Addressing the Drivers of Biodiversity Loss: Key Solutions for Companies and Investors

Key Insights:

Nature has risen to the forefront of agendas for both investors and companies, and 2025 promises to be another crucial year for advancing biodiversity efforts. Practitioners with an ESG mandate for corporate sustainability and sustainable finance are increasingly recognizing the complexity of the issue and the importance of prioritizing actions based on key impacts and dependencies. 

The focus is shifting from risk management and mitigation to exploring opportunities. For instance, approaches like regenerative agriculture and a circular economy are gaining traction as effective ways to address the drivers of biodiversity loss. At the same time, a growing number of investors are exploring nature-financing opportunities to accelerate the transition to a nature-positive future. In this article, I will highlight key focus areas that companies and institutional investors can prioritize to meaningfully address biodiversity loss. 

Zero Deforestation: Managing Land Conversion to Halt Habitat Loss and Climate Change

Land-use change and global warming remain among the greatest threats to biodiversity. Research predicts these pressures contribute to around 37.9% of species loss in vertebrate populations.¹ Addressing deforestation is vital, as forests are home to more than 80% of terrestrial biodiversity and are the second-largest storehouse of carbon.² 

2025 marks the target year for eliminating deforestation and ecosystem conversion, as recommended by the Accountability Framework initiative and the Science-Based Targets initiative (SBTi). Emissions related to land-use change, including deforestation and the conversion of other ecosystems, remain in a company’s emissions inventory for 20 years,³ with the largest emissions coming from the most recent years. This means companies cannot meet the 1.5-degree pathway without halting deforestation by 2025.⁴ Although many companies are still far from reaching this goal, investor initiatives like PRI Spring, IIGCC’s Finance Sector Deforestation Action (FSDA) and Investors Policy Dialogue on Deforestation (IPDD) are tackling these challenges collaboratively. 

Oceans: Eliminating Overexploitation Through Proper Governance and Guidance

Overexploitation is the second-largest driver of biodiversity loss after land-use change.⁵ While oceans cover over 70% of the Earth’s surface, nearly 90% of global fish stocks are fully exploited or overfished. Yet sound regulations for sustainable ocean use remain scarce.⁶ 

The upcoming UN Ocean Conference (UNOC3) in Nice, France, scheduled for June 2025, will play a pivotal role in ocean governance. The Nice Ocean Agreement, which aims to guide government actions with science-based solutions, is the expected outcome of the conference.⁷ Additionally, the Science-Based Targets Network (SBTN) will release guidance on setting ocean targets in 2025, helping companies reduce negative impacts on marine ecosystems and enhance their resilience.⁸

Regenerative Agriculture: Restoring Biodiversity through Sustainable Farming and Incentives

Regenerative agriculture addresses a variety of challenges, including emissions reduction, soil degradation, resource use efficiency and biodiversity loss. However, adoption needs to accelerate. According to the World Economic Forum, to align with the 1.5-degree pathway, the amount of global cropland managed using regenerative agriculture would need to increase from 15% to 40% by 2030.⁹ 

Actions to ensure the commercial viability of regenerative agriculture include: establishing common metrics for environmental outcomes, offering incentives linked to these outcomes, supporting farmers with transition costs, fostering supportive regulatory environments, and developing sourcing mechanisms to share transition costs across value chains.¹⁰ Companies along the value chain are actively discussing roles and responsibilities to advance regenerative agriculture, and this momentum will undoubtedly continue in 2025.

Circular Economy: Efficient Natural Resource Management via Sustainable Production and Consumption

Global material consumption has risen over 65% in the past two decades, and if this trend continues, Earth’s human inhabitants will require the resources of three planets by 2050.¹¹ Circular economy principles are frequently highlighted as a critical approach to addressing natural resource exploitation and ensuring sustainable production and consumption.

The issue of plastic waste and recycling has been an area of particular focus in recent years. The fifth session of the Intergovernmental Negotiating Committee (INC-5)¹² concluded in Busan, South Korea at the end of 2024, with a follow-up session planned in 2025 aimed at finalizing the Global Plastics Treaty, the legally binding international agreement to end plastic pollution. The Ellen MacArthur Foundation and the UN Environment Programme have launched the Global Commitment to tackle plastic waste through circular economy principles, setting ambitious 2025 targets across value chains. While this initiative demonstrates the potential for meaningful progress in reducing plastic waste and pollution, the world remains off track.¹³ 2025 will be a crucial year to reflect on these ambitions, assess lessons learned and identify opportunities for future improvements.  

