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.

Colin Saint-Vil got his money education at the dim sum cart, over a steamy plate of pork buns and turnip cake.

A friend offered to pick up the whole tab on her credit card, “for the points.” At the time, six years ago, “for the points” meant nothing to Saint-Vil, now a 30-year-old planning manager in Brooklyn, so he pressed for more details. They lingered over the dim sum meal as a larger conversation unfolded about annual percentage rates, credit-card debt, payment schedules and more.

Millennials and members of Gen Z prefer to seek financial advice from each other than from parents or from financial professionals. They don’t like overwhelming spreadsheets and marketing material written in seemingly foreign languages. They don’t trust big banks and institutions trying to sell them on investment strategies—as many were raised around the late 2000s financial-crisis. And, they are not wrong: There is a lot to be learned from comparing numbers with peers—from sharing salaries to talking out big decisions like home or car purchases.

Saint-Vil said when his father was his age, he had already begun investing in real estate, but with property prices now so high and mortgage rates only just beginning to fall, he said he couldn’t imagine being able to follow in his father’s footsteps. He, like many millennials and Gen Z-ers, describe their finances as “fairly good” these days, though they hold a negative picture of the greater economy, according to a new poll of 18 to 29-year-olds from the Institute of Politics at Harvard Kennedy School.

Millennials are still reeling from the impact of back-to-back recessions, all while large bank closures and investing scams dominate the headlines. Younger people report a feeling of “financial avoidance” exacerbated by high inflation and the pandemic-era budgeting.

As of June 2023, Gallup polling revealed a historically low faith in U.S. institutions, with younger generations voicing high skepticism. According to Gallup, only 9% of respondents aged 18 to 34 expressed “a great deal” of confidence in banks; meanwhile, 47% and 28% said they have “some” or “very little,” respectively.

But when it comes to winning back young consumers, these same financial institutions haven’t quite given up, and are rolling out new outreach programs and robo advisors, some of which have helped bridge a connection with Gen Z and millennials, said Keith Niedermeier, clinical professor of marketing at Indiana University. But many young people still say they prefer do-it-yourself investing platforms like Robinhood and Acorns over traditional advisers at more established wealth-management firms.

Andrew Ragusa, a real-estate broker based on Long Island, blamed the twin problems of low housing inventory and high home prices for postponing younger buyers’ ownership. The median age of a first-time home buyer in the U.S. is 35-years old as of 2023, according to data from the National Association of Realtors. That is slightly down from an record high of 36 in 2022, but still two years older than the median age in 2021, which is representative of an ageing first-time buyer trend.

When he talks with younger clients now, he detects a gloomy sentiment. “They try to be optimistic, but the overall sentiment is ‘This is supposed to be the American dream: we get a house and we get some financial security and I just have to have faith it will all work out in the end.’ But they don’t have faith it will.”

Fear and shame around being able to buy or accomplish as much as one’s parents might have financially can crop up when millennials talk to elders about their financial frustrations, said Jodi Kaus, director of Kansas State University’s student financial planning centre, Powercat Financial. She’s found that lessons and advice from friends are often more constructive.

Kaus leads a peer-to-peer financial planning centre that pairs up students to work through financial issues. She works to pair people with similar backgrounds: graduate students with graduate students or international students with international students. Talking with someone only a few years removed from your current situation means you’re better able to internalize the messages and execute on their advice, Kaus said.

“Early on, parents even say ‘Are you sure students can help my child?’” she said. “And I say ‘I am more than confident that they can help each other.’

Sharing money tips and financial know-how with your friends doesn’t only benefit the asker, Kaus said. In the Kansas State University peer-to-peer group, the advice giver also learns a lot from their own position, because sharing their story and bonding with a peer helps them to build their own confidence and belief in their financial acumen.

Lindsay Clark, a 34-year-old director of external affairs in Washington, D.C., recalls one lesson she shared with a friend carrying student loans from pharmacy school. Clark works at Savi, a student loan platform, and she offered to cook her friend dinner while they sorted through his loan repayment options. Long after they’d cleaned their dinner plates, they sat together at Clark’s kitchen island, lingering over a plate of homemade hummus and chatting about everything from financial goals to Costco card benefits.

“Those conversations blossom from the transparency, and the visibility makes both people feel really good,” she said. “That creates better relationships overall.”

When you’re talking about money issues with friends, Clark said, you’re not artificially inflating your salary or pretending to know more than you do. And most important, you’re not worried about their ulterior motives.

“You feel safe in that conversation, knowing their intentions are good and they’re not trying to make money off of you,” she said. “And that’s going to lead to better results, because we’re working with the reality here.”

Skepticism of pronounced experts and criticism of established financial institutions is especially common among millennials and Gen Z, Neidermeier said. Studies show people across generations are much likelier to take a friend or colleague’s recommendation to heart over that of a faceless institution, he said; people who spend time on social media just have a greater opportunity to source those answers and field questions.

“What people say to each other over the picket fence is what is the most influential,” he said.

At a certain point, however, talking solely to friends and peers for your financial lessons can be very limiting, said Sarah Behr, founder of Simplify Financial Planning in San Francisco. Relying on your social circle can also put a strain on those relationships; no one wants to be responsible for your disappointment when a financial decision that worked out well for them doesn’t fit as well in your own life.

Behr recommends tuning into your own emotional reactions when assessing peer advice: does the road map they followed align with your own financial values? Does it put pressure on you to live outside your means or challenge your personal risk tolerance? If the answer doesn’t feel clear, that could be a time to outsource to a financial professional who has no emotional connection to you or your financial status.

“‘People have been telling me do this, but I just don’t know if it’s the right thing for me’—I get a lot of calls like that,” said Behr.

Saint-Vil said he and his friends share tips on what high-yield savings accounts offer the best rates, and when he did his credit card research, he chose a card recommended by a friend. When it comes time to work with a financial adviser or even one day a wealth manager, he’ll likely work with someone recommended through a peer. Behr said close to 90% of her business comes by way of client referrals.

Since that first conversation over dim sum, Saint-Vil has thrown his own card onto the table at meals and shared his knowledge with other pals who look confused.

“I have a real wide range of friends who are in many different financial places, but I would say a rising tide lifts all ships,” he said.

Julia Carpenter is the co-author, with Bourree Lam, of The Wall Street Journal’s “The New Rules of Money: A Playbook for Planning Your Financial Future,” a personal-finance workbook published this week by Clarkson Potter, an imprint of the Crown Publishing Group.

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

Millennials and Gen Z are turning to peers instead of professionals for financial advice. They don’t trust banks, and they are tired of information overload.