SUSTAINABILITY / SECTOR LENSES
Finance & Investment
IFRS S2, SFDR, UK SDR, TNFD — the highest regulatory velocity of any sector. Capital allocation is being reshaped by mandatory disclosure and voluntary commitment simultaneously.
In brief
Financial institutions face the most rapidly evolving disclosure landscape of any sector. The TCFD framework, which shaped a decade of climate disclosure practice, was formally disbanded in October 2023 — its work absorbed into IFRS S2, the ISSB's global climate disclosure standard now transitioning into UK law as UK SRS. SFDR has reshaped how EU-distributed funds are classified. UK SDR is introducing sustainability labels with strict anti-greenwashing rules. And TNFD — a framework, not a platform — is adding a nature dimension to financial risk assessment that most institutions are only beginning to work through.
The direction of travel is clear: all material sustainability risk — climate, nature, social — will eventually be reflected in mandatory financial disclosure. The question for financial institutions is whether they are building the data infrastructure and analytical capability now, or waiting until the mandate forces a scramble.
Actor roles in this sector
The finance and investment ecosystem is more layered than a simple buy/sell distinction. Five distinct actor groups operate here, each with different objectives, different sustainability obligations, and a different relationship to nature and climate risk.
Stewardship — a term worth understanding. In investment, stewardship means using the rights of share ownership to influence the behaviour of companies you already hold — engaging directly with boards and management, voting at AGMs, and escalating concerns. It is distinct from ESG integration (using ESG data to choose which shares to buy) and from screening (excluding sectors). The FRC UK Stewardship Code (2020) is the formal reference. Within fund-side firms, the stewardship or RI team and the portfolio management team are usually different people, and bridging them is one of the sector's live challenges.
Capital allocators
The buy side — institutions that own and deploy capital
Pension funds, sovereign wealth funds, endowments, large family offices. The principals — they own the capital and hire asset managers to deploy it. Longest time horizons; actuarial framing of risk. IFRS S2 / UK SRS mandatory for large UK schemes. When a pension fund demands TNFD disclosure from its asset managers, that requirement flows through the whole ecosystem.
Manage portfolios of publicly listed company shares on behalf of asset owners. The dominant voice in sustainable finance. Stewardship is their primary climate and nature lever — not selling shares, but using ownership rights to engage with companies: voting at AGMs, meeting with boards, escalating concerns about governance or ESG performance. SFDR classification for EU funds; UK SDR labels for UK retail.
Invest in physical infrastructure, property, land, and private credit — not listed shares. The closest capital allocators to actual landscapes and nature. GRESB is the benchmark. TNFD and BNG are most directly relevant here. Capital that reaches land stewards, conservation projects, and nature markets typically flows through this part of the ecosystem, not through listed equity.
Act as whole-portfolio investment strategists for institutional clients — pension funds outsource their asset allocation decision-making to these teams. They shape how major pension funds construct portfolios across asset classes, including any sustainable investment integration. A significant influence channel for biodiversity-aware strategies entering mainstream portfolios.
Lending portfolios carry financed emissions (Scope 3 Category 15) and nature-related physical risk. IFRS S2 / UK SRS entity-level disclosure. Green and sustainability-linked loan structuring. NZBA (Net Zero Banking Alliance) commitments require portfolio-level emissions disclosure by sector. Banks straddle capital allocation and market infrastructure.
Physical risk underwriting is directly affected by climate change and nature loss — they price the risk that other actors create. IFRS S2 / UK SRS mandatory for large UK insurers. Also significant investors in their own right: insurance company investment portfolios are a major channel for capital allocation.
Market infrastructure
The sell side and market plumbing — structuring, intermediating, and holding
Structure and distribute financial instruments that channel capital to sustainable projects — green bonds, sustainability-linked bonds, transition bonds, blue bonds, social bonds. The mechanics of turning a nature or climate project into an investable instrument sit here. Increasingly structuring voluntary carbon and biodiversity credit transactions.
