It's often cited that more than 50% of the world’s GDP — or $44 trillion — is moderately or highly dependent on nature. To some, this figure might highlight a need to better protect our economies, but to me, it’s a stark reminder of just how much pressure we’re putting on the planet.
Our business models rely on nature as an input and pay virtually nothing for it. We take, chop, extract and dig, and all too rarely do we plant, replenish, spare or restore in a way that takes into account the complexity of a natural ecosystem.
The five main drivers of biodiversity loss are land- and sea-use change, direct exploitation, climate change, pollution and invasive alien species — all of which are fueled by large industry’s business models. This means, when it comes to saving the planet, corporates are in the driver’s seat.
The status quo is a little grim — but many see the release of the Taskforce for Nature-based Financial Disclosures (TNFD) as a signal that corporates are ready to start accounting for nature in their operations.
But is the TNFD going to enable nature-positive systems change? Will it spur innovation? Is it the foundation of a biodiversity credit market? Is the TNFD worthy of all the hype? I put these questions to:
- Tom Quigley, the co-founder of biodiversity-focused VC Superorganism;
- Carolin Leeshaa, KPMG Australia’s Global Lead for Natural Capital & Biodiversity and TNFD Taskforce Member;
- Guy Williams, Pollination Executive Director and TNFD Taskforce Member;
- Alex Logan, the co-founder of nature-tech startup Cecil; and
- Camille Goldstone-Henry and Jada Andersen, the co-founders of nature-tech startup Xylo Systems.
According to my six expert interviewees, the TNFD’s launch is significant for four main reasons, each of which we dive into below.
“The TNFD translates an awareness that we’re impacting nature into steps for action. It mobilises the mammoths of the global economy to start measuring, talking about, understanding and acting,” says Superorganism’s Tom Quigley.
“If we can kick-start movement in our largest industries to reduce pressures on nature, we're going to start seeing a global-scale reduction of impacts.”
1. It’s a signal
The very fact the TNFD exists is significant.
It’s a framework created by corporates, for corporates, that acknowledges and addresses the oft-detrimental dependencies and impacts businesses have on nature.
What’s more, the framework has been driven by the financial services sector in particular. This is notable because the TNFD’s goal is to transition financial flows from nature-negative to nature-positive.
“The financial services sector, in particular, is not only contributing significantly to nature risks by the lending, investment and financing decisions it makes to the real economy, but is also affected by the increased risk of nature loss in its asset-allocation decisions,” KPMG Australia’s Carolin Leeshaa explains.
The link between business and biodiversity loss might seem obvious to you, but it’s a relationship many leaders have been reluctant to address until now.
When I ask Tom why this is the case, he says, “for a long time, nature has been an afterthought, the purview of conservationists, scientists and national parks”.
“It’s become so separate from our day-to-day human lives that we don’t feel like we depend on it, whether individually or as a global economy. It's just something that you watch on the BBC and visit on vacation.
“But the TNFD indicates a broader global move towards thinking about nature as embedded within the global economy, and of humans as a part of nature rather than outside of it.”
Carolin agrees. At first glance, it’s a framework focused on risk disclosure, she explains, but “it’s really more around the holistic value-creation narrative”.
“It’s a step to moving beyond financial and manufactured capital, to recognising the value of nature in the same way as traditional capital, and integrating it into the heart of business and finance decision-making.”
2. It gives corporates a starting point
It would be unfair to imply business leaders have been unaware of nature-related dependencies and impacts until now. The reality is, biodiversity has been put in the too-hard basket by corporates, governments and organisations alike because it’s incredibly complex and hard to quantify.
Until now, there has been no clear first step to understanding a business' interface with nature. But “the TNFD has taken the conversation from ‘why we should consider biodiversity’ to ‘how we can consider biodiversity’,” Xylo Systems’ Camille Goldstone-Henry explains. “That change is pivotal for biodiversity, how we look at it, and how we operate our companies.”
“Nature plays out very differently across different industries and certainly across different landscapes and geographies,” Pollination’s Guy Williams tells me.
“The dependencies and impacts on nature for a fishing company that's focused in offshore waters in Thailand is very different from an agricultural company that's looking at montane grasslands in South America.
“This diversity necessitates financial decisions having some uniformity when talking about where to invest and divest, what is considered a high-impact or high-risk asset, and where to deploy capital. Without consistency, it's very difficult to make those decisions,” he adds.
The TNFD is no doubt a critical unlock — however, it’s not a silver bullet.
Corporates have a long, evolving journey ahead of them, as we collectively transition the entire global economy.
“It’s a step. There’s a misunderstanding that businesses need to do it all straight away. They just need to demonstrate progress, and be honest and transparent about where their exposure is and the work they have ahead,” Guy says.
“My everyday anxiety is the tension between the need to go fast and slow.
“Biodiversity loss is a critical issue. We need to act quickly. But on the other hand, there’s the need to go slow, because some of these processes involve large amounts of data, and many conversations involve local custodians and stewards, and both need to be done carefully and respectfully."
“But on the need to go fast, if we do get stuck in a process of endless awareness-raising and analysis of really complex datasets, we won't do what we really need to do, which is driving action,” he adds.
Indeed, at the TNFD launch event on September 18th, 2023, Taskforce members frequently mentioned the tension between fast and slow, and the trade-offs that come along with it, telling attendees that the framework will evolve, but nature can’t wait.
