Accounting for nature

1st February 2024

The crisis engulfing nature poses a massive risk to the global economy. Huw Morris reports on how the finance sector is adopting new measures for disclosing business activities and channelling investment

Partha Dasgupta sums up the global crisis confronting nature succinctly. The University of Cambridge economics professor and author of a landmark review for the UK government on the economics of biodiversity says maintaining humanity’s current way of life needs 1.6 Earths.

The past few decades have taken a “devastating” toll on nature. Populations of mammals, birds, fish, reptiles and amphibians have plummeted by almost 70% since 1970. Around one million animal and plant species – almost a quarter of the global total – are under threat of extinction. Most of this impact is silent and invisible, Dasgupta warns.

All this puts the global economy at risk of collapse. More than half the world’s gross domestic product (GDP) – equivalent to $58trn – depends on nature, according to PwC. Another professional services specialist, Marsh McLennan, warns that the potential collapse of ecosystem services such as pollination and water-based food is threatening to cause a $2.7trn decline in global GDP annually by 2030. Sustainability analyst Trucost estimates the annual cost of the global economy’s exploitation of nature – factoring in greenhouse gas emissions, land and water use, loss of wild species, pollution and waste – at round 13% of GDP.

“The bulk of the world’s biodiversity is in the tropics, where temperature and humidity matter,” says Dasgupta. “It’s not an accident that the poorest countries are in the tropics. The combination of the two is potentially lethal.”

His review stressed that an economy that conserves and restores nature is impossible without mobilising huge levels of private investment. Now the tectonic plates of finance and nature are starting to align.

In September, the Taskforce on Nature-related Financial Disclosures (TNFD) published its final version of nature-related disclosures after two years of development, earlier drafts and consultation with more than 200 major companies (see right). This is a voluntary financial reporting mechanism, with recommendations aligned with the goals and targets of the Kunming-Montreal Global Biodiversity Framework, signed by almost 200 countries.

The move could not be more timely. Before the TNFD, businesses and the finance sector did not have the tools to identify, assess and manage risks to nature. Its arrival offers those tools and guidance for them to tackle ecological loss while reinforcing their resilience and risk management.

“Nature risk today is unattended to, sitting on balance sheets, in cashflows and in investment and credit portfolios,” says TNFD technical director Emily McKenzie. “Nature risks are largely silent, invisible and mobile, as argued by the Dasgupta Review – and not unlike cyber risks.

“While companies have spent millions of dollars making their organisations more resilient to cyber risk, nature risks remain unaddressed, based on the increasingly fragile assumption that nature is largely benign and ‘will keep on giving’.”

The TNFD carries on all 11 of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations into a nature context and adds three other reporting areas, covering issues across value chains. McKenzie points out that there have been minimal changes to the language used in the TCFD to allow companies consistency in their reporting.

“Companies which are already disclosing against TCFD should have a baseline knowledge of the steps that they will need to take to begin disclosing, which we anticipate would mean report preparers are able to accelerate the pace at which they start to disclose their nature-related issues,” she adds.

McKenzie acknowledges that increased regulation means the TNFD recommendations could eventually become mandatory. A big plus is that the TNFD is in line with measures set out by the International Sustainability Standards Board, the Global Reporting Initiative and the European Sustainability Reporting Standards. The EU ratified the Corporate Sustainability Reporting Directive in 2023. This is widely tipped to affect more companies than any other piece of sustainability regulation to date, requiring around 50,000 firms worldwide to disclose, track and measure their performance.

“This new directive strengthens the rules concerning the social and environmental information that companies will have to disclose on sustainability and will ensure that investors can access the information they need to assess the impact of companies on the environment, and to assess financial risks and opportunities arising from sustainability issues,” she adds.

The initiative is gaining considerable momentum and big names are on board. Charoen Pokphand Group, E.SUN Financial, Forico, KDDI, Oxbury Bank and Sumitomo Mitsui Financial Group have already reported disclosures using earlier test versions of the framework. GSK, Ecopetrol, Forico, Mirova, MS&AD, Sanlam Group, Swire and United Utilities all intend to start using the TNFD’s final recommendations. Other high-profile international companies are expected to follow suit at the next World Economic Forum annual meeting in Davos.

