Biodiversity and nature: recent regulatory developments and horizon scanning in the UK, EU and globally

In July 2023, we reported on the biodiversity and nature-related regulatory trends we were seeing in the UK and EU at the time (see our previous blog post). So, what’s happened since then? 

This blog post explores some of the recent key regulatory developments in the UK, EU and globally and provides an update on the trends we expect to see in the biodiversity and nature regulatory space over the coming months. 

Current regulatory environment

Whilst there have been some regulatory developments over the past year, the pace of change has been slower than anticipated. However, we have seen some consolidation between regimes, particularly in the EU, and draft regulations and regulations already in place becoming more detailed. We’ve covered some of the key UK and EU developments below. 

Environmental and criminal regimes

Traditional environmental laws on nature-related topics such as species, pollution and habitats continue to develop, often in novel ways. 

Key updates include:

• In the EU, new environmental crimes and penalties have been introduced through the EU’s Revised Environmental Crime Directive (“revised ECD”) which came into force on 20 May 2024 (see our blog post). Member States have until 21 May 2026 to transpose the revised ECD into their national laws.  The revised ECD covers environmental offences such as illegal deforestation or forest degradation and illegal transport or treatment of waste and provides that more stringent penalties should be imposed on persons and companies that commit these offences. The revised ECD also introduces a new “qualified offence”, which is comparable to “ecocide”, an offence that already exists in the national laws of France, Belgium, Russia, Ukraine and Vietnam (see our blog post). Ecocide generally refers to any unlawful or unwanted acts committed with knowledge that there is a substantial likelihood of severe and widespread or long-term damage to the environment. The penalties for ecocide are generally very severe, such as those set out in the revised ECD, where companies found liable can face unlimited financial liability. NGOs and other stakeholders are alert to these developments and are increasingly seeking to bring cases against large corporates for criminal breaches. 
• In the UK, the biodiversity net gain (“BNG”) requirements became mandatory earlier this year for both major and small site developments under Schedule 7A of the Town and Country Planning Act 1990. The BNG requirements require developments to have a measurably positive impact on biodiversity compared to what was there pre-development. The BNG requirements will commence for other planning permissions on a phased-basis, including for nationally significant developments by the end of 2025. Developers of in-scope projects must deliver at least 10% BNG by creating biodiversity on-site, and if that is not possible, through a mixture of on-site and off-site measures or by purchasing statutory biodiversity credits from the government. The regime relies heavily on a private sector market for biodiversity units emerging, but it is unclear at this stage how rapidly that will scale up and what the demand will be.  The Green Finance Institute published in August a roadmap on major challenges within the BNG space and potential solutions proposed by industry stakeholders. 
• In the UK, the new Labour government has announced that it will undertake a rapid review of the UK’s Environmental Improvement Plan by the end of 2024. The government intends to use the review to guide the development of a new statutory plan to protect and restore the UK natural environment, with delivery plans to meet each of the UK’s Environment Act targets. The focus of the plan will be on cleaning up our waterways, reducing waste across the economy, planting millions more trees, improving air quality and halting the decline in species by 2030.

ESG disclosure and taxonomy regimes

Over the last year, a number of mandatory and voluntary nature-related disclosure frameworks have reached their final stages of development or have come into force. As a result, we’ve seen an increasing number of clients grapple with whether, and how, to make nature and biodiversity disclosures. 