Nature Finance: Growing Appetite to Fund Biodiversity 

The financial sector plays a critical role in achieving the Global Biodiversity Framework (GBF), particularly Target 19, which calls for mobilizing USD 200 billion annually for biodiversity by 2030. At the UN Biodiversity Conference (COP16) in Cali, Colombia, nature finance was a prominent topic, with the establishment of the Cali Fund¹⁴ underscoring the importance of financial flows to conserve biodiversity and encourage its sustainable use. The resumed COP16 in Rome, Italy in late February 2025 also concluded with a new finance roadmap, urging countries to fulfill Target 19 of the GBF.¹⁵

Leading financial institutions are also exploring biodiversity-related financing opportunities. For instance, Goldman Sachs Asset Management recently launched one of the first biodiversity-focused fixed-income funds to support biodiversity conservation and remediation.¹⁶ JPMorgan has observed a significant increase in demand for financial products that incorporate nature and is investigating solutions to help bridge the nature funding gap.¹⁷ Navigating biodiversity solutions, sustainable investment schemes and evolving regulations will remain critical for responsible investors in 2025.¹⁸

Looking Ahead

2025 is a pivotal year for corporate sustainability practitioners, as large companies¹⁹ are required to disclose sustainability-related information under the Corporate Sustainability Reporting Directive (CSRD). Furthermore, over 500 organizations have committed to publicly disclose nature-related information aligned with the Taskforce on Nature-related Financial Disclosures recommendations for fiscal years 2024 or 2025. These developments will drive continuous improvement in corporate nature-related disclosures and actions. 

To stay informed about market developments and best practices, Morningstar Sustainalytics' Stewardship Services offer a Biodiversity and Natural Capital Program and Scaling Circular Economies Program which facilitate one-on-one engagement dialogues with companies and supports both companies and investors in navigating the evolving landscape of nature. We engage with more than 100 companies across targeted value chains to address nature degradation in high-impact sectors such as agri-business, fast-moving consumer goods and automotives. Our engagements cover critical topics to ensure companies align with the latest science and best practices. For more information, reach out to [email protected].

