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The world’s next big challenge is becoming nature positive

25th August 2023 Dee Yang, Partner, McKinsey Sustainability 4 min read

Being nature positive means that the world interacts with nature in a way that’s restorative and regenerative rather than just extractive. Of course, that’s a broad definition, and people can think differently about how to achieve that. To me, for companies or sectors to be nature positive, they have to understand their impact on natural resources and ecosystems and if they’re using those resources in a way that’s sustainable and can be replenished.

The depletion of natural capital and the destruction of ecosystems highlight that the world has not invested enough in safeguarding a sustainable environment and represent fundamental losses to our collective “balance sheet.” Beyond the impact on those who depend on these ecosystems, these losses translate into impact on GDP and economic activities.

Climate change is generally discussed in terms of the carbon budget, but there isn’t just one way of looking at nature risk. Scientists are starting to form a consensus about the planetary boundaries that regulate the stability and resilience of the Earth system. There are nine: aerosol pollution, biodiversity loss, chemical and plastic pollution, climate change, forest cover loss, freshwater consumption, nutrient pollution, ocean acidification, and ozone depletion. The way to think about a planetary boundary is that it demarcates a safe operating limit beyond which livability will be affected.

Let’s take water as an example. People rely very much on freshwater usage, right? Once we diminish freshwater availability in certain locations, that creates tremendous impact on various ecosystems—not only for humans but also for plant and animal life. When an ecosystem is degraded, it can lose its ability to provide services that humanity depends on, such as healthy trees that sequester carbon and produce oxygen or healthy soil needed to produce food.

Being nature positive is a necessary part of achieving net zero because much of what is needed to sequester carbon is nature-based. For example, peatlands, wetlands, and tropical forests are all huge carbon sinks. McKinsey’s recent Nature in the Balance report highlights a 30 percent overlap between ecosystem conservation, restoration, or both and what’s beneficial for the climate. On the other hand, there are definitely things that are climate positive but nature depleting. So companies and societies have to learn to ask, what is their impact on ecosystems and how are they effecting change? These are trade-offs. Once leaders have the information that allows them to weigh the pros and cons of their actions, they can make more informed decisions.

Nature risk awareness has greatly accelerated. I would estimate that it’s about 12 to 18 months behind climate awareness. One trend to look at is the number of institutional investors that are making pledges for biodiversity outcomes; that number is really growing. Investor pressure is starting, and many central bankers have begun asking their financial institutions nature-related questions.

During this year’s UN Biodiversity Conference (COP15), there was a commitment to achieve “30 by 30,” which means protecting 30 percent of land and sea by 2030. You could compare this with the “Paris” moment on climate. Beyond 30 by 30, the Kunming-Montreal Global Biodiversity Framework, established as the main outcome from COP15, sets the course for corporations and financial institutions to embed nature consideration into their decision making, sunset harmful subsidies, and increase the transparency of their risk exposures, as well as their impact on nature.

The Taskforce on Nature-related Financial Disclosures, known as the TNFD, just released its final draft framework ahead of formalization in September 2023. It proposes how businesses can report and act on nature-related risks and opportunities and demonstrates that companies are starting to recognize that there is quite a risk exposure.

So what can sectors, industries, and companies do? The Nature in the Balance report identifies certain sectors that have outsize impact on some of the planetary boundaries. For example, agriculture and food systems have significant impact on biodiversity loss, forest cover loss, freshwater usage, and nutrient pollution. Many companies in the private sector are starting to examine their impact on freshwater usage, deforestation, and pollution. Once companies better understand their impact and reliance on ecosystems, they can start to devise an informed strategy on how to act.

Sometimes chief sustainability officers or others will ask us, “Is the world ready to talk about nature?” There are signals coming from the market, from corporations, and from international agreements. The world is ready to engage.

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