In a panel discussion moderated by MinterEllison Partner and Head of Climate & Sustainability Risk Governance Sarah Barker entitled Biodiversity and Nature: What can Boards Do? held at the Climate Governance Forum on 11 August 2023, an expert panel - Penny Bingham-Hall FAICD (Fortescue Metals Group), Ian Hamm MAICD (Indigenous Land and Sea Corporation) and Carolin Leeshaa GAICD (Taskforce on Nature-related Financial Disclosures, National Nature Lead KPMG Australia) - explored the question of why nature loss poses a significant risk for organisations and why it should be a priority for boards.
The panel discussion also touched on Taskforce on Nature-related Financial Disclosure (TNFD) framework which is expected to be released on 18 September 2023.
The relevance of nature loss for boards
The starting point for the discussion was that climate and nature are inextricably linked – net zero will not and cannot be achieved, without being nature positive - we can have both (ie protecting nature and achieving net zero) or neither.
As such, nature loss like climate change, is already a material ESG risk for organisations and a source of financial risk – eg supply chain disruption – as well as a source of potential opportunities.
Yet, despite our collective dependency on nature/biodiversity, nature continues to be thought of largely as ‘free’ (ie biodiversity/nature is not accorded a financial value). In consequence, nature continues to be open to exploitation and this comes at significant cost, both now (as is becoming apparent from recent events) and into the future.
In the panel’s view, looking ahead, biodiversity/nature may become so valuable that it will be determinative of the use to which an area/resource is put, and in the shorter term, significantly increase the value placed on restoring biodiversity as part of any project.
[Note: There already indications that this is likely to be the case. In Australia and in other jurisdictions, governments and industry are starting to explore ways to incentivise a reversal of biodiversity/nature loss. The introduction of the Nature Repair Market Bill 2023 (Cth) and Nature Repair Market (Consequential Amendments) Bill 2023 (Cth) which together would establish a framework for a voluntary national biodiversity market in Australia is one example of this. For more on these Bills see: Australia's biodiversity agenda: Nature Repair Market]
Reframing our thinking on Nature-based solutions - Not an ‘either, or’ choice
Reflecting on how we can draw on and learn from Indigenous People when it comes to thinking about nature-based solutions, Mr Hamm emphasised the importance of taking a ‘balanced’ approach – that is, balancing considerations of the economy, and nature, and culture – rather than assuming than pursuing a certain approach must come at the cost of nature, culture or the economy. It should not be assumed, for example that all mining projects are automatically ruled out, if we are looking to protect and preserve nature. Rather, it a question of rethinking which projects should go ahead and how they can go ahead to have as little impact as possible, as well as how biodiversity can be restored after the project is completed.
Nature, it was suggested, should not be thought of as something to be managed, but as an opportunity – consideration of nature should be part of/inherent in every decision.
Reporting on nature-related risks
What is the TNFD?
In light of the interdependencies between nature and climate, the panel agreed that it would be imprudent for boards not to be thinking about, and ensuring they are across, developments in this area. The panel’s expectation is that nature risk will eventually need to be disclosed on balance sheets (as climate needs to be disclosed).
The Taskforce on Nature Related Financial Disclosure (TFND) framework, currently in its final stages of development, is a market-led, science-based framework that aims to assist businesses to integrate nature into their decision making. More particularly, it’s envisaged that the new TFND framework will enable businesses to identify, assess and disclose nature-related risk in much the same way as the existing Taskforce on Climate-Related Financial Disclosures (TCFD) supports businesses in managing and disclosing climate-related risk. The final TFND framework is expected to be released on 18 September 2023.
Expectation that TNFD-aligned disclosure will be mandatory in time
The TNFD has been developed to be consistent with the recently released International Sustainability Standards Board (ISSB) global sustainability standards and with the existing TCFD framework.
Importantly, while the TFND is not binding on business as yet, the panel expects that it will become so in time.
What should boards be doing now?
The panel agreed that boards would be well-advised, in light of the fact that globally we are moving ever closer towards the edge of several ‘tipping points’, to prioritise action on nature-risk.
As a starting point, it was suggested that boards would be well-advised to:
- Think of nature-related risks as compounding factor rather than as a ‘new’ risk – boards should be focused on the interdependency between climate and nature-related risk, and prioritise it on this basis.
- Build awareness and understanding of nature-related risk by drawing on the materials/data available including the material available on the TNFD website. As a starting point, it was suggested that organisations give consideration to the TNFD's four-phase LEAP risk and opportunity assessment approach. This process assists organisations to: 1) Locate the interface with nature; 2) Evaluate the priorities/impacts; 3) Assess material risks/opportunities; and 4) Prepare to respond and report. This resource (from MinterEllison and the AICD may also be of relevance: Biodiversity as a material financial risk: What board directors need to know
- Educate yourself as a director (and/or senior manager) on what the impacts of nature-loss are likely to be for your own organisation eg through drawing (where necessary) on expert assistance from experts.
- Take ownership of the challenge: Given the urgency of the problem, boards were urged to prioritise and ‘run towards’ what is a significant, and urgent challenge – to lean into the inherent uncertainties – rather than put off taking action.
SME perspective
It was acknowledged that for smaller enterprises and not for profits that lack the scale/resources of larger enterprises, integrating nature into decision making can be a daunting prospect. However, the consensus was that despite this, small enterprises would be ill-advised to ignore the risk.
Instead, it was suggested that SMEs should start small – for example, by thinking about where they source their supplies – and build from there.
It was further suggested that one advantage smaller enterprises have over their larger peers, is the ability to adapt/respond more quickly to changes in the operating environment – an attribute that potentially stands them in good stead in this context.
[Source: This article is based on notes from the 11 August 2023 Climate Governance Forum panel discussion: Biodiversity and Nature: What can Boards Do? The panel included: Penny Bingham-Hall FAICD (Fortescue Metals Group), Ian Hamm MAICD (Indigenous Land and Sea Corporation) and Carolin Leeshaa GAICD (Taskforce on Nature-related Financial Disclosures, National Nature Lead KPMG Australia) and was chaired by Sarah Barker MAICD (MinterEllison Partner and Head of Climate & Sustainability Risk Governance)]
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