ESG Matters: The Nature Restoration Law - what will it mean?

Update
05.07.2024
In the July edition of ESG Matters, we discuss the EU Nature Restoration Law. Our spotlight section brings you up to date with the latest developments in ESG governance, disclosure, financial regulation and litigation.

Highlight:

  • The Nature Restoration Law: what will it mean?

    On 17 June 2024, the environment ministers of EU member states adopted the new Regulation on nature restoration. The new law had been fiercely debated. In March, the Netherlands withdrew its support following a parliamentary motion, because Dutch MPs considered the targets unachievable and wanted to meet existing obligations first. However, unexpected support from Austria tipped the vote in favour. Now that the Regulation has been adopted, what will it mean in practice?

    Europe’s nature is declining
    The reason for introducing the Regulation is that Europe’s nature is seriously and continuously declining. Assessments show that 15% of habitats show a good conservation status, while the vast majority show an unfavorable conservation status: 45% moderate and 36% poor. The situation in the Netherlands is even worse, with around 90% of habitat types and 75% of Habitat Directive species showing an unfavorable conservation status, of which only 21% and 14% respectively show a positive trend.

    Current framework
    Current policies and regulations, including the Birds and Habitats Directives and the Water Framework Directive, already impose obligations to maintain and restore natural habitats, wild animal and plant species of community interest and water quality. In addition, Member States are already required to ensure that the quality of natural habitats, habitat species and water does not deteriorate.

    Binding restoration targets
     The Regulation can be seen as the operationalisation of these general obligations. Whereas the Habitats Directive establishes the goal to achieve a favourable conservation status for habitats and includes the obligation to take appropriate measures, the Regulation on nature restoration sets out where and when these measures should be taken in order to gradually improve the conservation status. It also concretises how this goal is to be achieved by setting deadlines and targets.

    The Regulation establishes a framework for Member States to implement effective and area-based restoration measures, covering at least 20% of the Union's terrestrial and marine areas by 2030 and all ecosystems in need of restoration by 2050. It also contains obligations to reintroduce habitat types in areas in order to achieve a favourable baseline situation. It also includes effort obligations to take measures aimed at preventing significant deterioration of sites in order to achieve the restoration targets for habitat types. Where satisfactory status is achieved for species, measures must be taken to ensure that their habitats do not deteriorate significantly.

    What this means for you:

    • Member States are required to submit a draft national recovery plan to the Commission within two years of the entry into force of the regulation. This plan must assess the condition of ecosystems and include a description of the recovery measures to be taken, a timetable for the implementation, a monitoring plan and a financing plan.
    • The Netherlands has carried out an impact assessment of the implementation requirements, which shows that significant investments will be required to meet the objectives of the regulation, in the order of EUR 76 billion. However, the societal cost of not implementing the regulation is estimated to be at least EUR 129 billion.
    • As space is at a premium in the Netherlands, the implementation of the Nature Restoration Law will require more decisive choices on which space is used for what. It is therefore expected that the interest of nature restoration will play a more central role in permitting, and that the implementation of the regulation may also affect existing activities.

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