Good morning, everybody, and welcome to the latest edition of C&F Talks. Today I'm delighted to have with me Sebastian Leape, who's the Chief Executive of natcap. Sebastian is going to be speaking at our Natural Capital Summit in London on the 28th of November. Sebastian, welcome.

Oh, it's wonderful to be here, Maurice.

Great to have you with us.

Now natcap is obviously a leading nature intelligence and reporting platform. So how does natcap actually assist companies in locating and prioritising their interfaces with nature?

So, we bring together all of the data that companies need to measure nature. Obviously as you mentioned, align with the TNFD and CSRD reporting frameworks, and then crucially actually take action when they figure out what their big impacts are, where they're really dependent and what big financial risks they should be worrying about.

So what we've spent the last six years doing, is figuring out what metrics companies need to measure, collecting the raw data needed to drive those metrics, building the models to turn that raw data into metrics and then all the software platform that makes it easy to locate those assets, measure impact and dependencies, evaluate your risks and figure out what to do about it.

Okay, so I mean, obviously you mentioned TNFD and TNFD recommendations are going to be implemented ultimately by the ISSB and standards which will then be implemented nationally. So, compliance is obviously a key thing.

But are there benefits to be had for businesses in measuring and reporting their nature impacts beyond compliance?

Absolutely, I've just got back from a week at COP and the language there is all about risk.

Nature is now a risk issue, that is the primary framing through which we're engaging it and these risks are real. You will have seen Bloomberg did a great report the last COP: When the Bee Stings, laying out I think it was 10 case studies of some of the largest companies in the world, facing material impact as a result of nature risk. And these are things that we've not really thought of in those terms before but they're very real.

It's shipping companies getting fined because they're dumping ballast water in ports and introducing invasive species, it's semiconductor factories having to stop because they don't have access to water, it's 3M in the US getting sued in the tens of billions because they've been dumping PFAS chemicals into water supply.

So, risk is really that framework and this in the same way that we spent 15 years wrapping our heads around climate risk this is just the next frontier in that agenda.

Yeah.

So, I mean, the next question I was going to ask, is really about the debate has shifted between beyond just measuring nature impacts, so how they could be utilised.

And does your platform help companies in that? You mentioned a few of those case studies and so on, does your platform actually assist people and how they can utilise the data not just find the data that's relevant?

Yeah, absolutely. So, the big insights we see companies asking for are, can we figure out which of those assets, which are assets are going to be high priority for nature that we should be worried about and why, what are the impacts and dependencies.

The third breakthrough then is, actually what are the risks here that are tailored to my business. You know, we've spent quite a few years now using some risk assessment tools that are industry generic, so everyone in the same industry gets the same output. How do we start to figure out what risks are actually specific to where my assets are, how they're being managed, and crucially what's the financial impact if that risk were to materialise.

That's turning some of that raw data into the kind of insights that enterprise risk management teams need that reporting teams need of course also supply chain and procurement teams need and that's the kind of value add that we've been working on.

Yeah, absolutely.

I mean, going back to the raw data for a moment, how difficult is it to source that data? I mean obviously there are myriad sources but what do you do? Do you take all those sources and sort of combine and refine and double check the data? How does the process work?

So yeah, firstly, you're right there's a tsunami of data sources out there. I think the TFT’s catalogue does a good job of cataloguing several hundred of them but there's many more that we found.

So the first job is figuring out what is the best data for relatively small number of metrics a company will probably actually be measuring, so the science question which is looking at all the data sets figuring out its integrity and then selecting the most appropriate integrity one. Then there is a commercial question which is how do you negotiate access, a lot of this data is finding itself in the spotlight for the first time and doesn't isn't set up for commercial use often, or if it is it's there is a fee to be negotiated.

So the second is a commercial question which is how and the third is a technological question of how do we integrate these very big data sets in a way that is makes sense from a technical perspective, the data sets are so large generally they're global, you could spend a fortune on AWS or cloud fees trying to ingest them into your existing systems, how do you do that?

Yeah, so that's quite a challenge isn't it.

I mean, what about the challenges for companies themselves I mean they get the information from you how difficult is it for them to utilise that internally themselves and do you provide guidance in the way your platform works to assist them in that process?

Yeah no, we have a consulting advisory team alongside that provides a consulting like experience for companies. How do they use it? So, it really varies by what the what they're trying to do with it and how advanced the company is. And I'd say a lot of companies in the end like downloading excels from these platforms and having a bit of a go at analysing the data themselves and putting it onto slides and reports. So that's often how folks engage.

But if you, but also there is there's a platform and a select number of clients there's an API. I'd say that the companies just starting on their journey are really taking this from a reporting angle, so it's a simple use case which is, help me fill out the boxes I need for this report. But as the companies advance on that journey and there are multiple users from multiple different bits of the company who need to use the data in different ways it becomes more complicated.

Yeah.

And broadly, you know, how do you see this whole nature-related financial disclosure area evolving over the next five years? Is it, it seems to me that it's evolved much faster than climate disclosures which have taken an eon to really come to fruition, whereas nature-based reporting seems to have accelerated at a much faster rate. How do you think it's all going to play out over the next five years?

So, you're right we've had 502 voluntary early adopts of the TNFD. I think TCFD one year in was at about 275 so it's picking up much quicker than TCFD was.

That's because we're riding the coattails of all the work that's already been done on climate so it's a much easier extension than it was 10 years ago to start this whole process from scratch. In terms of where we get from here, well, one big thing is CSRD and so the increasing sophistication of those reports I think is a trend that we'll see. In year one they've been often quite qualitative, often quite high level, as we've seen with other similar disclosure frameworks, and that will evolve over time. So that's one thread which is we already have the regulatory infrastructure and it's just about implementing it better over time.

A second thread will be companies that aren't touched by regulation who are doing it voluntarily and I expect that TNFD number to continue to increase, particularly if and when it's adopted by the ISSB which you referred to, we're looking very carefully at adopting some kind of biodiversity standard. My understanding is that would be in 2026. That'd be a second kind of voluntary strand.

And then I think a third would be other jurisdictions making it mandatory and I think it's possible in the UK that's been on the docket for a while that would probably happen after ISSB is made mandatory, possibly in Singapore and Japan and I think elsewhere it's going to be a much longer journey and I wouldn't expect anything out of the US anytime soon.

So, I think what would be with the regulation we already have and the frameworks we have we're already set up for a journey over the next five years that sees many more companies start to do this.

Yeah, yeah, that's great. I mean for our viewers, if you'd like to hear more about this and other issues do come along to the conference the Natural Capital Summit, being held in London on the 28th of November. Further information available, as always, on our website www.cityandfinancial.com.

Sebastian, thank you so much for sharing those thoughts. Looking forward to seeing you on the 28th.

Absolutely, me too. Thank you, Maurice.