What about natural hazards?

Reporting on the business risks of climate change is increasingly becoming a mandatory part of doing business. This month, the Securities and Exchange Commission made such disclosures mandatory for publicly traded companies in the United States, following the lead of the European Union and California.

But climate is not the only aspect of the natural world being transformed by human activity.

Oceans, forests and freshwater supplies have also suffered. Although business leaders often don’t talk about these other parts of nature, they can have a major impact on the business world in ways we are only beginning to measure.

Will the loss of insects that pollinate crops reduce productivity? Could groundwater depletion threaten the data center boom? (More on that below.) Will policies to stop ocean pollution have an impact on how companies produce plastic?

Hundreds of companies have already committed to reporting their nature-related risks in their financial disclosures, and will roll this out in the coming months.

“We need to change the mentality that nature is something we can take for granted,” said Tony Goldner, executive director of the Taskforce on Nature-Related Financial Disclosures, which created the framework the companies use. “It is a risk that we must actively manage. And the resilience of nature supports the resilience of business.”

Here are a few ways companies are trying to map the complexity of nature and why it matters.

A practical money problem

Releasing more company information may seem like a small step. But experts say more transparency can help companies greenwash their environmental claims, as we reported in a previous newsletter, and help nature-conscious investors like New York State’s pension fund.

It can also make sense for the bottom line. According to a., half of the world’s gross domestic product is moderately or highly dependent on nature World Economic Forum Report 2020.

A few examples: Struggling aquifers in parts of Arizona could pose a major obstacle to the data centers being built there. The downfall of Europe bumblebeesthat pollinate crops such as strawberries and tomatoes will likely make it harder for supermarkets to source produce. A European law that creates obstacles for companies buying palm oil and other products from deforested areas, as my colleague Patricia Cohen has reported, could have significant consequences for companies based in tropical countries.

“Every business depends on nature, whether directly or through indirect connections,” says Sebastian Bekker, who is developing a tool to help assess nature-related risks for the United Nations Environment Program’s World Conservation Monitoring Center.

How it is done

This was published by the Norges Bank Investment Management, which is responsible for investing money from the Norwegian sovereign wealth fund with a trillion dollars. a report on nature-related risks a few weeks ago. The fund, created largely by profits from the country’s fossil fuel exports, is the largest in the world.

Snorre Gjerde, who works on the bank’s responsible investment strategy, told me that Norges Bank’s experience shows that understanding nature-related risks can be much more complex than just taking climate into account.

If the bank wants to find out how a company contributes to climate change, it is relatively easy to measure greenhouse gas emissions. “One tonne of emissions anywhere in the world has the same global impact,” he said.

The impact on nature is much more complex. First, he said, there is no global unit to measure nature. Second, a company’s impact on ecosystems will vary depending on the location of a factory or a farm. Drawing water from a healthy river is not the same as depending on a nearly dry aquifer, and deforesting a biodiversity ecosystem does not have the same impact as cutting down trees in an area that doesn’t have many species.

“How do you explain those nuances? “I don’t have an answer to that yet,” he said.

The fund owns about 1.5 percent of the entire global stock market, or “a small slice of the global economy,” Gjerde told me.

“Our mandate is to manage the fund for the benefit of current, as well as future generations,” he added. “In the very long term, our financial returns will therefore depend on sustainable development in economic terms, but also in social and environmental terms.”

A large increase in the demand for electricity

Something unusual is happening in America. Demand for electricity, which has been largely flat for two decades, is starting to rise.

Over the past year, electric utilities have nearly doubled their predictions for the amount of additional energy they will need by 2028. Peak demand is expected to grow by 38,000 megawatts nationwide over the next five years, the equivalent of adding another California to the grid.

Utilities are facing an unexpected explosion in data centers, an abrupt revival in manufacturing and millions of plug-in electric vehicles.

The stakes are high. If more power is not brought online relatively quickly, large parts of the country are at risk of power outages. according to a recent report by the North American Electric Reliability Corporation, which monitors the health of the nation’s power grids.

Ironically, the growing appetite for more electricity could also jeopardize the country’s plans to fight climate change.

To meet surging demand, utilities in states such as Georgia, North Carolina, South Carolina, Tennessee and Virginia are proposing to build dozens of natural gas-fired power plants over the next fifteen years. In Kansas, one utility does postponed the decommissioning of a coal-fired power plant to power a giant battery factory for electric cars.

Burning more gas and coal goes against President Biden’s pledge to halve global warming greenhouse gases by 2035.

“I can’t remember the last time I was this worried about the country’s energy trajectory,” said Tyler H. Norris, a former solar developer and energy systems expert. If a wave of new gas-fired power stations is approved by state regulators, he said, “it’s game over for the Biden administration’s 2035 goal of decarbonizing the economy.” — Brad Plumer and Nadja Popovich

Read the entire article here.