Nature had a front seat at the table at COP28 earlier this month. During the 2023 UN Climate Change Conference in Dubai, multiple stakeholders aligned on one critical assumption—any pathway to net zero must include protecting and restoring nature at scale. Indeed, nature underpins our lives and livelihoods, and markets, companies, nongovernmental organizations (NGOs), and scientists are signaling that it is time to get our nature house in order.
One step toward that goal, Target 15 of the Kunming-Montreal Global Biodiversity Framework, provides guidance for companies and financial institutions to act on nature. Additionally, institutional investors, banks, asset managers, and corporations are determining how to incorporate nature into their strategies with the help of the Taskforce on Nature-related Financial Disclosures (TNFD) framework. Actions taken in the near term will help determine how to manage nature-related risks and opportunities.
During COP28, McKinsey Sustainability hosted several discussions on building and financing a nature-positive economy. The following key themes emerged from these discussions:
- Treat nature as a balance sheet item and link protection to production. Unless an organization can fully understand, manage, and monitor its operations’ impacts on nature, a potentially productive asset could become a costly liability with major implications for supply chain resilience. “Investing in natural capital is the best way to bolster long-term economic resilience,” said Conservation International CEO M. Sanjayan.
- Look beyond the risks and focus on the potential opportunities in protecting nature. While a nature strategy helps leaders understand and manage the risks related to nature, its real benefits lie in nature-related opportunities—including new sustainable businesses, product innovation, cost reductions, supply chain resilience, and strengthened brand loyalty. As articulated by Barclays Group Head of Sustainability Laura Barlow, “While we really do think about the material risks, we also need to think about the opportunities presented by the transition to a more nature-positive ecosystem.”
- Collaborate with multiple companies to generate scale. Combining efforts with others on a pre-competitive basis, through partnerships or associations, can provide the necessary scale and confidence to aim high and maximize impact. For example, Salesforce’s VP of climate action, Tim Christophersen, spoke about his company’s collective efforts with 1t.org, the Mangrove Breakthrough, and others.
- Invest in nature. Historic underinvestment in nature has resulted in substantial private-sector investment opportunities in climate, land, and agriculture. Because costs for protecting and restoring nature are still externalized, transition funds will need to be invested into projects while corporate demand is built. “Nature is the next obvious investment trend. We are seeing investment prospects increase for more sustainably managed land as well as regenerative foods and agriculture,” noted Climate Asset Management CEO Martin Berg.
- Tackle climate and nature challenges concurrently with supply chain transparency. A full understanding of the relationships, risks, co-benefits, and opportunities inherent in climate and nature is essential to create a robust climate and nature strategy. “We cannot keep siloing this climate-nature issue, because if we are going to resolve climate change, 40 percent of mitigation and adaptation comes from nature,” noted Ingrid Kukuljan, head of impact and sustainable investing for Federated Hermes Limited.
- Derisk farming. Agriculture has the largest impact on nature of any sector as well as a large greenhouse-gas-emissions footprint. Mitigation options exist, but because many farmers are highly leveraged and operate with small margins, they are often reluctant or unable to adopt new practices. Creating the conditions to enable farmers to experiment with new practices could include improving access to financing, using technology, and derisking regenerative practices.
- Get started now. Business leaders can initiate four key actions to start contributing to a nature-positive economy—identify nature-related risks and financial impacts, incorporate nature into forward planning, identify nature-positive business opportunities, and collaborate with others to multiply impact.
The level of shared engagement and commitment to nature from the private and social sectors has surpassed many expectations. The corporate and financial sectors too could play a major role in restoring and protecting the world’s natural capital.
For more insights on nature from COP28, read our blog.
