Nature and biodiversity are becoming key factors in financial decision-making. Accountants, especially analysts, have a crucial role in integrating nature-related risks and opportunities into financial planning, risk management, and business strategy.
Organisations are increasingly expected to understand and disclose their dependencies, impacts, risks, and opportunities related to nature. Here is an overview of how analysts can support their organisations in navigating these challenges.
The role of analysts in nature-related accounting
Analysts oversee the financial health of organisations, supporting risk management, budgeting, forecasting, financial modelling, and decision-making. As sustainability and nature-related concerns gain prominence, analysts must integrate these considerations into their responsibilities. Investors, regulators, and stakeholders now demand transparency in how businesses manage nature-related risks.
Here is a high-level overview of how nature connects with the typical responsibilities of an analyst.
- Risk management: Identifying how nature-related risks impact financial performance and stability.
- Planning and analysis: Integrating nature-related risks and opportunities into budgeting and financial forecasting.
- Supporting decision making: Working with relevant experts to provide insights to senior management on nature’s financial implications, such as risks and opportunities; identify how this may impact performance trends; and how to make a business case for 'nature'.
- Performance monitoring: Collaborating with experts to track progress against nature-related goals.
Five key actions for analysts to get started
1. Understand your organisation’s relationship with nature
To analyse the financial impact of nature-related risks and opportunities, analysts need to understand their organisation’s relationship with nature. Reviewing any existing nature-related materiality assessments is a crucial first step. This helps identify key dependencies, risks and opportunities, which can then be factored into financial modelling and reporting.
- Familiarise yourself with fundamental nature-related concepts.
- Assess how nature affects business operations and financial performance.
- Identify sectors with high nature dependencies and associated financial risks.
2. Identify relevant experts to help determine material nature-related issues
Analysts need to integrate material nature-related risks and opportunities into an organisation’s financial, commercial and/or operational planning and analysis, to support more informed decision making and better risk management within operations and across the value chain. However, nature-related issues are complex, requiring collaboration with sustainability teams, risk managers, and external experts.
Analysts should engage with subject-matter experts to:
- Determine which nature-related risks and opportunities are most material to the organisation.
- Understand regulatory expectations and emerging disclosure requirements.
- Apply frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) LEAP guidance for identifying material risks.
Analysts should be aware that nature may present either a risk or opportunity in the future even if the prospect of this currently seems unlikely. Nature may present a material risk due to the context in which an impact or dependency occurs. This is particularly relevant in terms of affecting consumer behaviour, the expectations of financing organisations and investor request for information.
3. Assess nature-related data requirements
As sustainability reporting becomes increasingly mandatory, particularly concerning nature-related issues, the role of analysts in the accountancy sector is evolving. Professionals must assist senior managers and report preparers with the necessary information to manage and disclose nature-related issues effectively.
The demand for high-quality nature-related information is growing, and accountants' expertise is crucial in meeting this need.
To enhance the quality of data used in nature-related disclosures, analysts need to understand its intended use, which will determine the precision and volume required.
Collaboration with other experts is essential to identify relevant data and metrics. Familiarity with the nature-related assessment and reporting process will enable analysts to support credible and robust disclosures.
- Guidance on identifying nature-related issues: Refer to chapter 4 in the full guide, which outlines the TNFD LEAP guidance. The first three stages of this guidance provide a comprehensive framework for data collection and analysis.
- Overview of nature-related disclosure frameworks and standards: Refer to chapter 4 for potentially relevant frameworks and standards.
- Analysts should focus on the organisation's materiality lens to identify data needs and engage with various teams to assess existing resources. Reviewing current nature-related data may reveal valuable information, such as impacts and controls.
- Organisations already involved in climate-related disclosures can leverage existing processes to identify and report on nature-related aspects.
Effective collaboration and a thorough understanding of the requirements will ensure that nature-related disclosures are comprehensive, credible, and useful for stakeholders.
4. Integrate nature-related information into decision-making
Analysts connect finance, operations and sustainability. They are able to provide data-driven insights that shape strategic decisions, ensuring nature-related considerations are embedded in:
- investment analysis and capital allocation;
- budgeting and forecasting; and
- risk management frameworks.
By translating nature-related risks into financial terms, analysts are bale to support the business's management team to prioritise actions that mitigate risks and capitalise on opportunities. Clear, actionable insights improve decision-making at all levels.
5. Incorporate nature into performance monitoring and target setting
Organisations are setting nature-related targets alongside financial and operational goals. Analysts must monitor these targets and integrate them into performance tracking systems.
- Develop key performance indicators (KPIs) for nature-related goals.
- Use financial modelling techniques to assess the financial impact of nature-related risks and opportunities.
- Align nature-related performance tracking with business objectives and regulatory requirements.
Analysts play a critical role in integrating nature into financial planning and decision-making. As sustainability regulations evolve, finance professionals must proactively adapt to these changes. By understanding nature-related risks, collaborating with experts, and leveraging data analytics, analysts can drive more informed financial decisions that balance profitability with sustainability. Accountants must stay ahead of emerging trends to ensure businesses remain resilient in a rapidly changing landscape.