Key disclosure developments include:

• In the EU, the largest entities in scope of the EU’s Corporate Sustainability Reporting Directive (“CSRD”) will need to begin reporting against the European Sustainability Reporting Standards (“ESRS”) next year for financial year 2024 (see our CSRD materials). There are disclosure standards in the ESRS that relate to nature and biodiversity, including on water and marine resources, pollution, circular economy, biodiversity and ecosystems. It is not mandatory to make disclosures against all these standards, but it is mandatory for entities to describe the processes used to identify material sustainability impacts, risks and opportunities in their operations and value chains.  Further, the CSRD requires companies to describe the resilience of their business models and strategies to risks in relation to sustainability matters, including biodiversity and ecosystems. 
• In the EU, four additional environmental objectives were added to the EU Taxonomy in November 2023. The objectives cover the circular economy, water and marine resources, pollution prevention and control, and biodiversity and ecosystems (see our blog post). Several biodiversity funds are beginning to consider whether to classify their investments using these new objectives.
• In the UK, nature and biodiversity reporting is potentially not far off for the UK’s largest companies. The government recently laid out its next steps on endorsing and adopting the ISSB disclosure standards, which include biodiversity and nature topics. The government aims to make the UK-endorsed ISSB standards available in Q1 2025 (see our blog post). The government has also stated that it is working at pace on the UK Green Taxonomy and expects to launch a consultation on the design of the Taxonomy this year. The UK Taxonomy is expected to be based on the EU Taxonomy, which includes nature and biodiversity-related environmental objectives.  
• Globally, voluntary standards on nature and biodiversity are becoming increasingly sophisticated and granular. The Taskforce on Nature-related Financial Disclosures (“TNFD”) published the final version of its recommendations in September 2023 (see our podcast) and more recently published final versions of its additional sector guidance, additional guidance for financial institutions, and updated guidance on value chains (see our blog post). The Global Reporting Initiative (“GRI”) also launched a new biodiversity standard this year (GRI 101: Biodiversity 2024), which replaces GRI 304: Biodiversity 2016 and comes into force in 2026. The ISSB has also stated that it will undertake research over the next two years on the risks and opportunities associated with biodiversity, ecosystem and ecosystem services to better understand investors’ needs on this topic  (see our blog post). The ISSB’s research may inform the existing ISSB standards which already require disclosure of material information about all sustainability-related risks and opportunities under IFRS S1 (see our blog post).

Due diligence regimes

The introduction of due diligence regimes, particularly the EU Corporate Sustainability Due Diligence Directive (“CSDDD” or “CS3D”)) this year, has ushered in a new era of enhanced corporate accountability for human rights and the environment, including nature and biodiversity. 

In particular:

• In the EU, the CSDDD will require in-scope companies to comply with far-reaching obligations to establish and implement processes and identify and take action in relation to adverse human rights and environmental impacts of their operations, as well as those in parts of their chain of activities (see our blog post).  Member States will have until 26 July 2026 to transpose the CSDDD into their national laws. The CSDDD will apply to in-scope companies on a phased basis from 2027. The CSDDD makes clear that one of its aims is to contribute to preserving and restoring biodiversity and improving the state of the environment. It adds to and strengthens requirements under other existing environmental due diligence regimes, such as the EU Deforestation Regulation, which begins to apply to most EU companies on 30 December 2024 (see our blog post).
• In the UK, we are still waiting on regulations to be adopted to implement the UK deforestation regime (also known as the “forest risk commodity” regime). However, in December 2023, the previous government provided some clarity on the scope of the intended regime, stating that organisations using non-dairy cattle products, cocoa, palm and soya in UK supply chains will be in scope if they have a global turnover of over £50 million (see here).

Key trends

Over the last year, we’ve seen growing recognition within the business and financial sectors of a need to address biodiversity and nature loss and integrate nature and biodiversity considerations into core operations.

A few of the key points include:

