Nature in the Boardroom: Guidance for boards of financial institutions in asking the right questions
The importance of integrating Nature
We value nature because it is important, yet we lose nature because it is free. The economy is a wholly owned subsidiary of nature, not the other way around. Nature is our biggest shareholder. Yet nature does not have a seat at the table in boardrooms across the globe. Recent research by S&P Global Sustainable (2023) finds that 85% of the world’s largest companies have a significant dependency on nature across their direct operations. But according to the World Benchmarking Alliance (2024), only 2% of companies have boards that can demonstrate they have the relevant expertise on topics like biodiversity or climate. How can protecting nature protect your business? How might it also open up new investable opportunities? What would nature tell us if a seat were be made available for her?
Nature as a strategic management issue
Nature is a strategic management issue, that requires board oversight and impacts key management topics such as the future outlook of the market and the effect of legislation in the industry. Whilst climate risks and opportunities have been ‘onboarded’ by many organisations, increasing recognition of business and finance dependencies and impacts on services from nature, is driving new developments in regulation and legislation, fiduciary duties, financial risks, and social and client expectations that have elevated the imperative for boards to understand, and engage with, nature-related issues.
Risks from Nature’s collapse
Evidence of nature’s collapse is mounting. According to WWF, 69% of wildlife populations have vanished since 1970. This is translating into environmental risks that materialize across our economy as physical, transition and systemic risks. The degradation or collapse of ecosystems is disrupting supply chains. The US Department of Agriculture found that pollinators underpin one in every three bites of food eaten on the planet (USDA, 2024). Food producers, for example, could face higher costs as natural pollinators vanish. US$ 15.5 billion has been stranded or is at risk due to the global water crisis, due to changes in water regulations, high levels of pollution, and community opposition (CDP, 2024). Air pollution is estimated to cost US$8.1 trillion annually to our global economy (UICC, 2024). Climate change is making parts of the world uninsurable through nature-related fires, floods, droughts and storms (NYT, 2023). In this way, financial institutions are increasingly confronted with the loss of infrastructure (physical), legal and reputational costs (transition) and unforeseen other impacts (systemic) risks, that challenge traditional risk management frameworks.
New opportunities are emerging
As with responses to the challenge of climate change, we expect constraints linked to nature-related risks will drive innovation and new investable sectors. The most obvious sectors will be in those that have the greatest impact or reliance on nature – such as the global food system, extractives, construction and utilities. UNEP’s 2023 assessment of the State of Finance for Nature estimated the scale of opportunity was as a US$ 7 trillion turnaround in the flow of nature negative finance from public and private sources, to become nature positive. The transition opportunity this represents, is likely to follow a similar trajectory to business responses to climate change, with the emergence both stranded assets and new sunrise industries.
How this report helps
There is a growing recognition among some business leaders that, “after climate, nature is next”. But how many board members have the confidence to have informed conversations about these issues or know the right questions to ask their executive teams?
This report offers guidance to help boards navigate these complexities by providing a clear approach for identifying, managing, and reporting on nature-related risks and opportunities, enabling them to integrate these considerations into governance and strategic decision-making effectively within their organisations. Additionally, a helpful blueprint is included that outlines key actions and objectives aimed at integrating nature-related considerations into the core of executive leadership.
UNEP FI and partners believe that management and supervisory bodies play a key role in steering the strategic course of our members and setting it on the path towards sustainable long-term objectives. This publication provides boards of UNEP FI members and the wider financial system with a blueprint to address the critical need for financial institutions to integrate nature considerations into their governance frameworks and board level oversight to mitigate nature-related risks and invest in opportunities to promote long-term sustainability in alignment with the CBD’s Global Biodiversity Framework and the UN Sustainable Development Goals.
Additional support UNEP FI will offer
Beyond knowledge sharing, we seek to empower board members by enhancing their capacity to identify and address the actions they should be taking effectively, through capacity building, peer-learning workshops, and events to support capacity building at a board level.
Video series
In addition to our report, we have created a series of short videos that explore key topics related to nature and finance. These videos aim to help financial institutions understand the complexities of integrating nature-related considerations into their governance and strategy.
Topics covered include:
- Introduction to Nature and Finance
- Governance & Strategy
- Risk Management
- Portfolio Management
- Disclosure & Regulatory Guidance
Introduction to Nature and Finance
Governance and Strategy
Risk Management
Portfolio Management
Disclosure and Regulatory Guidance
