If you’re on the board of an agribusiness, nature can directly impact your bottom line. If you’re on a bank board, your reliance on nature is harder to define. Either way, you’ll soon need to account for its value on your balance sheet. 

    More than half of the world’s economic output — US$44 trillion of economic value generation — is moderately or highly dependent on nature. Yet most businesses would probably imagine themselves separate from nature.

    “Companies typically see supporting nature as an act of philanthropy rather than fundamental to their business decision- making,” says Guy Williams, Deloitte Vietnam Asia Pacific and global nature lead. “It’s clear now that leaders need to re-engage with the many ways they’re touching, interacting with and dependent upon nature. This is not a spiritual journey — it’s acknowledging the connection between nature and profit, understanding that nature is an asset you need to invest in and manage sustainably in order to get a return.”

    “We don’t have the option of expanding beyond our planetary boundaries so, for society and the diversity of species on Earth to survive and thrive, we need to transition to a regenerative economic system,” says Carolin Leeshaa, natural capital and biodiversity global lead at KPMG Australia. “In order to do this, we need to fully account for nature in strategy, economic, investment and risk management decisions, and bring nature onto the ledger. That’s about recognising the importance of nature as an asset to be protected rather than [as something to be] exploited or used.”

    Established targets

    In December last year, governments from around the world came together in Montreal, Canada for the United Nations Biodiversity Conference (COP 15). One outcome was the Kunming-Montreal Global Biodiversity Framework (GBF), which includes four long-term goals to be accomplished by 2050, plus 23 targets to be achieved over the next seven years. The aim is to protect 30 per cent of the Earth’s natural assets by 2030.

    “This is the equivalent of the Paris Agreement for climate change, in that it provides clarity around what governments expect from businesses,” says Leeshaa.

    The business community showed strong support. More than 400 business and financial institutions from 52 countries, with combined revenues of more than US$2tn, favoured the adoption of mandatory disclosures set out in Target 15 of the GBF.

    “The GBF goals and targets send an unambiguous message to organisations that they must prepare to assess and disclose their impacts and dependencies on nature as well as associated risks and opportunities,” says Leeshaa.

    “This is a vital opportunity to protect and enhance nature. As a member of the Taskforce on Nature-related Financial Disclosures (TNFD), it’s very exciting to see everyone — from policymakers, standard setters and business and finance to science and the public sector — in broad agreement with what we need to achieve.”

    Helpful framework

    For the past three years, the TNFD has been developing a risk management and disclosure framework to help organisations report and act on nature-related risks and opportunities. Funded by governments, the UN and international philanthropic foundations, the TNFD has the ultimate goal of supporting a shift in global financial flows away from nature-negative outcomes towards nature-positive ones. Its completed framework will be released in September 2023.

    “This isn’t a new sustainability standard, it’s a framework that provides support and guidance for businesses around how they can map, measure and monitor their interactions with nature, and where they can monetise the various risks and opportunities,” says Williams.

    Leeshaa points out that the Australian government is the second largest sovereign financial supporter of the TNFD — a strong signal to directors that it’s time to get ready and get involved. In February, Treasurer Jim Chalmers noted, “This strategy begins with climate finance, but over time I see it expanding to incorporate nature- related risks and biodiversity goals.”

    KPMG’s How can organisations grow with nature: 10 things boards and executives should know about nature-related risks and opportunities report recommends four critical actions boards can take to prepare for effective integrated climate-nature disclosure. “Taking steps now could give you an important head start,” she says Leeshaa. “For example, if you start assessing your material impacts and dependencies on nature across your operation, value chain and investment portfolio — and engaging with your investees and supply chain partners — you’ll have a good idea of your risks and opportunities by the time the TNFD framework is released.”

    Leveraging work on climate

    Deloitte’s The Chairperson’s Guide to Valuing Nature (in collaboration with the World Economic Forum and Climate Governance Initiative) acknowledges that many board members have been on a steep learning curve to understand the impacts of climate on business. Adding the impact of business on nature — and nature on business — as well as the critical role of nature in achieving climate goals, could feel like another mountain to climb. However, there is some good news in that, for many organisations, some of the work has already been done.