References

1. Newbold, T. 2018. “Future effects of climate and land-use change on terrestrial vertebrate community diversity under different scenarios.” The Royal Society. June 20, 2018. https://royalsocietypublishing.org/doi/10.1098/rspb.2018.0792. 
2. WWF. N.d. “Why Forests are so Important’” WWF. Access on 20 February 2025. https://wwf.panda.org/discover/our_focus/forests_practice/importance_forests/.
3. According to the US Environmental Protection Agency, “an emissions inventory is a database that lists, by source, the amount of air pollutants discharged into the atmosphere during a year or other time period. Governments use emission inventories to help determine significant sources of air pollutants and to target regulatory actions.” For more details visit: https://www.epa.gov/air-quality-management-process/managing-air-quality-emissions-inventories.
4. Accountability Framework initiative. N.d. “Afi Explainer – Setting and Implementing No-Deforestation Commitments Under SBTi FLAG.” Accountability Framework initiative. November 2024. https://accountability-framework.org/fileadmin/uploads/afi/Documents/Explainers/AFi_Explainer_-_No-Deforestation_Commitments_with_SBTi_FLAG.pdf. 
5. Covey, J. 2023. “What Is Overexploitation and How Does It Affect Biodiversity?” Defenders of Wildlife. August 10, 2023. https://defenders.org/blog/2023/08/what-overexploitation-and-how-does-it-affect-biodiversity. 
6. The World Bank. N.d. “Atlas of Sustainable Development Goals – Life below water.” The World Bank. Accessed: December 23, 2024. https://datatopics.worldbank.org/sdgatlas/archive/2017/SDG-14-life-below-water.html. 
7. Mission Permanente De La France Aupres Des Nations Unies A New York. “Third UN Ocean Conference (UNOC3) (Nice, 9-13 June 2025).” Mission Permanente De La France Aupres Des Nations Unies A New York. Accessed: December 23, 2024. https://onu.delegfrance.org/third-un-ocean-conference-unoc3-nice-9-13-june-2025#:~:text=In%202025%2C%20in%20the%20same,the%20case%20with%20the%20IPCC.
8. The World Resources Institute’s article “Why 2025 Is a Critical Year for the Ocean” provides valuable insights on this topic. See https://www.wri.org/insights/opportunities-ocean-action-2025.
9. Holsether, S. T. and Reid, G. F. 2023. “5 benefits of regenerative agriculture – and 5 ways to scale it.” World Economic Forum. January 11, 2023. https://www.weforum.org/stories/2023/01/5-ways-to-scale-regenerative-agriculture-davos23/. 
10. Ibid. 
11. United Nations Development Programme (UNDP). 2023. “What is circular economy and why does it matter?” United Nations Development Programme (UNDP). April 24, 2023. https://climatepromise.undp.org/news-and-stories/what-is-circular-economy-and-how-it-helps-fight-climate-change. 
12. The Intergovernmental Negotiating Committee (INC) was established to develop an international legally binding instrument on plastic pollution, including in the marine environment, beginning its work in the second half of 2022 with the ambition of completing its work by the end of 2024. However, significant differences among participating nations delayed a final agreement. As negotiations extend into 2025, there are high hopes for reaching an agreement. Sources: IUCN (https://iucn.org/incplastics#:~:text=The%20Intergovernmental%20Negotiating%20Committee%20(INC,by%20the%20end%20of%202024.) and World Resources Institute (https://www.wri.org/insights/opportunities-ocean-action-2025)
13. Ellen Macarthur Foundation and UN Environment Programme. “The Global Commitment 2023 progress Report.” Ellen Macarthur Foundation and UN Environment Programme. October 31, 2023.  https://emf.thirdlight.com/file/24/E0TR4NIE0M2GH8rE0V7NE8PXj7Z/The%20Global%20Commitment%202023%20Progress%20Report.pdf. 
14. In a major development under the Convention on Biological Diversity (CBD), the Cali Fund for the Fair and Equitable Sharing of Benefits from the use of Digital Sequence Information on Genetic Resources (DSI) was established. The Cali Fund, which will receive contributions from private sector entities making commercial use of DSI, will mobilize new streams of funding for biodiversity action worldwide, in support of the three objectives of the CBD: the conservation of biological diversity, the sustainable use of its components, and the fair and equitable sharing of the benefits arising from the use of genetic resources. Source: CBD (https://www.cbd.int/article/cali-fund-launch-2025)
15. Rodriguez, S. 2025. “UN biodiversity talks agree finance roadmap, postponing decision on a new fund” Climate Home News. February 28, 2025. https://www.climatechangenews.com/2025/02/28/un-biodiversity-talks-finance-2030-roadmap-fund-nature/.
16. Johnson, L. 2025. “Goldman Sachs launches biodiversity bond fund to support SDGs.” March 4, 2025. ESG Dive. https://www.esgdive.com/news/goldman-sachs-launches-biodiversity-bond-fund-to-support-sdgs/741533/.
17. Mridul, A. 2024. “Banks Are Retreating from ESG, But They Play A Key Role in Bridging the Nature Finance Gap.” November 12, 2024. Green Queen. http://greenqueen.com.hk/banks-nature-finance-gap-esg-cop16-jpmorgan-chase-climate-funding/
18. More insights can be found in Nature Finance, COP16 and a Critical Window for Action: https://www.sustainalytics.com/esg-research/resource/investors-esg-blog/nature-finance--cop-16-and-a-critical-window-for-action.
19. The EU Omnibus proposal aims to reduce the current scope of the CSRD to large companies with more than 1000 employees (i.e., companies that have more than 1000 employees and either a turnover above EUR 50 million or a balance sheet above EUR 25 million). Those companies will be required to report against the European Sustainability Reporting Standards (ESRS), while these standards will also be revised and simplified. Companies outside the scope of CSRD (companies with up to 1,000 employees) may choose to report on the basis of a simplified voluntary standard to be adopted by the European Commission, based on the voluntary standards for small and medium enterprises (or very small and medium enterprises) developed by EFRAG. The Commission estimates that the proposal will reduce the number of companies in scope by 80%. Source: EU (https://ec.europa.eu/commission/presscorner/detail/en/qanda_25_615).