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“Nature, our most precious asset” – Marc Palahí, Chief Nature Officer at Lombard Odier Investment Managers
Article published in El Economista on 20 December 2023
Our understanding of the global economy’s dependence on nature has become critical in recent years, as businesses, governments and regulators have woken up to the significance of nature-related risks.
Indeed, the statistical imperative is hard to ignore. PwC reported this year that more than half (55%) of the world’s gross domestic product (GDP) – the equivalent of an estimated USD 58 trillion – is moderately or highly dependent on nature, rising from USD 44 trillion in 2020. Further, the WEF’s Global Risk Report, published in January 2022, ranked ‘nature loss’ third on the list of key risk concerns among global CEOs, behind climate and extreme weather.
Read more: Why nature is becoming a new asset class
This highlights just how much our economy, society and future prosperity relies on nature. However, as more than just an economic good, its true value is often underestimated. It is impossible to imagine a world without nature; it is the reason we exist. It is undoubtedly our most important capital and the basis for human life. Fundamentally, it is our most real asset.
Our economy has grown at nature’s expense, and our sophisticated financial system has not historically invested in our most valuable asset. Companies must reform their practices now to halt and reverse nature’s decline and create a thriving global economy that restores and replenishes nature.
Rethinking our economy
It is time to rethink our economy. The climate and biodiversity crisis, as well as growing socio-economic inequalities, are different consequences of the same fundamental problem: our economic system. A new paradigm that positions nature at the heart of our economy and encourages the environmental transition is required.
Understanding and anticipating the reporting landscape
The number, type and scale of climate-related regulatory frameworks has grown exponentially in the last decade. There is widespread expectation that climate reporting will become standardised for public companies in the coming years. Indeed, many are already reporting in line with recommendations provided by the TCFD, or the UN Sustainable Development Goals.
However, consensus remains that nature has been somewhat side-lined in discussions around climate reporting and regulation. This is paradoxical, because a net-zero economy is not possible without nature.
The launch of the Taskforce on Nature-related Financial Disclosure’s (TNFD) final Recommendations at New York Climate Week in September shone an important spotlight on companies’ engagement with nature-related impacts, risks and opportunities. The TNFD looks set to catapult these considerations into companies’ daily activities and reporting. It may also serve as the basis for further, more nuanced, nature-related regulatory frameworks in the coming years.
It's clear that investor and regulatory expectations are growing when it comes to companies’ initiatives to integrate nature considerations in their existing decision-making and reporting. Boards, leadership teams and dedicated senior sustainability and nature resources must collaborate carefully. This will allow them to fully understand their organisations’ dependency on nature, and to prepare for greater disclosure expectations in the future.
Investing in data to underpin evolving stakeholder expectations
Access to data is a significant part of a company’s ability to increase the level – and quality – of its nature-related reporting and disclosures, helping accelerate the global economy’s transition to a nature-positive model. However, there’s a commonly perceived mismatch between the regulatory expectations of a company and the company’s ability to access data to meet these expectations.
The reality is that data related to nature and biodiversity is becoming increasingly accessible through the development of advanced technologies and scientific knowledge. The establishment of dedicated data providers, platforms and facilitators is proof of a wider recognition of the urgency companies face when it comes to identifying and quantifying their impact on nature.
Read also: re-NATURE Hub – putting nature at the heart of climate action
Leadership teams need to see nature reporting as a pre-requisite for reporting in terms of performance, risk and operations. Companies must invest in their data capabilities to minimise nature-related risks and anticipate nature-based opportunities. Standardising nature reporting now will successfully position companies for a nature-centric global economic model.
Connecting nature with finance
Another step companies can take is to hire a Chief Nature Officer, serving to connect nature with finance, and support companies that are faced with growing requirements and responsibilities as nature becomes more prevalent on their agendas. holistiQ Investment Partners, Lombard Odier Investment Managers’ sustainable investment platform, powered by a partnership with Systemiq, became the first financial institution to do so last year, creating a role to integrate nature and biodiversity centrally across the business’ strategy and investment agenda.
Banks and investment managers hold enormous power when it comes to putting value in nature and catalysing change towards a circular bioeconomy. They can affect change on a grand scale through the channelling of capital, but it is important to fully understand how to do so effectively. A healthy finance sector can act as pollinator, making prosperous and sustainable business flourish.
This is where a dedicated role, grounded in science and research, is crucial. Over the past few years, we have seen an exponential rise in the hiring of Chief Sustainability Officers (CSO), a position responsible for a company’s overall environmental strategy. We hope that Chief Nature Officers will follow a similar trajectory.
To protect our future, both ecologically and economically, we must afford as much importance to the biodiversity crisis as to the climate crisis. Companies must make the case for nature as our most precious asset, to demonstrate to their stakeholders an understanding of our economic dependence on nature, as well as the opportunities that nature-based solutions and the circular bioeconomy offer for the transition to a climate- and nature-positive world.
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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