Companies Urged to Take Stock of Their Impact on Nature and Related Risks

Companies should consider the natural world as core to their business and report their effect on it in much more detail, according to a U.N.-funded group that promotes sustainable business practices. But assessing environmental impact remains tricky.

The latest draft framework published by the Taskforce on Nature-Related Financial Disclosures aims to help big businesses and financial institutions report and act on nature-related risks, covering issues including deforestation, pollution, water stress and overfarming. It follows previous drafts, with a final version slated to be published in September.

Depletion of resources and damage to rivers and forests should be seen as integral to firms’ operations, and not merely a matter of corporate responsibility, said Tony Goldner, the TNFD’s executive director. “We used to think of nature as an endless supplier of resources into our business practices,” he said. “We’re trying to shift the conversation around the nature of the relationship between nature and business.”

The final framework should give priority to the end result in natural areas, said Kat Bruce, founder and director of environmental-DNA startup NatureMetrics.

“Creating a baseline on the state of nature in…priority areas and then ongoing monitoring to track progress over time is key,” she said, noting that new technology allowed for collection of much more solid biodiversity data.

“We also need to focus on how effective company actions are to mitigate risks,” Ms. Bruce said. The current guidance is a “solid step,” she said. “But we must not stop there.”

The TNFD is a market-led initiative but funded by the United Nations. It brings together 40 corporate executives, including Deputy Environment Director Alexandre Capelli of French luxury-goods group LVMH Moët Hennessy Louis Vuitton SE; GSK PLC head of corporate responsibility Sarah Dyson; Renata Pollini, head of nature at Swiss cement maker Holcim Ltd.; and Koushik Chatterjee, chief financial officer at India’s Tata Steel Ltd.

Some $44 trillion of global economic value is moderately or highly dependent on nature, according to the World Economic Forum. The collapse of natural systems could wipe $2.7 trillion a year from the global economy by 2030, according to the World Bank.

Companies and shareholders should pay more attention to the material risk of natural degradation, Mr. Goldner said. “Dependency is the pathway to risk,” he said. “If you’re investing in a fast-growing agricultural company in an area where there is water stress, that should trigger questions,” he said.

“What does that tell the investor about the ability to keep growing at that same rate?”

The draft framework covers three areas that should be assessed by large companies and financial institutions: the use of land, freshwater and oceans; pollution and pollution removal; and resource use and replenishment. The framework highlights the potential use of bidirectional metrics, that is to say, positive effects as well as negative, Mr. Goldner said.

A fourth indicator, on climate change, is covered by a separate framework set out by the Taskforce on Climate-Related Financial Disclosures, or TCFD.

Companies’ effect on climate change is relatively simple to measure. Emissions can be calculated in metric tons, and companies use shared rules that enable comparisons between one business and another, even if reporting remains patchy and partly based on estimates.

But reaching “nature positive”—as the TNFD aims to achieve—is a more nebulous concept, Mr. Goldner acknowledged. “There’s some work to do reaching a consensus on what nature positive looks like,” he said. It would likely encompass a basket of metrics, rather than a single indicator, he added.

The TNFD’s draft comes after nations agreed on a new international framework that will oblige large corporations to show they are reducing their impact on the world’s natural life.

Public subsidies seen as harmful for biodiversity will be cut by $500 billion a year under the Global Biodiversity Framework, or GBF, reached at the United Nations’ COP15 conference on biodiversity in Montreal in December.

Under the GBF, governments between now and 2030 will introduce laws and policy measures requiring large companies to disclose and reduce the damage done to ecosystems from their operations, supply chains and portfolios. They will also be required to provide information to the public needed for more sustainable consumption.

A previous draft requirement for businesses to reduce their negative impact on the environment by at least half wasn’t included in the final agreement, which doesn’t specify the extent of the required actions. Nearly 200 countries signed on to the final agreement. The U.S. wasn’t an official participant.

The TNFD’s framework aims to help businesses align their reporting and actions to global policy goals, such as the GBF, the task force said. The draft framework includes sector-specific guidance for areas including agriculture, mining, energy and financial services.