• Companies are increasingly being compared and scrutinised for their action on nature and biodiversity. Nature Action 100 published a set of benchmark indicators that will be used to assess the nature-related ambition and action of 100 companies globally.
• We’ve seen greater efforts to align voluntary and mandatory standards. For example, a correspondence mapping for the EU ESRS and the TNFD was published in June (see our blog post), and in October last year, the CDP announced that it would align with the TNFD Recommendations. Most recently, the GRI published a Q&A on what the EU ESRS mean for users of the GRI Standards (see our blog post) and the GRI and TCFD jointly published an interoperability mapping on the TNFD Recommendations and the GRI Standards (see our blog post).
• There is growing recognition that nature poses a real financial risk to companies. An English law opinion published in March 2024 argued that directors should consider nature-related risks under their duties under corporate law to promote the success of the company and act with due care and diligence. Similar analysis has been produced for other jurisdictions, including Australia, New Zealand, Singapore and Japan. Another UK legal opinion published this year similarly found that sustainability-related information should be included in company accounts to satisfy company financial requirements.
• Biodiversity is beginning to come up in shareholder meetings. At the most recent AGM of a major publicly listed beverage company, approximately 18% of shareholders voted in favour of a resolution urging the company to carry out a material biodiversity dependency and impact assessment. This was claimed to be the first shareholder resolution put forward at an AGM requesting a publicly listed company to conduct a comprehensive biodiversity report (see here).
• Litigants are increasingly seeking to target corporates on the basis of inaction on nature and biodiversity. According to a recent report by the Network for Greening the Financial System (“NGFS”), although the majority of strategic nature-related litigation to date has been directed at states and public entities, litigants are beginning to look at corporates to see what actions they can bring against them. For example, in France, a criminal complaint was recently brought against a major energy company’s directors and main shareholders on the basis of alleged environmental and biodiversity failures (see our blog post).
• The expectations of regulators around how businesses are managing nature and biodiversity risk is developing. For example, the European Banking Authority (“EBA”) published and consulted on draft guidelines this year which set requirements for banks to have internal processes and arrangements in place to identify and manage ESG risks, including in relation to biodiversity (see our blog post).  
• There is a push for companies and governments to adopt targets on nature and biodiversity. The EU Nature Restoration Law, which recently came into force, sets legally binding targets and obligations for nature restoration on Member States (see our blog post). Similarly, some of the disclosure frameworks require companies to set nature and biodiversity targets and there have been some recent efforts to help businesses with these targets. For example, the Principles for Responsible Banking published guidance in November 2023 to help the banking industry set targets, and the Science Based Targets Network released guidance in July 2024 to help businesses with setting science-based targets for nature (see our blog post).
• The market for nature-based solutions and funds continues to grow. According to two reports published by the World Economic Form in December 2023, the current market for voluntary biodiversity credits is estimated at around US$8 million, but with effective progress, it is estimated that global demand could reach US$2 billion in 2030 and US$69 billion in 2050. It is also predicted that more ESG-labelled bonds with biodiversity conservation as a use-of-proceeds will be issued as EU Member States work to meet the EU Nature Restoration Law targets. Lenders are also increasingly exploring debt-for-climate swaps as solutions to nature-based problems. 
• With COP16 in Colombia now less than 100 days away, the deadline for countries to publish their first National Biodiversity Strategies and Action Plans (“NBSAP”) is quickly approaching. During the previous COP15 in Montreal in 2022, 196 countries committed to the targets and ambitions of the Global Biodiversity Framework (“GBF”) as well as to publishing NBSAPs detailing how the country intends to meet the GBF’s biodiversity targets (see our blog post). So far, around 13 NBSAPs have been published, including a plan from the European Union. COP16 will provide an opportunity for the public and private sectors to discuss the NBSAPs and other biodiversity topics, such as the role of finance in mobilising resources and fostering corporate action. It is expected that mandatory biodiversity reporting and innovative financial mechanisms, such as biodiversity bonds and ecosystem payments, will also be discussed. 

What’s next?

With recent leadership changes in the UK and in the EU, it’s difficult to predict exactly how the next year will play out in the nature and biodiversity space. However, even if the pace of regulatory change were to slow down as new governments settle in, we do not see a reversal in the trend towards greater recognition of the impacts of nature and biodiversity loss . 

We expect that companies and the financial sector will need to continue working through what the current regulations mean for them in practice and how they intend to address nature and biodiversity in their operations and value chains.   

For more information on Linklaters' nature and biodiversity materials, click here.