    “When we talk about nature, we talk about land, freshwater, oceans and air, but we’re also talking about climate,” says Williams. “If you’re reporting on climate risk, you’re already on the path to accounting for nature, you just haven’t actually framed within this perspective.”

    It will also help that the TNFD is modelled on its sister framework, the Task Force on Climate-related Financial Disclosures (TCFD). “It really is an opportune time to integrate nature as part of a net zero transition strategy, because the scientific community is increasingly confident that nature loss and climate change are inextricably linked and must be addressed in tandem,” says Leeshaa.

    Good place to start

    While climate and nature have much in common, nature is inherently more complex.

    “In terms of climate, one tonne of carbon dioxide in Sydney is the same as one tonne of carbon dioxide emitted anywhere else in the world,” says Williams. “Nature and biodiversity play out differently across every organisation.”

    Dr Adrian Ward MAICD is CEO of Accounting for Nature, whose board includes former Treasury Secretary Dr Ken Henry AC. Ward has faced the complexity head-on in developing a scientifically rigorous methodology to help mitigate risks associated with greenwashing. “Our role in the market is to underpin the integrity of claims that a company is either improving the environment or not impacting it in a negative way,” he says.

    Ward believes that natural capital accounting takes broader ESG reporting to the next level by putting metrics in place. “That’s really important, because nature is really complex to measure,” he says. “Even the concept of biodiversity is very abstract for many boards and executives, so taking a systematic approach is critical.”

    Created by the TNFD, the LEAP framework gives guidance on nature-related risks and opportunities in four stages:

    • Locate your interface with nature
    • Evaluate your dependencies and impacts
    • Assess your risks and opportunities
    • Prepare to respond to nature-related risks and opportunities, and report.

    “This is a really nice, staged process for organisations starting to build a nature risk and opportunity strategy,” says Ward. “From a board’s perspective, it really helps identify the systemic risks to the business, so it’s a good place to start.”

    Williams also advocates simplicity. “Directors are already stretched, so it’s important to keep things as straightforward as possible,” he says. “Directors with clear financial metrics set out on a single page will be far better placed to make good decisions than if they’re presented with a multi-volume manifesto.”

    The process of change will require different skills. “We need accountants and economists to gain a better understanding of the value of natural capital,” says Williams. “Businesses can benefit greatly by including First Nations peoples in their consultations. They have remained connected to country for more than 60,000 years and are custodians of the kinds of knowledge we are only just coming to understand.”

    The move towards accounting for nature is happening fast. “We’re in a much better place than we were six months ago,” says Williams. “We have a huge amount of interest from the business community, led by investors and financial institutions, as well as government. We have an established goal, realistic targets and the TNFD is mapping out a plan for businesses to follow.”

    One new challenge is what Williams calls “go fast versus go slow on nature”. “There’s a need to go slowly and carefully on some aspects of integrating nature into executive decision-making, but there’s also a need to take advantage of quick wins,” he says. “Directors need to find a balance.”

    Natural capital pioneer

    Tasmanian private forest manager Forico’s 2020 Natural Capital Report was quite possibly a global first.

    Forico’s globally certified forests comprise 89,000ha of plantation managed for wood fibre production, and more than 77,000ha of natural forest managed for conservation, biodiversity and cultural values. When Rayne van den Berg GAICD joined as CFO in 2019, the company was already on a mission to understand the value of the forest’s natural capital.

    “They had collected a lot of data, but weren’t sure how to present it as we couldn’t find anything similar anywhere in the world,” she says. “We were talking about it as natural capital accounting, new territory for me as a chartered accountant, so we had to be innovative and experimental.”

    Forico’s 2020 Natural Capital Report was the first of its kind in Australia. Even valued conservatively, the ecosystems proved to be of three times greater value than the financial balance sheet. KPMG Australia provided independent limited assurance over Forico’s natural capital accounts.

    “We always believed that being able to compare natural capital values with our financial capital would help us to make better decisions,” she says.

