How can organisations grow in harmony with nature?

The pressures to which our natural environment is exposed have increased considerably over time. The protection and preservation of nature and thus its ability to contribute to sustainable economic growth is a major task for companies. Of course, this is also associated with risks for corporate and financial stability. However, it is the only way to ensure the long-term survival of companies.

All companies are directly or indirectly dependent on nature and are therefore threatened by the consequences of the destruction of nature and loss of biodiversity.

The Taskforce for Nature-related Financial Disclosures (TFND for short) has published a framework with recommendations on how companies can report on their nature-related risks and incorporate the risks into their strategies, activities, risk management, metrics and targets.

Given the complexity of this task, early action is recommended. Even before the final publication of the TNFD framework in September 2023, companies should take action now to give them a head start in measuring and managing nature-related risks.

The Taskforce on Nature-related Financial Disclosures was established in response to the growing realisation that nature should be considered in financial and business decisions. The TNFD is a global, market-driven, science-led and government-backed initiative that aims to:

• Develop a practical and consistent risk management and disclosure framework that enables companies and financial institutions to assess, manage and report on their dependencies on nature and their impacts on nature
• Helping to assess nature-related risks and opportunities with the aim of supporting a redirection of global financial flows away from activities that harm nature towards activities that benefit nature

Four areas are considered under the term "nature": Sea, land, freshwater and atmosphere. The TNFD defines nature as the natural world and emphasises the diversity of living organisms (including humans) and their interactions with each other and their environment. Humans are part of nature and not separate from it.

On the one hand, the well-being of society depends on the natural capital that the four domains provide to humans. On the other hand, our behaviour has an impact on the available resources.

Nature is our most valuable asset. The term capital is often equated only with money, but capital describes any resource or asset that represents or provides value to people and the economy. "Natural capital" works similarly to monetary capital - when we invest in nature, it creates value, and when we harm it, we diminish its value.

Nature's contribution to the global economy is estimated at USD 125 trillion per year, and more than 50 per cent of global GDP (USD 44 trillion) is moderately or highly dependent on nature and its services¹ - either directly or through its supply chains. The companies that are highly dependent on nature are considered to be the most vulnerable to the consequences of nature degradation and biodiversity loss. Yet investors, companies and policy makers consistently fail to consider the true value of nature in their decisions and actions. Business and investment activities can contribute both directly and indirectly to the destruction of nature and the loss of biodiversity. Both represent a major risk for the economy and society. However, there are also opportunities for companies and investors if they consistently take nature conservation into account in their business models and investment decisions. In order to continue to survive and grow, we all need to protect and regenerate our natural resources.

Natural risks are the potential threats to companies and investors that arise from the effects of natural phenomena and developments and our dependence on them. These can be physical risks, transition risks and systemic risks, which can have both short-term and long-term effects:

1. Physical risks arise when natural systems are impaired by the effects of biodiversity loss or the absence of ecosystem services. The ongoing extinction of species leads, among other things, to the loss of pollinator species necessary for food production. Non-native invasive species are becoming more common due to climate change, among other things, and not only pose a threat to native species, but can potentially even trigger pandemics. The increasing loss of ecosystems is also accelerating climate change, and extreme weather events are much more severe due to the lack of naturally protective ecosystem services.   
2. Transition risks arise during the transition to a more environmentally friendly economy from the discrepancy between the strategy and management of companies or investors and the changing legal and political framework conditions.
3. Systemic risks arise from the collapse of a system relevant to society, such as healthcare or food supply. The effects of such a collapse are striking and cause far-reaching macroeconomic damage.

Nature-related opportunities are positive outcomes for companies and/or investors as well as for nature. They can arise if the destruction of nature and the exploitation of natural resources are avoided in business activities and measures for regeneration are implemented.

Nature-related opportunities can arise,

• when companies minimise the risk of destroying natural capital and exploiting ecosystem services, and
• integrate business models, products, services and investments that actively contribute to halting or reversing the loss of nature into their strategy. This also includes the implementation of nature-based solutions and support services for these solutions, for example through financing or insurance.