Companies are seeing their share price, credit ratings and market capitalisation come under increasing pressure from an array of nature-related challenges including air pollution, freshwater shortages, deforestation and the presence of microplastics. Meanwhile, demands from governments, investors and consumers to halt and reverse nature loss are creating commercial opportunities.

However, most businesses are inadequately accounting for either the risks or opportunities in their governance, strategy, risk management and capital allocation decisions, according to a new guide from the Taskforce on Nature-related Financial Disclosures (TNFD), which warns that nature is both a core business issue and a director’s duty. 

The guide, published last month, is the first part of a new series of guides under TNFD’s Asking Better Questions on Nature banner, and is aimed specifically at board directors.

“In short, the resilience of your business depends on the resilience of nature,” the guide stresses. “For boards, it is key to understand the extent and severity of those nature-related issues for your company. This includes where they are in the business and how they can best be managed.”

Dependencies and impacts

As with other complex, fast-moving areas such as artificial intelligence and cyber security, managing nature-related issues requires board members to routinely ask for pertinent information from their senior management teams, the guide urges.

In particular, that information should set out the C-suite’s approach to managing nature-related dependencies, impacts, risks and opportunities, enabling board members to further their own knowledge about relevant, nature-based concerns.

The guide sets out to help board members uncover the decision-useful data they need to ensure their company is appropriately incorporating nature-related issues into its decisions around governance, strategy, risk management and capital allocation.

It is structured around a series of questions that directors may wish to raise with executives at board meetings, and advises them on what sorts of points they should look for – and expect to see – in the subsequent answers.

Those questions include: how and where does our business depend and impact on nature? How do those dependencies and impacts give rise to potential financial and non-financial risks? How do they generate potential opportunities for the organisation? And what is the interplay between the company’s nature- and climate-related dependencies, impacts, risks and opportunities?

The guide was produced in partnership with training and advisory specialists Competent Boards, together with Chapter Zero, which seeks to inspire non-executive directors (NEDs) to take a lead on climate topics. Additional project partners are the Commonwealth Climate and Law Initiative and Green Finance Institute (GFI).

Responsible stewardship

TNFD CEO Tony Goldner says that in the 18 months since the publication of the body’s official recommendations of September 2023, more than 500 organisations with more than $17tn in assets under management are now voluntarily reporting in line with them.

“With data and analysis now being generated, it is critical that boards and individual board members upskill themselves to be able to contextualise nature-related information as a key input into their decision-making. This guide is grounded in insights and wisdom from experienced board directors already taking an integrated approach to climate and nature issues.”

GFI last year published a report showing that nature risks could shrink UK GDP by up to 12% by the 2030s. CEO Rhian-Mari Thomas says: “Swift and coordinated action from businesses can embed resilience, build back this growth and unlock additional commercial opportunities,” she explains. “For board members, being conversant in these risks and opportunities is an increasingly critical and core requirement for informed and responsible stewardship.”

Chapter Zero CEO Vicky Moffatt admits that its members are unsure how to approach nature-related topics. While many boardrooms have given focus to climate, many do not regard that area as intrinsically linked to nature in the way that they should. Indeed, the nature question tends to come into sharpest focus for risk committees.

“From this perspective, oversight for the reliance and impacts on nature should be central to the question of organisational resilience. This guide enables NEDs, boards and their management teams to ask all the right questions to ensure this oversight is in place,” Moffatt says.

Meanwhile, Competent Boards CEO Helle Bank Jorgensen says: “No business is immune to nature risk. We are proud to collaborate with the TNFD on this guide, which equips directors with the critical questions needed to safeguard long-term value in a world where the health of nature and the resilience of business are inseparable.”

TNFD’s guide is not alone in positioning nature as a critical business issue. The day after its publication, the Nature Positive Initiative announced the launch of a pilot programme to test-run its new State of Nature Metrics, designed to help the world halt, reverse and fully recover from biodiversity loss. More than 30 businesses and financial institutions across 32 countries are taking part in the scheme.