DISCLOSURE INSIGHT ACTION Nature in Green Finance Bridging the gap in environmental reporting August 2023 CDP Financial Services Report 2023 2 Executive summary 556 FIs disclosed environmental data through CDP’s climate change questionnaire in 2022, a 67% increase since 2020. One-fifth of ecosystem services are at risk of collapse. Recognizing nature-related risks and opportunities has become critical, with over half of the world’s total GDP highly dependent on nature and its services. Climate change and the degradation of nature are inextricably linked, and therefore must be addressed in an integrated manner. Standards such as the Task Force on Climate-related Financial Disclosures (TCFD) have paved the way for nature-related disclosures such as the Kunming-Montreal Global Biodiversity Framework (GBF) and the forthcoming Taskforce on Nature-related Financial Disclosures (TNFD). As nature-related disclosures are set to become a business norm, this report assesses the readiness of financial institutions to build on their climate reporting towards holistic climate and nature disclosures. The report analyzes the current state of environmental reporting by financial institutions with a focus on climate change, forests and water security. In 2022, 556 financial institutions disclosed environmental data through CDP’s climate change questionnaire, a 67% increase since 2020. In reviewing the data disclosed by these financial institutions in 2022, we categorized the findings in accordance with the four base pillars of the TCFD and TNFD: Governance, Risk and Opportunities, Strategy and Implementation, and Metrics and Targets. The findings underscore the urgent need for financial institutions to integrate nature-related risks and opportunities into financial decision-making. While climate change is now widely considered within financial institutions’ strategies, disclosure and action on forests, water, and broader nature-related issues lag significantly behind. However, several trends indicate a gradual shift in financial institutions moving beyond tackling climate change in isolation, to addressing nature in tandem. CDP Financial Services Report 2023 Urgent action, based on a holistic approach, is needed to avoid tipping points and ecosystem collapse, and to reach net-zero emissions by 2050. 3 The initial efforts of financial institutions to disclose their forests and water-related impacts demonstrate the intent of the sector to act on climate change in synchrony with nature. However, the persistent and significant gap in actions to address climate and nature-related risks and opportunities is concerning. Urgent action, based on a holistic approach, is needed to avoid tipping points and ecosystem collapse, and to reach net-zero emissions by 2050. Financial institutions, regulatory bodies and standard setters play vital roles in facilitating a system-wide transformation to address these risks and opportunities together. The forthcoming disclosure guidelines and recommendations from the TNFD, due for release in September 2023, will significantly influence the future of naturerelated financial disclosures. Financial institutions making their first cross-theme disclosures through CDP are positioning themselves to implement recommendations, proactively manage nature-related risks and capitalize on emerging opportunities. Contents Executive summary 02 Summary & key findings 05 Introduction Key findings Calls to action 05 08 12 Sample overview and detailed findings disclosing financial institutions 15 Detailed findings 17 Governance Risks & opportunities Strategy and implementation Metrics and targets 17 21 32 42 Moving forward 50 How CDP is driving progress for nature 50 Conclusion 52 CDP Financial Services Report 2023 5 Summary & key findings Introduction In 2022, CDP’s portfoliofocused, TCFD-aligned questionnaire for FIs was expanded to cover naturerelated issues. Limiting warming to 1.5°C is unachievable without protecting and restoring nature. Encouraged by the Task Force on Climaterelated Financial Disclosures (TCFD) recommendations, voluntary and mandatory climate-related disclosures have not only become mainstream, but are also helping to usher in new frameworks for financial institutions on nature-related disclosures. The growing desire and recognition of the need for a holistic approach to building a resilient and green financial system is most recently evident in the Kunming-Montreal