the TNFD’s disclosure recommendations and guidance was market-led, with input from 40 Taskforce Members and 1800+ institutional supporters, science-based, partnering with 20 of the world’s leading scientific and standards bodies, and government-supported, including engagement across the G7 and G20.
In 2023, the TNFD published its 14 disclosure recommendations and supporting guidance6 to encourage and enable business and finance to assess, report and act on nature-related dependencies, impacts, risks and opportunities. The TNFD has also subsequently published sector guidance for businesses in the biotechnology and pharmaceuticals sector.7
Nature is now a strategic management issue of growing importance to regulators
The Green Finance Institute is available to support BIA membership
This covers a broad range of areas, from how others in the market are approaching TNFD, to leveraging work for other reporting requirements, to building a strong evidence base to support Board discussions. This initiative is funded by the UK government to provide free support to UK businesses.
Please reach out to [email protected] if this is an area you are exploring; the team would be pleased to discuss anything you might find useful at this stage.
You can also sign up to the TNFD UK Consultation Group for UK-based updates and events.