Brokers, originators, and traders in voluntary carbon markets and emerging biodiversity credit markets. Span the full value chain from project origination and finance through to deal execution, portfolio management, and trading. The operational infrastructure that makes nature markets function — and the actors who most directly bridge landscape-level projects with capital.
Hold assets on behalf of institutional investors and provide the settlement infrastructure for securities markets. Increasingly providing ESG data overlays and reporting services alongside custody — a growing channel for sustainability data to reach asset owners automatically.
Data, analytics & advisory
The knowledge and intelligence layer serving capital allocators
Sell modelled and estimated biodiversity, climate, and nature data across thousands of portfolio companies — MSCI, Iceberg Data Lab, GIST Impact. Coverage is the primary value: top-down, estimated, desk-based, spanning whole portfolios. The live tension is between granularity (location-specific, decision-useful) and coverage (every company in the portfolio, regardless of how little data exists). Neither the ground-truth nor the portfolio-wide read is yet fully satisfied.
Aggregate sustainability data into scores that directly shape investment allocation decisions — ISS ESG, Sustainalytics, S&P ESG, MSCI ESG Ratings. Distinct from data providers in that they produce a rated output, not raw data. Their methodologies determine which companies attract or lose capital, creating powerful but opaque incentives.
Advise asset owners (pension funds, endowments) on investment strategy, manager selection, and portfolio construction — Mercer, Willis Towers Watson, Aon, Hymans Robertson. Less visible than asset managers but highly influential: they shape how pension funds select managers and set sustainable investment mandates. Increasingly required to integrate ESG and nature into their advice.
Advise financial institutions specifically on nature-related risk, TNFD assessment, geospatial dependency mapping, and landscape-level analysis — The Biodiversity Consultancy, Frontierra, GIST Impact, Green Arch Consulting. No capital of their own; their product is expert intelligence that capital allocators cannot readily generate from a desk. Often the quieter voices in a room dominated by those managing large pools of capital — their influence runs through the quality of their analysis rather than the size of their AUM.
Standards & policy
Rule setters and norm shapers — the frameworks everyone else operates within
FCA, PRA, ECB, ESMA. Set mandatory disclosure requirements, taxonomy definitions, and prudential rules for how financial institutions must treat climate and nature risk. The FCA's mandatory IFRS S2 / UK SRS requirements and the EU's SFDR and taxonomy are the primary instruments. Regulatory trajectory is the dominant force shaping everything else in this sector.
ISSB (IFRS S1/S2), TNFD, SBTN, GRI, CDP, SASB. Define what good disclosure looks like and what measurements are valid. Standards set here become mandatory disclosure requirements later — TCFD became IFRS S2; TNFD is on the same path. The standard setters for nature are still converging on a common methodology.
UKSIF, PRI (Principles for Responsible Investment), IIGCC, GSIA. Convene capital allocators, set voluntary norms, publish guidance, run working groups. Do not allocate capital but shape what the buy side considers acceptable practice. PRI signatories represent $130+ trillion in AUM — their expectations effectively become market standards.
Civil society & mission-driven
Mission-led actors shaping the nature-finance agenda from outside the market
WWF, Fauna & Flora, The Nature Conservancy, local land trusts. Increasingly acting not just as advocates but as active participants in nature markets — structuring conservation finance deals, managing land that generates BNG and carbon credits, and convening the multi-stakeholder landscape partnerships that blended finance requires. The bridge between conservation science and investable projects.
Mission-driven labs, coalitions, and institutes working on the capital-landscape bridge — Landscape Finance Lab, CPIC (Coalition for Private Investment in Conservation), NPI (Nature Positive Initiative), blended finance networks. They are not managing capital or selling data; they are designing the pathways and structures that connect institutional capital to landscape-level nature outcomes. The bankability question is their core work.
UNEP FI, Stockholm Resilience Centre, Grantham Institute, Cambridge Institute for Sustainability Leadership. Generate the knowledge base that standard setters and capital allocators draw on. The NPI State of Nature Metrics, the Planetary Boundaries framework, and TNFD's LEAP methodology all trace back to this layer. Influence is indirect but foundational.