Taskforce on Nature-related Financial Disclosures (TNFD)

The TNFD’s 14 recommendations are built on the four pillars of governance, strategy, risk and impact management, and metrics and targets


Describe the board’s oversight of nature-related dependencies, impacts, risks and opportunities.

Describe the management’s role in assessing and managing nature-related dependencies, impacts, risks and opportunities.

When assessing and responding to nature-related dependencies, impacts, risks and opportunities, companies should describe their human rights policies, engagement activities and oversight by the board and management and how these affect Indigenous peoples, local communities and other stakeholders


Describe the nature-related dependencies, impacts, risks and opportunities the organisation has identified over the short, medium and long term.

Describe the effect nature-related dependencies, impacts, risks and opportunities have had on the organisation’s business model, value chains, strategy and financial planning, as well as any transition plans or analysis.

Describe the resilience of the organisation’s strategy to nature-related risks and opportunities, under different scenarios.

Disclose the locations of assets and activities in the organisation’s direct operations and, where possible, in its upstream and downstream value chains.

Risk and impact management

Describe the organisation’s processes for identifying, assessing and prioritising nature-related dependencies, impacts, risks and opportunities in its direct operations.

Describe the organisation’s processes for identifying, assessing and prioritising nature-related dependencies, impacts, risks and opportunities in its upstream and downstream value chains.

Describe the organisation’s processes for managing nature-related dependencies, impacts, risks and opportunities.

Describe how processes for identifying, assessing, prioritising and monitoring nature-related risks are integrated into the organisation’s overall
risk management.

Metrics and targets

Disclose the metrics used to assess and manage nature-related risks and opportunities in line with the organisation’s strategy and risk management.

Disclose the metrics used by the organisation to assess and manage dependencies and impacts on nature.

Describe the targets and goals used by the organisation to manage nature-related dependencies, impacts, risks and opportunities and its performance against these.

Nature and the UK

The UK government has pledged to protect 30% of land and sea by 2030. The chances of achieving that goal look slim, the House of Lords environment and climate change committee warns.

It revealed in July that only 6.5% of England’s land is protected in ways that count towards that 30% target. With less than seven years on the clock, the committee accused the government of treating the 2030 target as a long-term, non-urgent priority. Protected landscapes such as national parks and Areas of Outstanding Natural Beauty should not automatically count towards the 2030 goal, it added, unless their management improves and their conservation or restoration can be shown.

Investment is a huge problem. According to the Green Finance Institute (GFI), public spending to fulfil pledges made by Whitehall and the devolved administrations on nature conservation and restoration from 2022 to 2032 is projected to fall short by £97bn. The GFI is now spearheading an initiative to identify how the finance sector can help meet nature goals such as the government’s 30% target.

The GFI Hive UK Financial Institutions for Nature Group will develop a national database to track private investments in nature-related projects. This follows the Treasury’s response to the Dasgupta Review, which pledged to target £1bn a year of private sector investment in nature by 2030. The Treasury also promised to embed the impact on nature of the government’s spending decisions.

Members of the group will advocate for the widespread uptake of the TNFD’s recommendations and pledge to conserve, restore or create habitats. They will also lobby for a green finance taxonomy or framework for defining sustainable investments in the UK. This would in turn encourage the finance sector to channel money into nature-related asset classes.

The group includes Barclays, British Business Bank, Lloyds Banking Group, NatWest Group, Schroders, Scottish National Investment Bank, Triodos Bank, UBS Optimus Foundation and the UK Infrastructure Bank.

“Private sector investment is urgently needed if we hope to reach the UK’s nature goals this decade,” says GFI chief executive officer Rhian-Mari Thomas. “The market infrastructure is being put in place to enable the flow of private sector capital into nature recovery and nature-based solutions, but there is still much to be done.

“The support of the UK financial sector will be critical, in addition to the support of the broader UK private sector.”


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