Our climate and nature response: the imperative and opportunity – New Zealand Herald

Alec Tang is Partner - Sustainable Value at KPMG New Zealand.

OPINION:

September saw the Taskforce on Nature-related Financial Disclosure (TNFD) launch its final recommendations for nature-related risk management and disclosure, a significant milestone in the redefinition of business role and responsibilities in addressing our global nature and biodiversity crisis.

Much like the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations on which they were modelled, the TNFD recommendations send a strong signal about investors growing interest in broader, pre-financial impacts, dependencies and outcomes.

The TCFD recommendations sparked the escalation of climate risks and opportunities up on the business and boardroom agendas and instigated climate-related disclosure regimes such as our own mandatory requirements. It doesnt take much imagination to see where the TNFD recommendations will likely lead.

However, whilst the launch of the TNFD recommendations come at the end of a lengthy development process, we remain early in the adoption and implementation journey.

This affords us an important opportunity to think carefully about our local response to the recommendations, and the lessons we can and must draw from both the strengths and flaws of our climate response as we face up to what is a fundamentally more complex, localised, nuanced issue.

An opportunity that we must proactively seize, given the building global momentum towards a shift in the relationship between business, nature and biodiversity, and the impacts of this on our access to these global markets, even as our own climate response changes tack with a new Government.

At the core of this response must be recognition of the inherent connection between nature and climate, and the imperative to integrate our response to both issues.

The similarity of approach being used to drive business action across climate and nature is not a coincidence. The two issues go hand-in-hand, with the climate challenge we see today being simply a visible expression of what has become a largely extractive relationship with nature.

We have externalised the impacts of production, development and commercial activity in our myopic pursuit of growth-at-all-costs, and the environment be that our climate, or the wider natural and ecological systems that have created a safe operating space for humanity, a term coined by the architects of the Planetary Boundaries concept has borne the brunt of this.

We have forgotten that the natural systems we are reliant on not just for goods, products and services, but also for clean air, water, mental and physical sustenance have finite limits and are all-too-easily degraded from their functioning states.

These natural systems have, unfortunately, also suffered from an inherent ability to flex and adapt, such that the impacts of their degradation have been somewhat invisible until they hit tipping points of collapse, which we are now increasingly seeing.

With all this in mind, exploring and redefining our relationship with nature is not just another corporate sustainability issue for businesses to address, but rather a natural and necessary extension of our climate response.

A climate response that doesnt seek to shift this extractive relationship with nature, doesnt seek to integrate externalities into our economic and capital allocation structures, and addresses the wider implications of our consumptive economy is really only a partial response, and a very surficial one at that.

We cannot hope to solve these interconnected issues in isolation.

It is time to think more broadly and substantively about how we respond to the systemic issues that sit at the core of both.

The good news is that an integrated response to climate and nature also presents significant opportunities, particularly within an Aotearoa New Zealand context.

According to the World Economic Forum, more than half of global GDP, an estimated US$44 trillion of economic value is generated in industries moderately or highly dependent on nature.

In NZ, the picture is even more stark, with the Sustainable Business Council noting that 13 of our top 20 export commodities, constituting more than 70 per cent of the countrys entire export earnings, is dependent on natural capital.

We also have a rebounding visitor economy heavily focused on nature-based experiences.

Shifting our relationship with nature to one in which we better understand these dependencies and nurture operating models that dont just seek to minimise impacts, but that seek to regenerate our degraded nature resources, is critical to creating a more resilient and sustainability economy.

In a recent interview with the Financial Times, Frank Elderson, Executive Board Member at the European Central Bank, said: Destroy nature and you destroy the economy

This is not some kind of a flower power, tree-hugging exercise. This is core economics.

This said, looking just at the reliance of our GDP on natural systems only tells part of the story as any GDP-focused story does, more often than not.

A recent study noted that the ecosystem services associated with the Hauraki Gulf have an estimated total economic value of $5.14 billion per year, of which only $1.75b is explicitly measured in GDP and $3.39b are values such as avoided costs and expressions of public preference for activities like recreation in water of suitable quality.

Lets also not forget that the energy system which drives all aspects of our socio-economic activity is fundamentally dependent on natural resources, be they hydro, wind, solar, geothermal or fossil fuel deposits.

In myriad contexts, we see that a nature-focused approach can deliver both impact reduction and resilience-building for both individuals and organisations, as well as to society at large.

In an urban context, we have seen that green infrastructure solutions and investments in green space, can not only regenerate local biodiversity, but can also significantly reduce the impacts of extreme weather events whilst also creating places for community building and spaces for individuals to restore mental and physical wellbeing.

In a business context, a nature-lens requires the purposeful interrogation of value chain impacts and dependencies, given the broad and location-specific interactions of material sources and natural resources with operations, suppliers and customers. The opportunity to better understand and then maximise real value creation, whilst also minimising risks and value erosion is clear, and a key reason for the significant investor interest in this domain.

The nature momentum is building even beyond the TNFD recommendations, we see initiatives globally and locally placing an increasing focus on nature.

From the European Corporate Sustainability Reporting Direction to our own National Policy Statement on Indigenous Biodiversity and proposed biodiversity credit system.

Importantly, the increase in scale and depth of sustainability disclosure requirements to access key markets, and the growing scrutiny being placed by key customers on supply chain impacts and resilience, is a trend that will only grow with time.

But we must remember that whilst leading with a disclosure lens helps capture business attention, disclosures will only drive a response sufficient to meet the scale of the challenge we face if they lead to tangible transformations that tackle the root causes of our risk exposures.

Business-as-usual with fewer impacts is no longer sufficient if it ever As the Financial Markets Authority noted in its recent information sheet on scenario analysis for climate-related disclosures: if your scenario analysis doesnt lead you to question BAU (business as usual), then you probably havent done it correctly.

For Aotearoa New Zealand, there is another important consideration. The opportunity and imperative is that any response to our nature and biodiversity crisis should be rooted within a Mori worldview, as it is likely incomplete without this insight. It has been acknowledged that a key limitation of the TNFD is its belated engagement with indigenous world views.

It is important that our response in Aotearoa New Zealand doesnt follow the same path with Mori values as a bolt-on.

The response here needs to take the over-arching objectives of the TNFD and rebuild them with a base inclusive of Mori knowledge and values.

Getting this right isnt simply about doing the right thing from a cultural standpoint.

Getting this right presents an opportunity for Aotearoa New Zealand to lead the world in delivering a more holistic, integrated and systems-redefining response to both nature and climate.

Alec Tang is Partner Sustainable Value at KPMG New Zealand

As a Chartered Environmentalist and Fellow of the Institute of Environmental Management and Assessment, Alec Tang has focused his career on addressing the breadth of sustainability challenges and opportunities that are increasingly shaping our communities, society and economy.

This has included a range of leaderships positions in academia, business and the public sector, alongside an active involvement in professional institutions, industry associations and networking groups. His work has ranged from the development of high-level regional strategies on climate change, liveability and wellbeing, incorporating broad stakeholder and community engagement, through to the design of specific delivery programmes and the create of impact measures to gauge their success.

KPMG New Zealand is an advertising sponsor of the Heralds Sustainable Business and Finance report.

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Our climate and nature response: the imperative and opportunity - New Zealand Herald