The Commonwealth Climate and Law Initiative (CCLI) partnered with the Taskforce on Nature-related Financial Disclosures (TNFD) to produce a new resource for board directors along with Chapter Zero, Competent Boards, and the Green Finance Institute (GFI): “Asking Better Questions on Nature: A Guide for Board Directors.”
This is the first in the TNFD’s new “Asking Better Questions” series, designed to help senior leaders uncover critical insights about their organisation’s nature-related dependencies, impacts, risks, and opportunities.
For boards, understanding how their company both depends on and impacts nature is essential for many reasons including:
- Complying with legal requirements and regulations;
- Future-proofing business operations;
- Improving investors’ confidence and raising capital;
- Increasing long-term financial performance.
The accelerating decline of nature and biodiversity presents strategic and operational risks to companies across sectors—from supply chain disruptions and regulatory exposure to litigation risk and loss of investor confidence.
In any business sector, nature provides a flow of inputs – known as ecosystem services, which contribute to value-generating activities for the organisation. For example, agriculture and food system businesses depend on healthy soils and on pollinators like bees to support crop production. Manufacturing of semiconductor chips depends on freshwater free from contaminants.
As a result of the increasing frequency, foreseeability and materiality of nature-related risks and opportunities, directors’ duties have been shown to include the identification and management of nature-related issues.
As a board member, managing an organisation’s dependencies and impacts on nature is part of core legal duties to exercise loyalty, care and diligence. It is also a vital part of a director’s role of driving forward a company strategy that ensures the long-term financial viability and resilience of the organisation.
The guide presents 12 key questions that directors can use to frame board-level discussions and what they should look for in management’s responses – enabling them to assess the adequacy of executive oversight of nature-related risks and opportunities. The questions are informed by interviews with experienced executive and non-executive board directors of leading organisations that are already considering climate- and nature-related issues.
CCLI provided input on how directors’ duties under existing corporate and securities laws intersect with nature-related risks.
1. Fulfilling your director’s duties to manage your organisation’s nature-related risks starts with pinpointing how the business relies on nature and how it impacts on nature, and where this is happening.
2. Dependencies and impacts on nature from your organisation’s current and future operations both pose sources of risk for your business, your shareholders and stakeholders.
3. These include risks stemming from an organisation’s dependencies on natural systems (such as freshwater, pollination, or healthy soils) as well as risks linked to its impacts on nature (such as pollution or land use change).
4. Nature-related industry standards and regulatory requirements beyond climate are emerging quickly. Even where no specific disclosure regulation for nature exists in relevant jurisdictions, directors should consider whether they need to disclose financially material nature-related risks under other applicable laws and whether to voluntarily disclose nature-related risk (in response to consumer, market or investor expectations).
Jasmin Fraser, Lawyer – Corporate/Finance, Climate and Biodiversity, Commonwealth Climate and Law Initiative:
“The conclusions from recent legal opinions are clear: directors’ legal duties of care and loyalty require them to identify and manage material nature-related risks. While management may be closer to the detail, this is no excuse for boards to remain at arm’s length. Directors need to ask the right questions, challenge assumptions, and ensure action is taken where needed. This guide is an essential tool for boards to engage meaningfully with nature-related risks and opportunities, providing strategic insight to create value and strengthen company resilience.”
Vicky Moffatt, CEO, Chapter Zero: Vicky Moffatt, CEO, Chapter Zero:
“Our members tell us they are unsure how to approach nature; many boardrooms have given focus to climate, but many do not see nature and climate as intrinsically linked in the way that they should be. The nature question comes into sharpest focus for Risk Committees given that we are pushing our planet beyond its boundaries. From this perspective oversight for the reliance and impacts on nature should be central to the question of organisational resilience. This guide enables non-executive directors, boards and their management teams to ask all the right questions to ensure this oversight is in place.”
Helle Bank Jorgensen, CEO & Founder, Competent Boards:
“No business is immune to nature risk. We are proud to collaborate with the TNFD on this guide, which equips directors with the critical questions needed to safeguard long-term value in a world where the health of nature and the resilience of business are inseparable. This is a timely and practical resource to help boards fulfill their duty of care and engage confidently with stakeholders on nature-related issues.”
Rhian-Mari Thomas, CEO of Green Finance Institute:
“Last year, the GFI published a report alongside the Universities of Oxford and Reading, UNEP-WCMC, and NIESR, demonstrating that nature risks could decrease the UK’s GDP by up to 12% by the 2030s. Swift and coordinated action from businesses can embed resilience, build back this growth, and unlock additional commercial opportunities. For board members, being conversant in these risks and opportunities is an increasingly critical and core requirement for informed and responsible stewardship. These questions, developed by the TNFD, GFI, Chapter Zero, Competent Boards and CCLI, offer a practical guide for those who wish to get started.”
Tony Goldner, CEO of TNFD:
“In the 18 months since the publication of the TNFD recommendations in September 2023 over 500 organisations and over USD 17 trillion in AUM are now underway with voluntary assessment and reporting of their nature related issues aligned to the TNFD recommendations. With data and analysis now being generated, it is critical that boards and individual board members upskill themselves to be able to contextualise nature-related information as a key input into their decision making. This guide is grounded in insights and wisdom from experienced board directors already taking an integrated approach to climate and nature issues.”