New Global Standards for Measuring Nature-Related Financial Risks

- The Nature Positive Initiative introduced the State of Nature Indicators and Metrics, a minimum set of indicators for measuring changes in the state of nature.

- Accountants should prepare for clients to require standardized metrics for nature-related dependencies and risks in their sustainability reporting.

- The takeaway for firms is to tighten judgment, documentation, and client communication before the issue becomes urgent.

The Nature Positive Initiative, a coalition of conservation organizations, institutes, and business and finance groups, has introduced the State of Nature Indicators and Metrics. This initiative aims to establish a globally aligned minimum set of indicators to measure changes in the state of nature. For financial firms and institutions, these metrics provide a science-based method to track how investments depend on and affect the natural world.

Measuring environmental impact has historically been a fragmented process. The new framework distills over 600 existing metrics into four core indicators: Ecosystem Extent, Ecosystem Condition, Species Extinction Risk, and Species Populations. This streamlined approach allows companies to assess changes in ecosystems and species across various landscapes and sites more clearly. The framework was pilot tested by 29 companies across 23 countries and over 50 sites to ensure its practical application.

The framework is not operating in a vacuum. It has already been integrated into the Taskforce on Nature-related Financial Disclosures (TNFD) and the Science-Based Targets Network. Furthermore, the Global Reporting Initiative is moving toward integration to ensure consistency across reporting approaches. Notably, the International Sustainability Standards, which operates under the International Financial Reporting Standards Board (IFRS) and the International Accounting Standards Board (IASB), will take over the work of the TNFD by the third quarter of this year.

Developing these metrics was a massive undertaking involving over 500 experts and practitioners over a two-year period. The primary focus was on the private sector to help businesses understand nature-related dependencies, impacts, risks, and opportunities. The project was funded by Rockefeller Philanthropy Advisors and approved by the 27 core member organizations of the Nature Positive Initiative. The goal was to create a framework that is scientifically rigorous, practical to use, and accessible to a broad range of organizations.

The initiative addresses a critical gap in how businesses measure their impact on the environment. While nature underpins global economies, health, and food systems, there has been no clear consensus on how to measure whether specific efforts are leading to nature's recovery. The State of Nature Indicators and Metrics provide a decision-useful way for businesses and financial institutions to assess whether their actions are putting nature on a path to recovery while building organizational resilience.

The development of the framework involved significant technical collaboration. Partners included EY, the Biodiversity Consultancy, the World Economic Forum, and the Ocean Risk and Resilience Action Alliance. These groups worked together to ensure the metrics are suitable for being embedded consistently across various standards, frameworks, and reporting systems. The initiative aims to complement, rather than replace, existing metrics to provide a more comprehensive view of environmental impact.

As the International Sustainability Standards (ISS) takes over the TNFD work, expect to see these nature-related metrics become a standard requirement for corporate sustainability reporting. CPAs should prepare to advise clients on how to identify and quantify nature-related dependencies and risks, as these will likely become a staple of non-financial reporting and risk management.