Extractives & Infrastructure
The extractives sector - mining, oil and gas, quarrying - and large infrastructure projects represent some of the most direct and visible interfaces between business and biodiversity. Unlike diffuse supply chain impacts in agriculture, mining and infrastructure often create highly concentrated impacts at specific geographic locations: open-pit mines that remove entire landscapes, linear infrastructure corridors that fragment habitats, and industrial facilities that discharge pollutants into adjacent ecosystems. For this reason, the sector has long been subject to environmental impact assessment requirements, and TNFD builds on those foundations to create a more systematic, financially-oriented approach to nature-related risk and opportunity disclosure.
Nature Impacts of Mining Operations
Mining creates a range of direct biodiversity impacts at the site level. Open-cast mining removes the entire soil profile and associated vegetation, destroying terrestrial habitats and altering hydrological flows. Underground mining can cause surface subsidence, altering wetland hydrology. Tailings dams - facilities that store the waste material from ore processing - represent long-term contamination risks to surrounding freshwater systems if they fail or leak. Acid mine drainage, generated when sulphide minerals in mine waste react with water and oxygen, can render rivers and streams uninhabitable for decades.
Beyond direct site impacts, access roads built to serve remote mining operations open up previously inaccessible areas to settlement, agriculture, and hunting - creating a cascade of indirect biodiversity impacts far beyond the mine footprint. This "infrastructure effect" is one of the most significant and often underestimated biodiversity consequences of extractive projects in frontier ecosystems.
Energy Infrastructure and Habitat Fragmentation
Energy infrastructure - power lines, pipelines, wind farms, hydroelectric dams - creates different but equally significant biodiversity impacts. Linear infrastructure corridors interrupt ecological connectivity, preventing the movement of species across landscapes. Hydroelectric dams fundamentally alter river flow regimes, blocking fish migration routes and changing downstream sediment and nutrient dynamics. Offshore oil and gas platforms produce noise and light pollution that affects marine mammals and fish behaviour.
Renewable energy infrastructure, while essential for climate transition, also carries nature-related risks that companies and investors are increasingly expected to disclose. Wind turbines can cause direct bird and bat mortality; solar farms require large areas of land; and geothermal energy development can affect geothermal ecosystems. The TNFD framework applies equally to transition economy infrastructure, reflecting the understanding that a climate solution that destroys biodiversity creates new systemic risks.
The Mitigation Hierarchy
The international best-practice standard for managing biodiversity impacts from extractives and infrastructure is the mitigation hierarchy: a sequential four-step framework requiring developers to first Avoid impacts entirely by selecting alternative sites or designs, then Minimize unavoidable impacts through design modifications and operational practices, then Restore affected habitats where impacts cannot be minimised further, and finally Offset residual impacts through equivalent habitat creation or protection elsewhere. Only after exhausting the first three steps should offsetting be considered. This hierarchy is embedded in IFC Performance Standard 6 and is referenced throughout TNFD sector guidance for extractives.
IFC Performance Standard 6: Biodiversity Conservation
The International Finance Corporation's Performance Standard 6 (IFC PS6) on Biodiversity Conservation and Sustainable Management of Living Natural Resources is the most widely adopted international standard governing extractive sector biodiversity management. Published by the World Bank's private-sector lending arm, IFC PS6 applies to all IFC-financed projects and, through the Equator Principles (adopted by over 130 financial institutions globally), to all large project finance transactions in any sector.
