A Brief History of Nature Risk
The evolution of data science from a niche discipline to one of the "sexiest" professions, as hailed by Harvard Business Review, has transformed how businesses interpret big data. And now with the advent of AI-driven models, companies can now precisely analyze complex impacts, including the intricate effects of their operations on surrounding ecosystems in order to understand their nature risk. What many don’t realize is that this field began with well-known global events, which have led to an increasingly mainstream approach to understanding our impact on nature and our deep reliance on it.
The evolution of environmental data collection
The earnest collection of Environmental, Social, and Governance (ESG) data began at the turn of the 21st century, influenced by critical societal and environmental events like South African apartheid, the 1989 Exxon Valdez oil spill, the Nike sweatshop labor controversies of the early 1990s, and the globally agreed upon Montreal Protocol to address ozone layer depletion. These events, among many others, highlighted the need for transparency and accountability from corporate entities regarding their environmental and social responsibilities.
After the Exxon Valdez spill, which not only had devastating environmental impacts but also cost the company approximately $2 billion in cleaning and compensation, it became evident that the environmental impact of business activities could have significant financial consequences, particularly for investors. In response, a non-profit organization called the Coalition for Environmentally Responsible Economies (CERES) was established by a group of environmentalists and investors. This group laid the groundwork for the first sustainability reporting framework, the Global Reporting Initiative (GRI). In 1999, a pilot group of multinational companies, including Bayer, GM, and Shell, published reports under the GRI framework, setting a new standard for corporate transparency. Today, 99% of Fortune 500 companies and 98% of public companies globally publish annual sustainability reports.
“Today, 99% of Fortune 500 companies and 98% of public companies globally publish annual sustainability reports.”
This reporting is a primary source for information on company ESG performance, and used by investors, insurers and consumers to evaluate businesses. Additional reporting frameworks have emerged to create standardization for reporting on financially relevant impacts of climate and biodiversity risk, such as the Taskforce for Climate-related Disclosure (TCFD) - now part of the International Sustainability Standards Board (ISSB), and the Taskforce for Nature-related Disclosure (TNFD). Regulation is also catching up, further increasing the number of companies disclosing their environmental and social responsibility initiatives.
The future of nature reporting
What began as a reaction to environmental crises is now becoming a standard part of risk assessment, compliance and accountability for companies worldwide. It is expected that the TNFD framework will follow a similar process as TCFD, where the standards will become widely accepted and integrated into the ISSB’s global sustainability framework, which informs most ESG-related regulation.
Given the rapidly evolving market and societal attitudes towards nature, it is crucial for companies to promptly prioritize and address nature-related risks through these frameworks to stay ahead of regulatory timelines. This initial action allows for the evaluation of nature-related dependencies, impacts, risks, and opportunities, setting the foundation for comprehensive assessments.
At Dunya Analytics, we are committed to delivering the best in nature reporting. By providing financial figures on biodiversity risk alongside financial accounting, we ensure our products evolve to meet the needs of businesses today and tomorrow. Contact us today to learn more about how we leverage the latest insights and techniques to measure and understand nature risk.
