In the second in our series of nature-related blogs, we explain what businesses in Australia and Aotearoa New Zealand can learn from recent UK research into the economic and financial impacts of degrading nature. Our first blog covers the UK’s Green Finance Institute (GFI)’s research.
Continuing to degrade nature, both locally and globally, poses significant risks for the Australian and Aotearoa New Zealand economies and financial sectors. That’s the conclusion we draw from recent ground-breaking research from the UK’s Green Finance Institute (GFI)
The UK report raises the alarm in the UK and urges government, central banks, regulators and the financial sector to respond quickly to nature-related risks. Why should businesses in Australia and Aotearoa New Zealand care about this? And what (if anything) should they do about it? Here it is in a nutshell: degrading nature means new regulations – changes wrought by nature itself – impacts on our economies – impacts on our financial systems. Read on for more.
The benefits of nature
In Australia and Aotearoa New Zealand we would expect nature to provide the same benefits to our economies as it does to the UK’s: benefits to tourism, recreation and the health (from recreation). But there’s more – so much more.
In our part of the world, nature benefits other critical economic activities too. These include agriculture, extracting resources (e.g. minerals) and manufacturing. For example, the Hauraki Gulf in Auckland, New Zealand alone is estimated to be worth > $5 billion NZD per year.
What are the emerging nature-related risks and opportunities for our part of the world?
These risks and opportunities fall into two main categories.
Potentially serious economic risk
Australia and Aotearoa New Zealand’s agriculture, manufacturing, and services sectors contribute significantly to local GDP. Our countries are arguably more directly dependent on nature through our economic activities than the UK. We are already observing the impacts of nature-related risks.
The UK identifies both Australia and Aotearoa New Zealand as sources of ‘vulnerable’ imported goods. These ‘imported goods’ are our exports. We face both risks and opportunities here and the UK is likely to expect us to respond to them. So, we should be prepared for:
- environmental regulations and taxes for exported products to become more stringent. High-risk sectors like the beef industry may be severely affected and risk being left with ‘stranded assets’.
- the UK to diversify its sources of materials to reduce supply chain risk.
- central banks and financial institutions to start expecting nature-related financial disclosures. This will help them obtain more information on nature-related issues up and down value chains. Businesses will need to provide disclosures related to the Taskforce for Nature-related Disclosures (TNFD) if this occurs. Our Need to Know: Nature-related Financial Disclosures explains what these disclosures involve.
In TNFD-speak these are ‘transitional’ risks.
Failure of mass stabilisation and erosion control
Australia and Aotearoa New Zealand are intimately aware of the direct impacts of failing mass stabilisation (making land more stable) and erosion control. Severe weather events have caused land slips. Flooding and subsidence have destroyed homes, damaged livelihoods, caused small and medium-sized agricultural businesses to fold and affected national economies. Secondary impacts have affected the housing market, insurance premiums, mental health and tourism.
In TNFD-speak these are ‘physical’ risks – acute or chronic
How businesses need to respond
The GFI review of nature-related risks for the UK makes a strong business case for Australia and Aotearoa New Zealand to begin transitioning domestic economies towards more nature-positive outcomes – now. An early transition will mean we can respond to transitional risks that result from changes overseas (e.g. new regulations and taxes), physical risks felt at home (e.g. floods) and the chronic global risks expected to emerge over time (e.g. rising temperatures).
Nature-related disclosures are a good place to start
Get your facts straight and strengthen your business with the information you need to make the best decisions. You’ll need to:
- Understand what nature-related disclosures involve and what they mean to your organisation.
- Map your value chain (all the activities involved in creating, producing, delivering, using and disposing of your products and services). You’re looking to identify for ‘sensitive’ activities (i.e. activities that involve nature in material ways), risks and opportunities.
- Make a plan. Adopt a strategy that brings together targets for climate (e.g. reducing your greenhouse gas emissions) and nature (e.g. reducing pollution of waterways). Set goals and collect and interpret nature-related data.
- Strengthen your governance (e.g. reviews of nature-related activities and policies).
- Communicate. Communicate. Communicate. Share what you’re doing to enlist others’ support for the changes you’ll need to make.
- Act!
We will bring you more information relevant to businesses in Australia and Aotearoa New Zealand in future blogs in this series.