Why this matters if you are not a financial institution
The finance and investment ecosystem can feel remote — pension funds, asset managers, and TNFD disclosures seem like another world from a farm, an architecture practice, or a small conservation project. But the connection is direct and increasingly consequential.
The standards set here become the requirements in your supply chain
When a pension fund requires its asset managers to report against TNFD, those managers ask the companies they invest in to disclose their nature dependencies. Those companies ask their suppliers to provide data. That chain of demand eventually reaches farms, land managers, and small businesses — often without warning. The timeline from "voluntary framework" to "your buyer is asking for it" has compressed from decades to years.
The capital that reaches nature outcomes starts here
The real assets and infrastructure capital allocators — the Foresight Group end of the ecosystem — are the institutions whose capital can reach a BNG project, a woodland carbon scheme, or a nature-based solutions fund. Understanding how that capital makes decisions (what it needs to see, what bankability means in practice, how revenue streams are assessed) is essential for anyone trying to attract or structure that investment at landscape level.
The data gap they are trying to solve is the same one you are sitting in
The dominant frustration in sustainable finance is that portfolio-level data is estimated and desk-based, while project-level data is ground-truthed but hard to aggregate. A land manager who can demonstrate credible, verified environmental outcomes — soil carbon, biodiversity, water quality — in a form that institutional data infrastructure can read is solving a problem that the capital side will pay for. The translation between landscape outcomes and investor-grade data is not yet built.
The translator role. The finance and investment world and the landscape and production world use different languages, different time horizons, and different measures of value. Neither understands the other particularly well. The most significant gap in sustainable finance is not a framework gap or a data gap — it is a translation gap. Capital allocators tend not to focus on what happens at ground level; land stewards tend not to focus on TNFD disclosure. Bridging that distance is where the most consequential sustainability work currently sits.
Why biodiversity is structurally harder than climate for finance
The GHG Protocol gave finance one globally adopted standard and one metric — the tonne of CO2 equivalent. Carbon from any source, in any country, converts into that single unit. Biodiversity has no equivalent. That difference is not a data gap that more investment will close; it is a structural property of what biodiversity is.
Carbon / GHG Protocol
- ✓One global standard, universally adopted
- ✓One metric: the tonne of CO2 equivalent — everything converts to it
- ✓Fungible: a tonne avoided in India counts the same as one avoided in the UK
- ✓Comparable across geographies, sectors, and time periods without local calibration
- ✓Tradeable: fungibility makes liquid markets possible
- ✓CDP Climate administers the same questionnaire globally — the metric is the same everywhere
Biodiversity
- →No global equivalent standard — NPI State of Nature Metrics and COP17 are the current attempt
- →No single metric: species, extent, condition, connectivity — each measured differently, none aggregating cleanly
- →Not fungible: chalk grassland in Surrey is not interchangeable with tropical forest in Sumatra
- →Location-dependent: the same activity has different biodiversity impacts in different ecosystems
- →Not tradeable at scale: BNG is deliberately local — regulated demand within a planning authority area
- →Five distinct pressures (climate, land-use change, over-exploitation, pollution, invasive species), each measured differently
Why carbon markets scaled while nature markets stay fragmented
Fungibility is what makes a market liquid. A buyer and seller of carbon credits do not need to know anything about the specific project — one tonne is one tonne. Nature credits carry the geography with them. BNG is deliberately geographically anchored: the DEFRA Biodiversity Metric discounts units sourced further from the development site, regulations establish a local-first preference hierarchy, and many local planning authorities impose stricter proximity conditions on top. A voluntary carbon credit from Brazil can satisfy a UK corporate's climate commitment; a habitat unit from Surrey is unlikely to satisfy a planning condition in Yorkshire. The lack of fungibility limits scale, limits liquidity, and keeps nature markets local and fragmented rather than global and liquid.
The ‘holy grail’ — and where the solution is coming from
The dominant challenge in sustainable finance for nature is transposing nature degradation into financial materiality — the same translation the GHG Protocol made possible for carbon. The Nature Positive Initiative (NPI) State of Nature Metrics is the current attempt to create a common measurement backbone, being embedded into TNFD, SBTN, and GRI from 2026. The pragmatic interim position, advocated by experienced practitioners in the room, is to stop waiting for one golden metric and use a scorecard across the five pressures, drawing on publicly available data such as CDP responses. Not perfect, but decision-grade enough to act on now.