Guidance for other industries, including textiles, will be released on a rolling basis over the coming months, the TNFD said.

For decades, Australia has leaned into its reputation as the lucky country. But luck, as it turns out, is not an economic strategy.

What once looked like resilience now appears increasingly fragile. Beneath the surface of rising property values and steady headline growth, the Australian economy is showing signs of strain that can no longer be ignored.

Recent data paints a sobering picture. Australia has recorded one of the largest declines in real household disposable income per capita among advanced economies.

Wages have failed to keep pace with inflation, meaning many Australians are working harder for less. On a per capita basis, income growth has stalled and, at times, reversed.

And yet, on paper, things still look relatively solid. GDP is growing. Unemployment remains low. But that growth is increasingly being driven by population expansion rather than productivity.

More people are contributing to output, but not necessarily improving living standards.

That distinction matters.

For years, Australia’s economic success rested on a powerful combination: a once-in-a-generation mining boom, a credit-fuelled housing market, strong migration and a property sector that rarely faltered. Between 1991 and 2020, the country avoided recession entirely, building enormous wealth in the process.

But much of that wealth is tied to property. Around two-thirds of household wealth sits in real estate, inflated by leverage and sustained by demand. It has worked, until now.

The problem is the supply side of the economy has not kept up.

Housing supply is falling behind population growth. Rental vacancies are near record lows.

Construction firms are collapsing at an elevated rate. At the same time, massive infrastructure pipelines are competing with residential projects for labour and materials, pushing costs higher and delaying delivery.

The result is a system under pressure from all angles.

Despite near full employment, productivity growth has stagnated for years. In simple terms, Australians are putting in more hours without generating more output per hour. The economy is running faster, butgoing nowhere.

Meanwhile, government spending continues to expand. Public debt is approaching $1 trillion, with spending now accounting for a record share of GDP.

The gap between spending and revenue has been filled by borrowing for decades, adding further pressure to an already stretched system.

This is where the uncomfortable question emerges.

Has Australia become too reliant on a model driven by rising property values, expanding credit and population growth?

As asset prices rise, households feel wealthier and borrow more. Banks lend more. Governments collect more revenue. Migration fuels demand. The cycle reinforces itself.

But when productivity stalls and debt outpaces real income, the system begins to depend on constant expansion just to stay stable.

It is not a collapse scenario. But it is not particularly stable either.

Nowhere is this more evident than in housing.

The National Housing Accord targets 1.2 million new homes over five years, yet current completion rates are well below that pace. With approvals falling and construction costs rising, the gap between supply and demand is widening, not narrowing.

Housing is also one of the largest contributors to inflation, with costs rising sharply across rents, construction and utilities. Yet the private sector, from small investors to major developers, is struggling to make projects stack up in the current environment.

This brings the policy debate into sharper focus.

Tax settings such as negative gearing and capital gains concessions have undoubtedly boosted demand over the past two decades. But they have also supported supply. Removing them may ease prices briefly, but risks deepening the supply shortage over time.

That is the paradox.

Policies designed to make housing more affordable can, in practice, make the shortage worse if they discourage development. The optics may appeal, but the economics are far less forgiving.

It is also worth remembering that most property investors are not institutional players. The majority own just one investment property. They are, in many cases, ordinary Australians using real estate as their primary wealth-building tool.

Undermining that system without replacing it with a viable alternative risks unintended consequences, from reduced supply to higher rents and increased inflation.

So where does that leave Australia?

At a crossroads.

The country can continue to rely on population growth and rising asset prices to drive economic activity. Or it can shift towards a model built on productivity, innovation and sustainable growth.

The latter is harder. It requires structural reform, long-term thinking and political discipline.

But it is also the only path that leads to genuine, lasting prosperity.

The question is no longer whether Australia has been lucky.

It is whether it can evolve before that luck runs out.

Paul Miron is the Co-Founder & Fund Manager of Msquared Capital.

Companies Urged to Take Stock of Their Impact on Nature and Related Risks

A U.N.-funded task force aims to help businesses report and act on a variety of issues, including deforestation and overfarming

As housing drives wealth and policy debate, the real risk is an economy hooked on growth without productivity to sustain it.