Force of nature

Saturday, 01 April 2023

Dr Ken Henry AC & Tony Goldner MAICD

    It is time to think about nature as infrastructure, write Taskforce on Nature-related Financial Disclosures (TNFD) executive director Tony Goldner MAICD and Accounting for Nature director Dr Ken Henry AC. 

    After three decades of policy drift, Australia is emerging from the climate wars. As we do, this is the time to reframe the national debate about the necessities, risks and opportunities of taking action. Sustainability and sustainable finance are potential new sources of advantage for Australian business and finance, underwriting the long-term resilience of our future prosperity, creating jobs and services exports.

    Thinking about nature as infrastructure may be the key to better managing the risks we are already confronting and seizing the opportunities that lie ahead as part of a global transition. The goal for that transition should be not just net zero, but also nature-positive.

    Australian business and government have collaborated effectively over more than three decades to plan, develop and finance the world-class infrastructure assets that have been central to our productivity growth and national prosperity. While there is room for improvement, Australian policy settings, risk-sharing models and planning processes are world-leading. They have provided certainty of outcomes for citizens, governments and investors, and delivered a pipeline of scalable investment opportunities that has mobilised national savings and attracted quality, long-term global capital to this country. They have also generated tens of thousands of well- paid, skilled jobs across Australia.

    Like economic infrastructure, we should treat nature as a set of strategic assets providing critical services to our economy and society. Like economic infrastructure, nature needs patient, long-term investment capital. And structuring infrastructure project financing is recognised globally as an area of distinct Australian expertise and innovation.

    With the same mindset and similar spatial planning, policy and delivery frameworks that we have had in place for decades through PPP (public-private partnership) deal structures, and organisations such as Infrastructure Australia, we can deliver landscape-scale regeneration projects on land and across coastal marine ecosystems. This would include at-scale interventions to tackle soil erosion, salinity and water table challenges, and store carbon around national river systems like the Murray- Darling, and seaweed farming and mangrove expansion to underwrite the sustainability of fisheries, provide floodwater protection, help address ocean acidification and create new blue carbon sinks.

    At the heart of a nature-as-infrastructure approach would be three key shifts in mindset, policy and the allocation of capital.

    Firstly, we need to widen our thinking beyond the current focus on energy transition, emissions and net zero — critical as they are — and recognise that climate change and nature loss are twin crises that need to be addressed together.

    New national emission reduction targets provide welcome policy certainty for investors and solution innovators, as does the government’s announcement of new offshore zones for wind farms. But the opportunities ahead for Australia are immense, and they extend well beyond the energy sector.

    Secondly, we need to see nature itself as our best ally to take effective action. The 2022 State of the Environment report is another stark wake-up call about the risks of continuing to treat nature as a free and endless supplier to economic activity.

    While we typically wait for government to lead through policy, major Australian businesses are already mobilising to spend billions of dollars in transition plans to achieve net zero targets. This voluntary, private sector-led momentum for change on such a critical national priority is unprecedented and powerful. We are already seeing these commitments accelerate demand for financial instruments, such as carbon credits, to offset internally generated carbon emissions. But these same commitments can also underwrite financial support, through carbon co-benefits, for a whole new set of financial instruments based on biodiversity and ecosystem health. Nature- based solutions need to be integral to those transition plans to de-risk the capital being deployed to get to net zero while being inherently nature- positive at the same time.

    Thirdly, the interventions and investments required need to be at orders of magnitude of greater scale than they are today. There are many exciting pilot projects and incremental initiatives underway around the world, but taking them to scale remains a global challenge.

    Challenges are also opportunities

    With a public-private partnership mindset and offtake commitments for climate and nature outcomes — as we are seeing now with carbon credit markets — there is the opportunity to structure bond-like returns to patient capital investors tapping into Australia’s multitrillion-dollar pool of savings. This would deliver skilled jobs, better environmental outcomes to underpin long-term economic resilience and returns to investors.

    A national policy framework would be essential, but decision-makers also crave high-quality, decision-useful information on which to make risk and capital allocation decisions. Reinforcing a nature- as-infrastructure policy framework, the Australia government — at home and diplomatically through the G20 — could accelerate efforts to develop fully integrated and globally consistent sustainability reporting standards. Doing so would help secure the future flow of funds in — and into — Australia to finance a pipeline of investment opportunities aligned with net zero and nature-positive outcomes.

    Again, this would build on already strong momentum and interest across corporate Australia. A sustainable finance taxonomy is under development and the new International Sustainability Standards Board (ISSB) has already incorporated the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) supported by more than 125 Australian companies. There is now strong and growing Australian interest, including government funding support, in the sister initiative, the Taskforce on Nature-related Financial Disclosures (TNFD), focused on the four realms of land, ocean, freshwater and atmosphere.

    This is no time for modest ambition. Now that we are resetting our international reputation on climate change, Australia has all the ingredients to be an early innovator and global leader in investing in nature as the sustainable finance sector continues to scale.

    Tony Goldner MAICD is executive director of the TNFD. Dr Ken Henry AC is a director of Accounting for Nature.

    Practice resources — supporting good governance

    Examples of the AICD’s contemporary governance practice resources for members:

    An Introduction to Reporting on Nature-related Risks

    The Chairperson’s Guide to Valuing Nature

    Biodiversity as a Material Financial Risk: What Board Directors Need to Know

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