Where biodiversity markets sit today
Biodiversity markets exist on a spectrum from mature regulated systems to nascent voluntary experiments. The structural challenges above explain why they have not scaled the way carbon did — but the direction of travel is clear, and some mechanisms are significantly further along than others.
The most developed biodiversity offset system globally. Wetland mitigation banking has operated under the Clean Water Act (Section 404) since the early 1990s — developers who impact wetlands must purchase credits from pre-approved mitigation banks. Conservation banking (endangered species under the Endangered Species Act) follows the same model. Legally mandated, geographically constrained to a defined service area, overseen by the Army Corps of Engineers, EPA, and Fish & Wildlife Service. Decades of case law and established registries.
Mandatory for most English developments since November 2023. Developers must achieve 10% net gain in biodiversity value using the DEFRA Biodiversity Metric. Off-site habitat units can be purchased from registered habitat banks — a market that is now forming. 30-year legal management agreements. Habitat bank register maintained by Natural England. The most significant national BNG scheme outside the US, and one of the only examples of a mandatory biodiversity credit market outside North America.
The NSW Biodiversity Conservation Act (2016) created a functioning biodiversity offset credit market — landholders generate biodiversity credits by committing to improved habitat management, developers purchase them to offset development impacts. More developed than most national schemes but implementation has been uneven. The Commonwealth is also developing a broader Nature Repair Market.
Companies buying biodiversity credits voluntarily to support nature claims. No equivalent of Verra or Gold Standard — no dominant registry, no standardised metric, no liquid market. Several approaches in use: the STAR metric (IUCN — Species Threat Abatement and Recovery, measures contribution to reducing extinction risk), Verra CCBS (adds biodiversity co-benefits to carbon projects but not standalone credits), Plan Vivo, Wildlife Credits (UK). Transactions are small, bespoke, and hard to compare. The NPI State of Nature Metrics is the attempt to create the common backbone this market needs.
What is being done to accelerate the market
The framework landscape
IFRS S2 was published by the ISSB in June 2023 and is the global successor to TCFD — which was formally disbanded in October 2023 having completed its mission. IFRS S2 retains TCFD's four-pillar structure (Governance, Strategy, Risk Management, Metrics & Targets) and adds further requirements. In the UK, existing climate disclosure mandates (embedded in FCA Listing Rules, Companies Act, and large pension scheme regulations) remain in force and are transitioning to UK SRS, the UK's implementation of IFRS S1 and S2 with minor domestic adaptations. UK SRS S1 and S2 were published in February 2026, and FCA consultation CP26/5 sets a mandatory climate-disclosure path for listed issuers from 1 January 2027. TCFD as an organisation is gone; the disclosure obligations it gave rise to are not.
EU regulation requiring financial market participants to classify products as Article 6 (no sustainability objective), Article 8 (environmental/social characteristics), or Article 9 (sustainable investment objective). Applies to UK managers distributing into the EU. Principal Adverse Impact (PAI) indicators at entity and product level.
FCA's UK equivalent. Four sustainability labels: Sustainability Focus, Sustainability Improvers, Sustainability Impact, Sustainability Mixed Goals. Anti-greenwashing rule applies to all FCA-authorised firms. In force 2024.
TNFD is a framework and methodology — not a disclosure platform. Final recommendations published September 2023. The LEAP methodology (Locate, Evaluate, Assess, Prepare) guides assessment of nature-related dependencies, impacts, risks, and opportunities. Companies produce TNFD-aligned disclosures in annual reports or standalone sustainability reports — TNFD itself does not collect data. Separate from CDP: CDP's Biodiversity questionnaire partially aligns with TNFD LEAP, but submitting to CDP is not equivalent to TNFD-aligned reporting. Most institutions will need to do both: TNFD-aligned disclosure in their reports, and CDP submission as the investor-facing data channel. In April 2026 the ISSB took on nature disclosures as an IFRS Practice Statement (exposure draft due at CBD COP17, October 2026) and TNFD began handing over its technical work, the nature equivalent of the TCFD-to-ISSB climate journey. TNFD adoption has passed 730 organisations.
