Hello everybody and welcome to the latest edition of C&F Talks. Today, I have with me Richard Barker, who's a Board Member of the International Sustainability Standards Board, the ISSB. And Richard's going to be speaking at our upcoming Natural Capital Summit which is being held in London on the 28th of November. Welcome, Richard.

Thank you.

Very good to have you with us.

Let's turn to our first question. How important is the incorporation of nature-related financial disclosure in the next phase of the ISSB's work? And is it a central theme?

Yeah, it very much is a central theme. So, the next phase of our work is really in two parts.

One part is two research projects. Those research projects will lead ultimately to standard setting projects and then ultimately to our next standard to S3 and S4. In parallel with that, we are doing updating of our industry-based standards. So, nature features prominently in both of those tracks. On the two research projects, one of them is currently labelled biodiversity but it's nature broadly defined. And so that's in process. So that you would expect.

Decisions yet to be made but you would expect that will develop into a nature-based standard in some form. And the SASB standards, the industry standards that we're developing, we're starting by enhancing the existing SASB standards in high impact sectors because those are where there are greatest risks and opportunities for investors.

So this is in extractives and power generation utilities and food and beverage. So, all sectors with a very high nature-related component.

Right, so as you say, very much central to your work.

I suppose part of that is you're going to be building on or incorporating the recommendations of the TNFD?

Yes, yes. So the biodiversity project I mentioned explicitly in the remit, in the scope as it were, for staff developing that project is building on the foundations of TNFD. So we've explicitly called out TNFD as foundational in that work.

ISSB adoption of a similar approach to nature-related financial disclosures as to climate-related disclosures.

Maurice

And I suppose you have a sort of a model to base your future work on nature, obviously with your first two standards on climate. Will you be adopting a sort of similar approach in your work? And they're not identical by any stretch of imagination. The type of here-or-there is fungible where the same is not true of nature. So what are the main challenges? How does it differ?

Yeah, yeah, yeah. No, absolutely. So from our point of view, the approach, you know, the standard setting approach is the same, right? You know, there's an agenda consultation.
What should we do? There's a due process that we go through and so on.

We were given the mandate to start with climate. Climate is climate-related risks and opportunities. So actually nature features already in our climate. It's not just, you know, what are your emissions. But when you get to nature, of course, it's much more complicated in a variety of ways. You know, it's in the first place, it’s far less well-developed.

So the sort of measurement and reporting in that space is far less developed. So for us, TNFD, having done all the work that they've done is incredibly helpful, right? Because you know, thinking how much groundwork has gone into that and how we can now use that, right? But nature is, and we talk about nature as if it's a thing in the same way we talk about climate as if it's a thing. Well, global warming is a thing, but nature is not.

It's many and its manifestations are many and it's local, you know, the localised issues are so varied and so on. And the interactions and the complexities. So, it's a much, much more difficult space. And we need yet, we have yet to figure out quite how we're going to start to crack it.

Yeah, it's such a complex area, isn't it? I mean, as you say, in a sense, it's two sides of the same coin, but that probably oversimplifies it.

Yeah, I mean, I think there's significant, obviously, there's significant overlap and interaction between nature and climate.

You don't get a climate solution without a nature solution going hand in hand with it. And many of the climate related risks and opportunities come through nature. But there's also a set of nature related activities that's not climate related, right? So it's, and I think that, you know, the challenge in many ways is, you can't fix all of that in one go, you can't in a standard setting sense, you've got to identify where can you make the most difference. Yeah, so for example, if you take the topic of, this is not, this is me talking now rather than, you know, it's not the board view.

But if you take the topic of biodiversity, you could kind of go for that head on, but that's a really hard thing to do. But you could also go for land use, water use, and deforestation, and you've covered a lot of the drivers of biodiversity loss. So, and therefore, the risks and opportunities of that for our business.

So there are different ways of approaching it. And one has to be pragmatic, I think.

Yeah, a very, very complex area.

But I guess that however you do decide to approach it, that there'll be considerable interplay between your climate standards and a future nature standard. And I suppose that's going to, do you think that will make it easier, perhaps, for corporates in terms of adoption?

It should do because, you know, our standards currently, there's two standards, right? There's a general requirements standards and a climate standard. And the general requirements one basically says report all sustainability related risks and opportunities that could reasonably expect, you know, affect your, be expected to affect your prospects.

And then we spell out what that means for climate. We haven't yet spelled out what it means for nature, right? And so inevitably, doing more spelling out will fill in some of the gaps and make it easier. Yeah, I think that's right.

Yeah, yeah.

And I suppose, you know, having gone through all that work for the climate standards, where you have to consolidate that there's a whole number of different standards, voluntary standards, and so on, which you've managed to, in large measure, to consolidate and people have accepted the ISSB standards as the ones that are going to follow. So, with nature, you're starting, other than the TNFD's recommendations, you're starting with a clean sheet. So do you think it makes, it will speed the process up for you?

Do you think with the, sort of supplementary question, do you think that at the national level, though, in contrast to that, is going to be more difficult because the relative complexity of nature related versus climate disclosure? So on one hand, it's faster, on the other hand, it's perhaps slower for the implementation.

So there's a lot, there's a good question, there's a lot in there.

So in terms of the clean slate, it's not quite as clean as you describe in the sense that, there are already GRI standards that cover nature and biodiversity that are very widely used. And of course, there are now ESRS standards that are starting to be widely used. And so, issues of interoperability with those standards is really important to us.

And in fact, when we, in our MOU with GRI, that has called out biodiversity as a particular area of collaboration between the two, developing a standard that, developing a sort of a seamless interaction between the standards, as it were, interoperability between the standards so that investors and other stakeholders are not getting different information for the same thing. So, and then of course, the SASB standards also have nature and biodiversity metrics in there. So actually, there is some consolidation to do with existing interoperability issues.

In terms of adoption, I think in many ways, it's the critical step actually is adopting S1 and S2 because once you've done that, you've got the legislative regulatory infrastructure in place to do sustainability related financial disclosure. And then, you know, plugging in a nature standard is a relatively straightforward next step to take. So I think the adoption thing is relatively straightforward, especially because, you know, these things do take time.

It takes time to go through the S1 and S2 adoption process. It also takes time for us to adopt the, to develop a nature standard. And, but then by that stage, I think it will all naturally flow.

And corporate reporting practice will continue to evolve in the meantime. So, you know, voluntary reporting in this space, which has been so important, will continue to develop and best practice in the companies looking at what, over their shoulders, what others are doing and so on will develop.

Yeah, a complex situation, but one I'm sure you're making very, very good progress.

For our viewers, if you want to hear more about these issues and related issues, please do attend the Natural Capital Summit being held in London on the 28th of November. There's further information available on our website www.cityandfinancial.com. And we'd very much like to see you all there.

Richard, thank you so much for sharing those thoughts with us today.

Thank you. And thank you for holding this event, by the way. You know, natural capital, nature, biodiversity, however one wants to describe it, has not got the attention it deserves in relation to climate.

You know, it's, it creates the same level of existential risk, but also extraordinary opportunity. And so it's really important that it gets more, more attention.

Well, hopefully we can bring some clarity and bring the main issues to people's attention. Look forward to seeing you on the 28th.

Thank you, Maurice.