Boardrooms have a lot to learn about trees

In today’s newsletter our Sparklines columnist looks at whether financial companies are considering the risks and opportunities that come from nature. You can also read and share this story on Bloomberg.com. For unlimited access to climate and energy news, please subscribe.

By Nathaniel Bullard

Most financial firms are failing to see how the natural world impacts their business, but they’re about to wise up — quickly. 

That’s one conclusion you could make from the latest financial disclosure report from CDP. For years the non-profit has collected data on how banks, insurers, asset managers and asset owners approach the measurement of risks from climate change. Last year it asked companies to do the same for nature-related problems from commodity-driven deforestation to water insecurity.

CDP findings show threats from climate change receive board-level oversight in more than 90% of its surveyed firms, but less than a third of financial institutions give concerns about forests and water the same level of attention. And while this gap is important, a sense of direction means more: Another one-fifth of CDP’s respondents said they plan to extend board-level oversight to nature-related challenges within the next two years.

If things move at that pace, disclosure on nature issues could be almost as common as climate reporting in less than six years. Nature, in other words, could be the new climate when it comes to priorities for the world’s biggest financial institutions.

While climate- and nature-related risks are exactly that (risks), CDP’s respondents do not see them as only downside.

More financial institutions view climate, forests and water as opportunities than risks in their portfolio. The survey found 10% and 13% of companies identified risks with forests and water, but 13% and 15% identified opportunities with those categories, respectively.

Financial institutions are not fully using their voting rights on nature or climate at the moment, to the responses collated by CDP. Three-quarters of financial firms exercise their shareholder voting rights on climate topics today. Only 40% do so on forest issues, and 39% on water.

That said, they are planning to focus more on this in the future: Financial institutions expect to increase their voting rights exercise on nature issues by 28% in the next two years. That would pull bring their participation close to today’s climate voting.

One of the biggest factors that will drive more action on forest and water risks is having more knowledge about natural systems in the boardroom. 

CDP found that 68% of boards disclose at least one member “with competence for climate-related issues,” but only 24% have at least one member with knowledge on how forests and water relate to their business. CDP says that “the majority of FIs [financial institutions] that do not have this competence on their board indicate that they see the issues as important, but not an immediate priority.”

Those priorities may get reordered. If financial institutions expect to significantly exercise their voting rights on nature-focused resolutions, then surely they will prefer to have that expertise in-house.

Moreover, the number of banks and insurers present at the UN Convention on Biological Diversity conference in Montreal at the end of last year shows the financial community is starting to move nature much higher up their agenda. The meeting, which produced a deal to protect a third of Earth’s land and water by the end of this decade, has the potential to shake up the regulatory landscape for the finance industry.

All of this is a call to action for the world’s financial institutions’ boardroom. Nature-related issues are both a risk but also, for the quickest movers, a potential opportunity. And capturing that opportunity, from the boardroom down, will begin with staffing decisions. If nature is the new climate, then it requires matching expertise in the boardrooms of major organizations.

Millions of families are struggling in hot homes across the UK and Europe, the world’s fastest-warming continent due to climate change. Heat waves in the region are becoming more frequent and intense, creating livability issues in cities that have long gotten by without air-conditioning. Many people in inadequately cool housing are struggling to sleep, work and relax, and some have little recourse — only the promise of hotter days ahead.

Air flow is one way to cool a hot house. Good ventilation can go a long way. And sophisticated tactics can improve the efficiency of air conditioning or central heating systems, depending on season and climate.

UK steel industry faces climate levy. After the UK government made it cheaper for companies to emit CO2, Britain’s steel exports to the EU now risk being hit with a climate surcharge.

Fossil fuel is still getting subsidies. Despite repeated government pledges to cut back, a new report finds that subsidies to fossil fuel companies  surged to a record $1.3 trillion last year.

A wildfire near the Greek capital that started on Tuesday continued to destroy parts of the forest in Mount Parnitha, threatening more homes as the wind is expected to get stronger through the day. 

The fire in the national park north of Athens roared back overnight and could get worse as wind speeds are expected to pick up from about 10 a.m., a spokesman for the fire service said in an interview with Mega TV. Smoke is covering much of Athens, making it hard for people to breathe even in the center. 

Meanwhile, Turkey kept most shipping traffic through the Dardanelles Strait suspended for a second day because of wildfires in the area, leaving hundreds of vessels unable to move between the Black Sea and part of the Mediterranean Sea.

In other weather news:

Atlantic: Tropical Storm Franklin could grow into a Category 2 hurricane as it travels over the Atlantic. Some weather models show the storm eventually moving into Nova Scotia, which was hit by a hurricane a year ago.

Pacific: Another tropical storm is meandering around the Pacific east of the Philippines. 

Central US: The severe heat across the Midwest and upper Great Plains will start to relax Friday into the weekend. Texas, however, will not be joining the cool out. The high in Dallas on Thursday will be 107F and Sunday’s high is forecast to be 106F. 

With contributions from Brian K. Sullivan, Onur Ant, Taylan Bilgic, Sotiris Nikas

This week Zero revisits Bloomberg Green reporter Akshat Rathi’s story on Form Energy, a startup that has raised $900 million for pioneering long-duration batteries. Listen to the episode and hear how the company got its start and why their technology could end up replacing coal plants. Subscribe to Zero on Apple, Spotify, or Google to get new episodes every Thursday.

Sustainable Business Summit New York: Join us Oct. 5 as we bring together business leaders and investors for a day of solutions-driven discussions and community building that will drive innovation and scale best practices in sustainable business and finance. Register here.

Follow Us