3. It focuses on risk and opportunity
The TNFD translates nature-related dependency and impact into both business risks and opportunities. It’s your classic carrot-and-stick approach. But notably, Guy tells me there’s a whole lot more carrot in the TNFD than there is in its climate predecessor.
“The TCFD asked ‘how can we create a framework that helps to mitigate big enterprise risk, and also, starts to identify the opportunities?’ The TNFD has built on that even further,” he explains.
“There’s a much more explicit requirement to consider opportunity mapping and scanning, and to translate awareness and assessment into action and investment.
“Even though risk is the fiduciary duty of directors, executives and board members, they're probably most interested in the business case and the opportunity landscape.”
But when it comes to opportunity as a motivator, Cecil’s Alex Logan suggests caution.
“I think risk mitigation is a much stronger business case that will drive meaningful, long-term change over the next 10-15 years,” he says.
Alex points to the now-struggling voluntary carbon market as a warning of what happens when companies pursue opportunity at the expense of risk mitigation.
“This is a bit of a controversial take, but a lot of the funding entering the voluntary carbon markets was coming from the wrong budgets. That source of funding is now being cut off as companies focus on the steps they actually need to take to transition to net-zero.
“I’d hate to see us make progress and then have similar challenges within nature markets.”
To outline just how motivating risk can be, Alex points to the insurance sector. “What happens when people can’t afford or access home or travel insurance?”
“The physical risk of nature loss on highly exposed companies can be catastrophic — and the TNFD makes it transparent for the first time,” he adds.
“It’s this kind of risk which is going to, unfortunately, bring the business case for nature forward and drive long-term change.”
4. It will catalyse innovation
The TNFD helps corporates to locate, assess and evaluate their nature-related dependencies and impacts — but this feat won’t be possible without technology. Indeed, the TNFD’s rollout promises to create huge demand for nature-tech products and solutions, and when awareness shifts to action, investment in nature-positive projects too.
As a VC, soon-to-boom demand is something Tom is particularly excited about.
“At every single step in the TNFD process, there is a pretty greenfield opportunity for startups to be creating repeatable structures that serve either a specific client, a type of corporate, or an industry,” he says.
“There's so much emerging opportunity to grow and build — especially because so many corporates are adopting the TNFD from a relatively low basis of skills, tools and knowledge. There’s scope for startups to focus within agricultural effects, to pick a step in the mitigation hierarchy or a step in LEAP approach, or even focus entirely on restoration and being the restoration tool.”
As a nature-tech founder, Alex agrees, and hopes the demand will see innovative solutions become affordable and mainstream.
“I see a lot of the data that’s getting collected today, and it’s still coming through the likes of manual bird surveys. There’s a tonne of innovation still to come around the collection and measurement of data at the ecosystem level. There are still plenty of people with clipboards, counting species in the field,” he explains.
“There's a broad set of technologies that are currently emerging — from eco-acoustic and eDNA to different lidar technology and camera traps. We just need to continue to reduce the cost and scale up deployment.
“We also need to find ways to bridge older, manual data with any new data sources to ensure we can develop accurate understandings of the health of nature assets.
“And, given better data can lift the level of integrity across whole nature markets, we also need to ensure this emerging data ecosystem is interoperable and accessible,” he adds.
There’s also a lot of talk — and cautious hope — that the TNFD is the building blocks for a high-integrity voluntary biodiversity credit market.
It’s important to note we’re not talking about offsets here. Biodiversity is complex and unique, and therefore, isn’t fungible. No two trees, parrots, rivers, forests, woodlands or spoons of soil are identical and interchangeable. What we are talking about is the growth of a credit market that companies could opt to participate in to demonstrate their support of nature-positive projects.
There’s a lot to be excited about — a voluntary biodiversity credit market could finance the global continued conservation and restoration of biodiversity at scale. But we need to tread carefully, and learn from the voluntary carbon market’s successes and failures.
There are already some pilot biodiversity credits in market, Xylo Systems’ Jada Andersen says. “But none of the methodologies I've seen are rigorous whatsoever. The definition of a credit is currently very, very fluid depending on the environment.”
We also need to ensure any credits are designed alongside and to empower our First Nations people, says Camille.
“First Nations people are absolutely critical to how we preserve biodiversity, and are going to be disproportionately affected by corporates moving into the nature space," she says.
“The biodiversity credit space is a huge opportunity for our First Nations people, and I worry that without their voices front and centre, corporates are going to, again, be extractive of First Nations people and their land.
“There need to be more First Nations people front and centre saying ‘yes, we are supportive of the TNFD, we think it's going to work for us in our communities’.”
Once we see this additional engagement with the First Nations people on the biodiversity frontline, the hope is that the TNFD will chart a path to nature-positive.
“What the TNFD is doing is helping us measure biodiversity. It’s helping us create a standard for high quality biodiversity and how we actually quantify biodiversity as a unit,” Jada explains.
“Once we get to that point, we can take these standards and embed them with incentives in a biodiversity credit market. That is the natural progression.”
Carolin acknowledges the potential of environmental markets, but adds, they are one of many emerging opportunities.
“We can expect innovation in the blue economy in all of its facets, from nature-tech startups, in the transition towards circular manufacturing processes that use less water and other precious natural resources, and in sustainable finance or impact-investment products, innovative financial instruments on blockchains,” she says.
“The opportunity is to develop new business models and products that can actively halt or reverse nature loss. This is all part of unlocking opportunity everywhere, and ultimately, a whole new nature-positive economy.”
