Accounting for Sustainability (A4S) has launched The Business Case for Nature, the first in a series of guidance on nature for corporations and finance and accounting professionals designed to support them develop a business case for taking action on nature through practical advice, with both illustrative and real-world examples.
According to A4S, nature is the foundation on which all organisations depend. However, nature’s lack of visibility in the financial system means business operations “have caused a significant decline in nature and biodiversity”, presenting an existential risk to people and the economy. Capital markets “have amplified this degradation”, providing financing for activities that cause harm to the world’s natural capital.
While financial institutions may interact with nature less directly, they have significant indirect exposure to nature-related risks through their financing activities and provide enormous opportunities to drive change. Finance teams are well placed to make the business case for action and help draw the connections between nature, financial value and wider business value, according to the guide. They can do this by integrating nature-related risks and opportunities into strategy, decision-making processes and reporting, including integrating into corporate governance considerations, risk registers, budgeting, capital allocation and investment processes, as well as internal and external reporting.
So far, however, progress has been hampered by denial of the severity of the issue and a failure to link nature-related activities and how a business creates value. Developing a business case that recognises this link, and the importance of nature “is a crucial step towards taking action on nature for businesses”, the report concludes.
Nature-related corporate reporting has also brought nature onto the radar of many CFOs and their teams, through frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations. However, few understand the implications of the loss of natural capital for their organisation.
“In 2022, Brunel Pension Partnership updated its stewardship priorities, producing a separate plan on nature we communicated to our asset managers. Our engagement and voting provider wrote to each identified company outlining the risks of not addressing nature loss. They then held individual and collaborative engagement meetings to highlight their expectations and discuss how each company could contribute to halting and reversing nature loss,” explained Faith Ward, chief responsible investment officer, Brunel Pension Partnership.
“As part of this, we will be encouraging the use of the TNFD framework and want to see more companies disclose information on their nature-related risks and opportunities in a standardised and decision-useful manner.”
Further guidance in the series is expected in due course.
