Nature: agenda item number one

27 Mar 2024

As one of the world’s “nature superpowers”, Australia has more natural capital to lose than almost every other nation. But we are also “uniquely positioned” to protect nature, our audience at TRANSFORM heard.

Australia is one of 17 megadiverse countries that make up less than 10% of the world’s surface, but support more than 70% of all species. Around three quarters of Australia’s native species, according to the State of the Environment report, are under threat and 19 ecosystems show signs of collapse.

But just two countries in the OECD have the “deep educational talent, scientific research capabilities and financial market sophistication” to “bend the curve” on nature loss, TNFD UK’s Executive Director Tony Goldner said. Those two countries are the United States and Australia. “We’ve got every reason and opportunity to be a pioneer and an early mover.”

Tony was beamed into Sydney to set the scene for what turned out to be a two-day discussion with nature at its heart. “We need to bend the curve on nature loss or nature will inevitably bend the curve on the capacity for companies across sectors to generate the cash flows and the returns that investors – including all of us as superannuation account holders – have come to expect,” he warned.

Tony pointed to Bloomberg's 2023 report, When the Bee Stings, to share several cautionary tales. Electric vehicle giant Tesla faced months of delays when environmentalists attempted to halt construction of its ‘gigafactory’ in Berlin following declining groundwater, for instance, and the company’s share price fell by 3.1%. Conglomerate 3M incurred a $10.5 billion liability for polluting waterways with 'forever chemicals’.

Tony also referred to the 2021 “crisis” in Sweden’s construction industry following the supreme court’s decision to revoke the license of the country’s largest cement manufacturer on environmental grounds. These are just three signs of the times.

Voluntary...for now

As businesses begin to consider the potential costs of nature loss on their bottom lines, money markets are already on the move.

In January, 100-plus financial institutions and owners of $14 trillion in assets became the first to commit to reporting against the Taskforce on Nature-related Financial Disclosures, or TNFD.

The TNFD will recalibrate the way nature is valued, the GBCA’s Chief Executive Officer Davina Rooney said in the following session. Bushfires, floods and other extreme weather impacts over the last few years have “rewritten the rule book” and property companies have been “caught by surprise” as 30-year land banks are now, often, the only remaining biodiversity corridor or habitat for endangered species.

Financial institutions are rethinking their risks, which is why the federal Treasurer is leading talks on a nature repair market, Davina noted. “It is not just an environmental issue; it is also a financial one,” she said.

“How does Australia’s property industry proceed?,” Davina Rooney asked EY’s partner and climate change specialist, Alexandra Banks. The TNFD disclosures are voluntary today, but likely to be the “next iteration” of mandatory disclosure in Australia, Alexandra said.

EY undertook a TNFD Pilot Study in 2023 for the Australian Government to investigate the nature impacts across five nationally significant and high risk value chains, one of them property. What did EY learn? Nature must be “agenda item number one” when project teams sit down to discuss a new project, Alexandra said. “Any later and it’s too late.”

An ecosystem on solutions

We can’t pretend that displacing nature isn’t a core activity of the property sector. Nor can we ignore the reality that real estate companies draw resources from around the planet. Therefore, our response cannot be focused “just in our backyard” GPT Group’s Steve Ford noted. GPT Group, who is our Nature Principle Partner, created a ‘biodiversity account’ at its development site in the Melbourne suburb of Truganina, Steve said. Every square metre of the ex-grazing greenfield site was assessed for its ecological value before GPT implemented strategies to salvage, restore and respond with ecologically sensitive design. GPT’s voluntary approach shows how small steps can deliver big impacts over time. “It is very important to take everyone on the big journey, and on lots and lots of little journeys,” Steve observed.

At the national scale, the Costa Rican experience was shared by Nicolás Ramírez, Executive Director of the Green Building Council Costa Rica. Home to 6% of the world’s known species, Costa Rica had decimated its forest cover over decades before a “series of ambitious and innovative policies” came together with private sector goals and committed communities. Forest cover has increased from 21% in 1989 to 59% two decades later. Today, Costa Rica is among the top 10 forest recovery countries in the OECD, Nicolás noted.

Bringing First Nations thinking to the centre of design can also reveal new solutions. “We’ve locked up nature and tried to impose the built environment on nature rather than connecting it to nature,” said First Nations design specialist Rowena Welsh-Jarrett. She suggested treating Aboriginal knowledge and cultural heritage as “vital technical elements of the built environment”.

There’s no single solution, Greenfleet Chair Dr Dominique Hes added later. “It’s an ecosystem of solutions.” How will we know when we’ve chosen the right solutions? “Nature is not there to be solved. There’s no point where we can say, ‘nature is done let’s go back to climate’,” Pollination’s Guy Williams observed.

International signposts are instructive

For Australia’s property and construction industry, the international signposts are instructive. Just this month, Norway's $1.6 trillion sovereign wealth fund captured headlines when it cut ties with Fortune 500 company Jardine due to concerns its business activities in Indonesia could damage orangutan habitat.

But doing “less harm to nature” is “distinctly different” from generating positive impacts on nature, Tony Goldner said, and reporting should reflect this. Failing to report on both positive and negative impacts was disingenuous, he suggested, and akin to providing investors with a net profit after tax figure without shedding any light on the corresponding revenues and expenses in the profit and loss statement.

The UK's new biodiversity net gain framework, which became mandatory in February, requires any new development to deliver at least a 10% increase in biodiversity value. This could provide a template for Australia, Tony suggested.

A scalable solution for world

The nature conversation is layered and the journey ahead a long one. To seek industry input, the GBCA has launched a nature discussion paper ahead of the publication of a Nature Roadmap in 2025. The Nature Roadmap, much like the Climate Positive Roadmap before it, will shape the future of environmental management and nature regeneration in and around Australia’s buildings and communities.

There is a clear financial imperative. Almost half of Australia’s GDP, $896 billion, depends directly on nature. Indirectly every dollar spent in the Australian economy depends on a healthy ecosystem and nature.

Repairing the damage done to our environment will also require an enormous weight of capital. Around $700 billion a year is needed globally to halt and reverse nature loss over the next decade, TNFD’s Tony Goldner said. Private, public and philanthropic funding will be required, as well as innovative business models and investment propositions.

But Australia could seize a global nature superpower advantage. Following decades of innovation in design, development and financing “economic infrastructure” Australia could apply the same approach to nature, Tony suggested. “Treating nature as the essential infrastructure underpinning our economy” could be a “scalable and replicable model” for Australia to export to the world.