IFC PS6 distinguishes three categories of area with escalating protection requirements:
- Natural Habitats - areas with primarily native species; companies must avoid significant conversion or degradation and implement the mitigation hierarchy
- Critical Habitats - areas with high biodiversity significance (including Key Biodiversity Areas and IUCN Category I-II protected areas); no net loss of biodiversity values is required, and some activities may be prohibited entirely
- Protected Areas - legally designated areas where additional legal requirements apply and where IFC-financed projects face stringent conditions or exclusion
Analogy: The Mitigation Hierarchy as a Doctor's Protocol
Think of the mitigation hierarchy as a medical treatment protocol for biodiversity harm. The first choice is always prevention - avoid the procedure that causes harm if there is an alternative route to the desired outcome. If some intervention is unavoidable, minimise its severity through the least invasive technique. If residual harm occurs, assist recovery through rehabilitation. Only if full recovery is impossible do you consider compensation - paying for equivalent care elsewhere. Jumping straight to offsetting without first attempting avoidance and minimisation is equivalent to skipping prevention and rehabilitation and going straight to paying compensation. TNFD and IFC PS6 require the steps to be followed in sequence.
Nature-Related Financial Risks in Extractives
The extractives sector faces a distinctive mix of nature-related financial risks. Physical risks include the loss of water availability for mine processing in increasingly water-stressed regions, and ecosystem instability (landslides, flooding) affecting mine site access and stability. Transition risks include tightening environmental regulations on mine permitting and tailings standards, increasing community opposition that delays or blocks project development, and restrictions on operating in or near protected areas and KBAs.
Liability risks - including cleanup costs, fines, and litigation from pollution events - represent a category of nature-related risk specific to extractives. The 2019 collapse of the Brumadinho tailings dam in Brazil, which killed 270 people and caused catastrophic environmental damage to the Paraopeba River, resulted in Vale paying over BRL 37 billion (approximately USD 7 billion) in fines, compensation, and remediation costs - illustrating the scale of financial exposure that nature-related incidents can generate.
Case Study: Mining and Sensitive Ecosystems
Example: Applying the Mitigation Hierarchy to a New Mine
A mining company proposes developing a copper deposit in a biodiversity-sensitive region. Following the mitigation hierarchy: (1) Avoid - the company models alternative extraction approaches and adjusts the mine boundary to exclude a critical wetland and associated riparian corridor, avoiding direct impact on a Key Biodiversity Area; (2) Minimize - the processing plant is designed with closed-loop water recycling to reduce freshwater abstraction from local rivers by 60%; dust suppression measures are implemented to reduce airborne particulate deposition on adjacent vegetation; (3) Restore - a detailed habitat rehabilitation plan commits to progressive restoration of disturbed areas using locally-sourced native species with monitored success criteria; (4) Offset - residual impacts on grassland habitats are offset through the permanent protection of equivalent grassland habitat in the same bioregion. The company discloses this mitigation hierarchy approach in its TNFD disclosure, including quantitative targets and outcomes for each step.
TNFD Disclosure Expectations for Extractives
TNFD sector guidance for mining, quarrying, and oil and gas identifies priority disclosure areas including: proximity of operations to protected areas and KBAs, water use and discharge in water-stressed basins, tailings management approach and associated biodiversity risks, mine closure and rehabilitation plans, and alignment with the mitigation hierarchy. Companies are expected to report against standardised metrics such as area of habitat disturbed and rehabilitated, water consumption per tonne of ore processed, and number of incidents causing biodiversity impacts.
Key Takeaways
- 1The extractives sector creates direct, concentrated biodiversity impacts at specific geographic locations through habitat removal, hydrological alteration, pollution, and indirect infrastructure effects that open frontier areas to further degradation
- 2The mitigation hierarchy (avoid, minimize, restore, offset) is the international best-practice standard for managing biodiversity impacts and must be applied sequentially before offsetting is considered
- 3IFC Performance Standard 6 is the most widely adopted international standard for extractive sector biodiversity management, distinguishing Natural Habitats, Critical Habitats, and Protected Areas with escalating protection requirements
- 4The Brumadinho tailings dam collapse illustrates the scale of nature-related financial liability in extractives, with cleanup and compensation costs exceeding USD 7 billion
- 5TNFD sector guidance for mining requires disclosure of proximity to KBAs and protected areas, water use intensity, tailings management approach, and rehabilitation commitments