Accountants & Nature: The New Financial Frontier

Nature is now a business-critical issue. Global regulatory frameworks and financial markets demand greater transparency on how businesses interact with and impact the natural world. This presents both a challenge and an opportunity for the accounting profession. Accountants are uniquely positioned to help businesses integrate nature-related considerations into financial reporting, risk management, and strategic decision-making. This blog explores why nature matters to accountants, the financial implications, and how professionals can lead in shaping a more resilient, nature-positive economy.

Why Nature Matters to the Accounting Profession

Accountants have a duty to ensure that financial statements present a true and fair view of a company’s position. Increasingly, this means recognising that nature-related dependencies, impacts, risks, and opportunities must be incorporated into financial decision-making and reporting.

Nature-Related Dependencies and Impacts

Every business, directly or indirectly, depends on nature. These dependencies include:

• Raw materials: Agriculture, forestry, fisheries, textiles, mining
• Ecosystem services: Pollination, water filtration, flood protection, carbon sequestration
• Biodiversity: Ensuring soil fertility, disease regulation, climate resilience

Businesses also have impacts on nature, both positive and negative. Deforestation, water pollution, carbon emissions, and habitat destruction can lead to reputational damage, regulatory penalties, and financial loss. Conversely, investments in sustainable practices can drive efficiency, innovation, and market differentiation.

The Financial and Strategic Implications of Nature

Nature-Related Risks

Understanding nature as a financial risk is a growing expectation within the profession. Nature-related risks fall into three broad categories:

1. Physical Risks: These arise from environmental changes, such as resource scarcity, extreme weather events, and biodiversity loss. For example, water shortages could impact manufacturing supply chains
2. Transition Risks: As regulations tighten and consumer preferences shift towards sustainability, businesses that fail to adapt may face higher costs, stranded assets, or declining market share.
3. Systemic Risks: Nature degradation can lead to economic instability, with financial institutions and businesses exposed to cascading risks across markets and sectors.

Nature-Related Opportunities

While risks are significant, nature-positive strategies also present new financial opportunities:

• Cost savings: Through resource efficiency (e.g. reducing water and energy use)
• Innovation and new markets: Through regenerative agriculture, sustainable materials, green finance etc.
• Enhanced trust: Stronger investor and consumer trust, enhancing brand value and long-term financial stability.

Assessing and Integrating Nature into Financial Reporting

Assessment of Nature-Related Issues

The Taskforce on Nature-related Financial Disclosures (TNFD) has introduced frameworks for assessing nature dependencies, risks, and impacts. Accountants must help businesses:

• Identify key nature-related dependencies and vulnerabilities in value chains
• Quantify financial risks and align them with reporting requirements
• Evaluate opportunities for sustainable investments and cost savings

Connecting Nature to Financial Impact

Nature-related issues influence financial statements across:

• Income Statement: Higher costs due to raw material shortages, operational disruption from extreme weather events
• Balance Sheet: Devaluation of assets due to nature-related risks, liability from environmental degradation
• Cash Flow: Increased capital expenditure for regulatory compliance, investment in sustainability initiatives

Decision-Making and Nature Integration

Embedding Nature in Corporate Strategy

To build resilience, accountants should advocate for:

• Integrating nature considerations into enterprise risk management frameworks
• Aligning financial planning with nature-related dependencies
• Setting nature-positive targets in corporate strategies

Regulatory Landscape and Reporting Standards

Evolving Disclosure

The Global Biodiversity Framework (GBF), TNFD, and GRI Biodiversity Standards signal a shift towards mandatory nature-related disclosures. The EU Corporate Sustainability Reporting Directive (CSRD) and IFRS Sustainability Disclosure Standards require in scope companies to report on nature-related financial risks and performance, subject to materiality.

Nature-Related Financial Disclosure Trends

• The TNFD framework encourages companies to assess and disclose nature-related dependencies and risks under four pillars: governance, strategy, risk management, and metrics.
• Where nature is identified as a material topic, the European Sustainability Reporting Standards (ESRS) specify the information to report and, where relevant, the structure for reporting that information.
• Investors and stakeholders are demanding enhanced transparency on biodiversity impact, with growing emphasis on third-party assurance of nature-related disclosures.

The Accountant’s Role in Shaping a Nature-Positive Future

Accounting professionals are uniquely positioned to guide businesses in understanding, measuring, and integrating nature-related financial risks and opportunities. The profession must:

• Develop expertise in natural capital accounting and environmental financial disclosures
• Support clients and businesses in compliance with evolving regulations
• Advocate for the integration of nature into financial decision-making
• Leverage sustainability data and analytics to enhance financial insights

Conclusion: The Time for Action is Now

The role of accountants is expanding beyond traditional financial reporting to include environmental and nature-related financial disclosures. The profession must lead the transition by embedding nature into risk management, corporate decision-making, and financial reporting. By doing so, accountants will help businesses navigate emerging risks, unlock new opportunities, and build a resilient, nature-positive economy.

This is the first blog in a two-part series exploring how accountants and board members can integrate nature-related financial considerations. The next blog will focus on the actions board members need to take to lead this transformation.

Why Nature Matters to Accountants – A guide to building resilience and value through nature-positive action. Source: https://globalaccountingalliance.com/why-nature-matters-to-accountants