    “These figures really change the conversation around the board table. We now recognise the importance of embedding nature in the strategy that runs the planning framework, the budgets, KPIs, incentive programs and every other aspect of the business.”

    Frame game

    The TNFD is in the final stages of its consultation on the Nature-related Risk and Opportunity Management and Disclosure Framework, due for release in September. As one of the world’s 17 a megadiverse countries, only two of which are OECD economies, Australia could lead the charge in developing bankable nature-based solutions.

    There’s an underappreciation of nature as a source of risk across the economy, despite its presence on the balance sheets and cash flow of companies and the investment portfolios of financial institutions like banks, insurance companies and asset managers, according to Taskforce on Nature-related Financial Disclosures executive director Tony Goldner MAICD. The TNFD was born of an urgency to provide businesses and finance with a “torchlight” to better assess, disclose and ultimately respond to their nature- related risks, empowering better investor and stakeholder decision-making.

    Goldner cautions against missing the urgency, “The default view at the moment is because we’ve treated nature as something that’s just going to keep providing us with endless supplies of what we need,” he says. “The bees will pollinate the crops. The watersheds will just keep providing us with the water we need for human consumption. The forest will keep growing the wood that we need to make timber products.”

    Goldner says it’s time to reframe such resources as investable assets. “We’ve just treated nature as if it happens around us and will endlessly provide those services into our society and business. We know that’s not the case — the science is increasingly clear around tipping points. This whole focus on nature and the nature-business relationship is about shifting the way we think about nature. Not as an endless supplier of free resources, but as an asset we have to invest in. And we want that asset to appreciate in value like any asset that a company has.”

    Australia is one of only two megadiverse yet highly-industrialised OECD countries. The US is the other. “We have every reason to embrace this because we are strategically, in a global sense, a place where we can’t let nature loss continue any further,” says Goldner. “And we have a unique value proposition around project finance and bringing finance and government together with business to design risk sharing models over the long term to deploy capital against these big problems.”

    The TNFD framework is deliberately aligned with the Taskforce on Climate- related Financial Disclosures (TCFD) so as to ensure consistency. “Ultimately, TCFD and TNFD are trying to drive towards and contribute to the development of an integrated approach to sustainability reporting,” says Goldner. “That’s what the market needs and wants.”

    A fundamental distinction is the TNFD’s emphasis on “dependencies”. “We don’t have a concept in the climate discussion around our dependence on the atmosphere,” he says. “We know we’re emitting gases that are harming the atmosphere... but the notion of us being dependent on the atmosphere is not something that’s part of the lexicon around climate change.”

    However, he maintains that understanding dependencies is central to the nature conversation — the concept that we are dependent on “ecosystem services” such as the provision of water flow.

    “Natural assets provide us with a set of ecosystem services, and those services are the things we pull through into the production processes of businesses across the economy. If we compromise the flow of those services, we compromise the ability to make the goods and services, which ultimately will impact on the risk to companies, shareholder value, profitability and returns.”

    Goldner says a social-related disclosures taskforce is also getting started, with the potential to fold climate, nature and social into an integrated set of sustainability reporting requirements now under development by the International Sustainability Standards Board.


    While interest in the term “nature- positive” is growing quickly, Goldner emphasises that work needs to be done to coalesce market participants around a shared definition. “We don’t have a common understanding of what nature- positive means,” he says. “There’s a real risk, as people rally around this term, that it will become the next vector for greenwashing. Then everyone will run in the opposite direction and we’ll be back to square one.”

    Goldner notes there’s an effort underway internationally to come up with a consensus definition of nature-positive. “At its core, that emerging definition is reflected in the recently negotiated Global Biodiversity Framework agreed in Montreal in December 2022 — a notion that ‘nature-positive’ is the broad social outcome to halt and reverse nature loss by 2030 and get to living in harmony with nature by 2050. That’s very different from saying, I have a nature-positive product, I have a nature-positive project, or I’m a nature-positive company.”

    Latest news

    This is of of your complimentary pieces of content

    This is exclusive content.

    You have reached your limit for guest contents. The content you are trying to access is exclusive for AICD members. Please become a member for unlimited access.