The poor outlook for the environment and biodiversity in Australia caused by climate change, habitat loss, invasive species, pollution and mining activity underscores how environmental issues are turning into key financial risks for Investors.
Released last week by the Australian government, the five-year State of the Environment report paints a damning picture of the health of Australia’s environment and biodiversity with nearly 20 ecosystems nearing collapse. It highlights the environmental impact of changes in rainfall patterns and the intensity and frequency of bushfires and heatwaves with average temperatures climbing to nearly 1.5 degrees Celsius since the start. recordings.
“Investors will welcome the transparency and good governance that comes with the publication of this crucial report on the state of the environment, but the content itself is cause for serious concern, according to a spokesperson for the Investors Group on Climate Change, an alliance representing Australian and New Zealand institutional investors with over $36 trillion in assets under management.
“For millions of Australian investor beneficiaries, their long-term financial security and the stability of our economy are tied to the health of our land, air and water,” he said.
The report also emphasizes the importance of nature and biodiversity. “Investors have focused on climate change over the past decade, but the discussion of biodiversity and nature has been largely absent,” said Michael van Niekerk, managing director at consultancy Peakview Strategy.
“While climate change is clearly impacting nature, the impact of biodiversity loss could be greater than climate change.”
Improve disclosure
The report also highlights the importance of improving disclosure of the impact of nature-related risks under the Taskforce for Nature-related Financial Disclosures (TFND). Currently in draft form, the TFND is expected to be an important area of disclosure for years to come.
To date, the more established Taskforce for Climate-Related Financial Disclosures has raised investor awareness of climate risk and is now firmly embedded in the reporting regimes of many companies. Adoption of TCFD has been accelerated by countries like the UK and New Zealand, making it mandatory.
Elsewhere, the International Sustainability Standards Board is developing a global sustainability disclosure baseline for capital markets that will further improve disclosure and transparency standards for investors.
Despite the report’s dire findings, it also highlights new investment opportunities in areas such as decarbonization and climate resilience.
“Over time, the importance of considering nature-related investment risks and opportunities will only grow as the world tackles these issues or not. We are already seeing investors looking for more sustainable investments and we believe this trend will only strengthen in the future,” said Claire Molinari, Head of ESG at CareSuper.