Global Real Estate Sustainability Benchmark. Annual survey for real estate and infrastructure funds. Scores feed into institutional investor allocation decisions. The primary sustainability benchmark for real asset portfolios.
UK's equivalent of the EU Taxonomy for sustainable finance. Still in development (2024-25). Will define which economic activities are "environmentally sustainable" for UK financial product classification purposes.
Signatory commitment to incorporate ESG into investment decisions and ownership practices. Over 5,000 signatories managing $130+ trillion. Annual reporting assessment. Increasingly a baseline expectation for institutional investors.
Net Zero Banking Alliance, Net Zero Asset Managers Initiative, Net Zero Asset Owner Alliance. Sector-specific commitments to align portfolios with 1.5°C. NZAM is the pledge; NZIF (Net Zero Investment Framework, developed by IIGCC) is the methodology for implementing it — providing the assessment tools and target-setting framework that NZAM signatories use to translate commitment into portfolio-level action. Require financed emissions disclosure and interim target-setting by sector.
The NPI is developing the State of Nature Metrics — the closest equivalent to a GHG Protocol for biodiversity, covering extent, condition, connectivity, and species across terrestrial, freshwater, and marine realms. Final consultation closed March 2026; being embedded into TNFD, SBTN, and GRI from 2026 onward. Convened by Marco Lambertini (ex-WWF Director General) through Rockefeller Philanthropy Advisors, with a 27-organisation stewardship group spanning conservation, business, finance, and science. The metric backbone that nature markets and nature disclosure frameworks are converging on.
The landscape connection
Physical risk for financial institutions is ultimately a landscape question. The value of real assets — property, infrastructure, agricultural land, forestry — depends on the stability of the landscapes they sit in and the ecosystem services those landscapes provide. Flood risk, drought risk, biodiversity loss risk, and sea-level rise all translate directly into asset value and insurance cost.
TNFD dependency disclosure is making this explicit: financial institutions must now assess which parts of their portfolios depend on healthy ecosystems, and where those ecosystems are under threat. Nature-related financial risk starts at the landscape.
The Pandion view
Most financial institutions are at the beginning of nature-related disclosure, not the middle.
Climate disclosure took a decade to go from voluntary to mandatory. Nature is moving faster — TNFD published its final recommendations in 2023, and regulatory adoption is already underway in multiple jurisdictions. Financial institutions that wait for the mandate are already behind the early movers.
Financed emissions data is the missing foundation for most net zero commitments.
Net Zero Banking Alliance and NZAM commitments require portfolio-level emissions disclosure by sector. Most institutions do not yet have reliable Scope 3 Category 15 (financed emissions) data. Without it, interim targets are directional at best.
UK institutional capital is now committing to natural capital, on its own terms.
The Big Nature Impact Fund reached a £64.6 million first close (with £30 million Defra first-loss capital), and a Foresight survey found 94% of UK institutional investors expect to allocate to natural capital within five years, with contracted ecosystem services preferred over credits. Set against UNEP's finding that nature-based solutions receive roughly US$220 billion a year against US$7.3 trillion of nature-negative finance, the gap is vast, but the direction of UK capital is now clear.
The voluntary carbon market has bifurcated, and integrity now carries a measurable premium.
Data confirms CCP-labelled credits command roughly a 3x premium, with Tier 1 credits up 46% against Tier 3, while overall volumes stay depressed. For allocators and structurers the signal is that quality, not volume, is where the value sits, and the same integrity tiering is beginning to shape how nature credits are assessed.
TNFD / LEAP
Nature-related financial disclosures — methodology, adoption, and what LEAP requires
Policy & Governance
Full framework landscape — where TCFD, SFDR, and TNFD sit relative to each other
All sector lenses
Other sectors and how their sustainability obligations connect to finance