This Earth Day we’re encouraged by the proliferating commitments from financial services firms, regulators, policy makers, and corporations, in support of protecting and valuing the climate and natural ecosystems.
Although there is much to be done, including greenwashing to discern, an increasingly bright spotlight is shining on climate, which illuminates interrelated environmental and social issues. One of those issues is the management and protection of natural capital resources, which is the focus of this email and a key theme in our upcoming RIA Channel ESG Playbook iSummit on May 12th from 12:00 – 2:00 PM US ET
CORPORATE NATURAL CAPITAL MANAGEMENT
In March, BlackRock released Our Approach to Engagement on Natural Capital, noting the connectivity between natural capital and climate, with a particular focus on biodiversity, deforestation, and freshwater and oceans. The report stated that “heightened awareness of the economic and social impacts of unsustainable natural capital depletion could accelerate policy actions that either introduce or increase taxes on the externalities from which companies currently benefit. This has the potential to significantly impact the economic viability of some business models.”1
BlackRock underlines the need to appreciate critical social aspects. Beyond supporting food systems and livelihoods, biodiversity, for example, is “an integral part of religious, cultural, and national identities throughout society, and provide[s] sources of recreation, knowledge, and inspiration.”1 Companies should therefore see natural capital within this broader lens and focus on their impact on communities in addition to disclosing their reliance on natural capital.
These topics are gaining more priority from a standards and frameworks perspective. The Taskforce on Nature-Related Financial Disclosures (TNFD), which emerged from discussions at the January 2019 World Economic Forum (WEF), aims to leverage the structure of the Taskforce on Climate-related Financial Disclosure (TCFD) and emulate its rapid path to industry acceptance. TNFD expects to deliver a reporting framework in 2023 which will guide “corporates and financial institutions to assess, manage, and report on their dependencies and impacts on nature, aiding in the appraisal of nature-related risk and the redirection of global financial flows away from nature-negative outcomes and towards nature-positive outcomes.” As with TCFD, “[i]t is expected that complying with the recommendations of the TNFD will initially be voluntary for financial institutions and corporates. Over time, mandatory disclosure requirements are expected.”2