For centuries, livestock farmers in Aso, Japan, have gathered each spring for one purpose: to set fire to the region’s famed grasslands.
The controlled blazes are designed to chew up dead grass and fertilize the soil, revitalizing a landscape home to several rare plants and animals. But in recent years, the fires have become less common, in part because of concerns they could spiral out of control and damage nearby property.
That is now changing thanks to Japanese insurer MS&AD. Last year, the company began offering liability insurance for Aso’s farmers, giving many the backing they need to resume the springtime burns.
“Grasslands are diminishing all over Japan,” says MS&AD sustainability expert Hiroko Urashima. “This is a precious ecosystem. We need to take care of it.”
MS&AD is one of the early adopters of a new set of recommendations that help companies chart their environmental footprint and gauge how much their operations rely on the natural world.
The recommendations, developed by the Taskforce on Nature-related Financial Disclosures (TNFD) and supported by the United Nations, can, for example, show banks how much their lending contributes to deforestation or help chart the value of freshwater it siphons from a river.
UNEP News
The goal of the recommendations, which are voluntary, is to shift global capital into activities that protect and restore nature, which is in peril around the world.
Since the launch of the TNFD recommendations in 2023, more than 300 companies, including some of the world’s biggest banks, have committed to using the guidance. Observers say their uptake is crucial for countering a nature crisis that is seeing an estimated 1 million species pushed towards extinction.
“Nature underpins human civilization. If it collapses, the consequences would be devastating,” says Elizabeth Maruma Mrema, deputy executive director of the United Nations Environment Program (UNEP) and a senior advisor to the TNFD. “These recommendations are an important step, led by market players themselves, in creating a global economic system that safeguards nature.”
Fifty financial sector companies, including insurer MS&AD, participated in a trial run of the TNFD recommendations led by the UNEP Finance Initiative (UNEP FI), which brings together banks, insurers and investors in an effort to create a more sustainable global economy.
Among the early users of the recommendations is the Netherlands’ Rabobank, which specializes in lending to food and agriculture companies. After a deep dive into its financing activities, the bank found that 85 percent of its portfolio was highly dependent on nature, with many of its borrowers heavily reliant on freshwater.
Rabobank is now examining the extent to which its lending contributes to pollution, land use changes and the over-drawing of water, says Marie-Claire Franzen, its Lead for Nature. While it is early days, the bank is exploring how it could further steer its portfolio on nature and help farmers make better environmental choices.
The new TNFD recommendations, she says, are a “progressive approach that speaks to all sectors and can be adopted in a pragmatic way” she says.
On the brink
Every year, governments and private companies invest US$7 trillion in activities that harm nature, according to UNEP’s State of Finance for Nature report. The list of transgressions includes everything from clear-cutting forests to pumping out planet-warming greenhouse gasses. That is contributing to a rapid decline in biodiversity; one in eight species is now on the path to extinction. The World Economic Forum has identified biodiversity loss and ecosystem collapse as one of the five most-severe risks facing humanity over the next decade.
For companies, the biodiversity crisis is a ticking time bomb. Nearly all businesses ultimately rely on either natural resources or natural services, like the pollination of plants by animals, for their continued operation.
The TNFD outline how firms should report their environmental footprint to investors and the public. The hope is that increased scrutiny will push companies to stop damaging the natural world and, eventually, start restoring what has been lost. Some 40 percent of landscapes are classified as degraded and reviving those areas is a key theme of this year’s World Environment Day, an annual celebration of the Earth hosted by UNEP.
Backers hope regulators will eventually roll the TNFD recommendations into national-level accounting standards, a move that would make them mandatory.
There is a precedent for that. In 2023, the International Financial Reporting Standards Foundation, a global body that sets accounting rules used in 140 jurisdictions, developed a standard for climate change reporting.
