Managing your Nature Risks

Encouragingly, students across the world are learning how to adapt to the extreme weather events expected to become more frequent and severe due to global climate change. In the UK, students examine how to minimise severe flood damage, in Bangladesh, they develop drought-resistant crops, while in Canada, they support tougher building standards and limited coastal development.

The World Economic Forum predicts that extreme weather events, biodiversity loss & ecosystem collapse, and natural resource shortages already threaten global stability and progress. According to the UN Environmental Programme (UNEP), global governments are underprepared and underfinanced in their adaptation to these inevitable nature risks. The cost of national priority adaptations around the world is estimated at US$387 billion per year.

Nature risks are a major concern for business too. They include financial losses from extreme weather events, supply chain disruptions, high insurance and compliance costs, as well as the reputational costs of failing to take meaningful action.

Why nature risks matter

Over half of the world economy – equivalent to about US$58 trillion – is classed as being moderately or highly dependent on nature. As extreme weather events and natural resource shortages increase, more businesses will be directly impacted. Exposure to nature risk can also affect investors’ perceptions of a business’s value.

Understanding both how your business depends on nature and how it could be damaging those vital natural services is integral to managing your nature-related business risk.

A US Government report (2023) estimated that the global value of the world’s ecosystem services is US$125 trillion annually; that’s over 50% more than the estimated US$80 trillion per year value of the global market economy.

Identifying your nature dependencies

Dependencies are those environmental assets and ecosystem services that an organisation relies on to function. For example, a company’s business model may depend on ecosystem services for maintaining water supplies, reducing flood risks, and sequestering carbon. Refer to our previous blog on how to identify your nature dependencies.

Identifying your nature impacts

Impacts refer to a change in the state of nature (quality or quantity), which may result in changes to the capacity of nature to provide social and economic functions. Impacts can be positive or negative. They can be the result of an organisation’s or another party’s actions. Refer to our previous blog to how to identify your nature impacts.

Drained wetlands are unable to purify water, dying coral reefs can no longer support the fish that feed us, organically depleted soil produces lower crop yields, and reduced bee populations cannot reliably pollinate of our fruit trees. One study estimates that the value of ecosystem services lost since 1997 could be on the order of US$20 trillion a year.

Managing your nature risks

Over time, as dependencies and impacts interact, negative impacts undermine the availability of natural resources and the performance of ecosystem services on which organisations depend. A comprehensive dependencies and impacts assessment enables you to see where your nature impacts – both from direct operations and through your value chain – could be threatening your own business dependencies.

These impacts are risk elements that you can control or influence, revealing ways that you can reduce your ongoing nature risks through your own activities.

To identify the risks associated with your dependencies and impacts you need an understanding of the current state of nature, and expected changes to it, in the places that your dependencies and impacts occur. This includes impacts on local communities, which could have a knock-on effect on business operations.

The World Bank estimates that collapse of ecosystem services such as wild pollination, provision of food from marine fisheries and timber from native forests, could disrupt complete supply chains and is estimated to cause a global GDP decline of $2.7 trillion by 2030.

Planning for a nature positive future

When it comes to ensuring a sustainable and prosperous future for our businesses and our societies, we need to take a lesson from the students. Corporations and governments alike need to invest in understanding and managing nature risk – an investment that will pay dividends in the years and decades to come.

LEAP ahead

The Taskforce on Nature-related Financial Disclosure has developed a universal approach for conducting initial nature impact assessments. Known as LEAP – Locate, Evaluate, Assess, Prepare – this provides an integrated process that any business can follow. The steps can be applied to all the key parts of an assessment – mapping operations and value chains, assessing dependencies and impacts, and evaluating nature-related risks and opportunities.

The Bottom Line

Extreme weather events and nature loss can be a big risk to a business’s strategy or bottom line. To create a policy commitment or business plan that addresses your nature risks, you need to know what those are. Ultimately, if you haven’t done a proper risk assessment, any environmental policy you make is based on assumptions and guesswork. Which means that important opportunities to manage and mitigate your real risks could be slipping through the net. And that could affect your bottom line.

Daniel Turner

Director of Strategy, ANMONDIAL

Find out more …

• Full guidance on the LEAP approach can be found on the TNFD website
• ANIMONDIAL is here to help you with your dependency analysis – our team of experienced tourism and biodiversity professionals can guide you through the detailed process to provide the insight you need for policy and strategy development and robust reporting and disclosure
• NATOUR IMPACT – our online evaluation tool, specifically created to help travel & tourism businesses assess, monitor and disclose their nature-related risks and impacts – is now available in a Lite version for businesses with fewer reporting needs but a strong commitment to a nature positive future. See details in the new brochure.