More action to reverse climate change is excellent but let’s also act fast to restore nature – last weeks launch of the Task Force for Nature-Related Financial Disclosures is a potential accelerant.
This week the Climate Change Commission released their much awaited report mapping Aotearoa’s pathway to a low carbon emissions future. This is a significant positive step but let’s hope we ramp up action significantly for both reversing climate change AND restoring nature.
In 2015, the then Governor of the Bank of England Mark Carney coined the term “Tragedy of the Horizon” . The expression is a clever play on the well-known economic problem “Tragedy of the Commons” , put forward in 1833 to describe situations where individuals benefit personally through depleting common good resources (for example healthy waterways and native ecosystems). Mark Carney used “Tragedy of the Horizon” to explain how the catastrophic impact of climate change will impose a cost on future generations that current decision-makers have no incentive to fix.
Six years on from this realisation at the highest echelons of the global finance sector, we now have a lower carbon emissions plan for Aotearoa plus our banks, insurance companies and investors are beginning to report on climate-related financial risks. In time this reporting is expected to drive investment flows to firms that minimise climate-related risks and seize climate-related opportunities.
But there is not one “Tragedy of the Horizon” – there are multiple Tragedies. In addition to dangerously accelerating climate change, we face ecological degradation and associated species extinctions, water scarcity and resource depletion.
In an effort to address nature-related challenges, the Task Force on Nature Related Disclosures (TNFD) was launched last week and immediately fully endorsed at the annual G7 (leaders from Canada, France, Germany, Italy, Japan, United Kingdom and the United States plus European Union reps) meeting in Cornwall.
As described in the TNFD launch statements “The G7 endorsement should be recognised as vital and a clear signal to global business and governments of the need for urgent action to halt nature loss. Nature is declining at rates unseen in human history, which poses unprecedented risks for corporates and financial institutions, so now is the time for decisive action that can secure a sustainable future.”
Building on the success of the climate-related risk reporting framework (developed by the Task Force on Climate Related Disclosures known as the TCFD) , the TNFD will, by 2023, deliver a consistent set of requirements for best practice reporting on nature-related financial risk. The objective is to support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.
None of this activity to restore nature is a “nice to have” option - put simply our economy relies on a healthy natural environment and we ignore this fact at our peril.
According to the TNFD background papers:
- More than half of the world’s economic output – US$44 trillion of economic value generation – is moderately or highly dependent on nature.
- The recorded extinction of 83% of wild mammals and 50% of plants therefore represents significant risk to corporate and financial stability.
- Action for nature-positive transitions could generate up to US$10.1 trillion in annual business value and create 395 million jobs by 2030.
As far as I am aware the costs for protecting and restoring nature across Aotearoa have not been calculated in a similar way to the work completed for the Climate Change Commission report. It is highly likely though that the key result would be similar – the longer we leave the problem unaddressed the more difficult and expensive it will be to fix it.
The TNFD will consist of approximately 30 members, with an equal representation of financial institutions, corporates and data/service providers from developed and emerging markets. It will be informed by a diverse stakeholder group. I have not been able to find any official New Zealand- based representation on the TNFD but am involved with the Responsible Investment Association of Australasia (RIAA) group set up to provide input. Please let me know if you are interested and I can send through more detail.
The health of the ecosystems on which we, and our economies, depend is deteriorating more rapidly than ever. Let’s hope the reporting frameworks and associated financial sector focus on nature-related impacts get traction and leads to on-the-ground change before the situation becomes insurmountable. Our focus on reversing climate change is a hugely positive step. But we need to make sure we also act as soon as possible to avoid the nature-related “Tragedy of the Horizon “before it is too late. If we don’t, we not only lose the precious unique animals and plants we share Earth with, we also lose the basis for half our economy and an important contributor to our personal wellbeing.