‘You don’t know what you’ve got till it’s gone’: Why nature matters to Canada’s GDP

This opinion was written by Daniel O’Brien and Ryan Riorda, and was published in the Globe & Mail on June 20, 2024.

Daniel O’Brien is partner, sustainability and climate Change, PwC Canada and a member of the Taskforce on Nature-related Financial Disclosures (TNFD).

Ryan Riordan is director of research at the Institute for Sustainable Finance, which acts as the co-convener in Canada for TNFD.

Much of our Canadian identity is connected to our vast natural landscapes and abundant wildlife. What we tend to appreciate much less is how dependent we are on nature for a thriving economy. This is to our detriment. When natural assets are degraded or destroyed, we’re all on the hook for the sometimes-staggering cost. A recent report in the U.K. found that deterioration of nature could lead to a 12-per-cent loss of British GDP, a greater economic impact than COVID-19 or the 2008 financial crisis.

Consider our forests. They have a very practical role in mitigating floods, something that clearly has economic value. Where forests are burned by wildfires, or recently clear-cut, water runs off unimpeded. The result, according to University of British Columbia researchers, is that “floods that used to happen only once every 10, 20, 30, 40 and 50 years are all becoming much more common.” Catastrophic flooding caused nearly $700-million in insurable losses in B.C. in 2021. And the total cost of climate-related disasters in the province that year, including floods, fires and heatwaves, has been estimated at $10-billion to $17-billion, with much of it falling on taxpayers.

Nature provides a multitude of services we depend upon. Wetlands do the work of expensive water-treatment systems. Trees prevent soil erosion, making farms more productive. Bees pollinate crops. Biodiversity provides countless novel chemicals for medicines and consumer products. Pristine views drive real estate values and draw tourism dollars. Forests, grasslands and wetlands can mitigate climate change by sequestering CO2. All told, according to an analysis by PwC, more than half of global GDP, or US$58-trillion, is materially dependent on nature. In Canada, wetlands alone are estimated by Institute for Sustainable Finance researchers to contribute roughly $225-billion annually in natural services.

But little of this value appears on any balance sheet. And without pricing this information in, the costs when nature breaks down are ultimately borne by society, often disproportionately by the Indigenous people and local communities who depend most on healthy ecosystems for their livelihoods.

This breakdown is already under way. Here in Canada, we have lost 80 per cent of original wetlands in and around urban areas, and onefifth of assessed species are at some level of risk of extinction in Canada.

Like Joni Mitchell’s song says, “you don’t know what you’ve got till it’s gone.” But it doesn’t have to be that way. We are becoming much better equipped to assess how our dependencies and effects on nature will materialize as financial risks for businesses that will pass on to the financial system via loans, investments, insurance, etc. Similarly, nature-based opportunities are emerging, where restoring and protecting ecosystems can reduce costs, protect assets and even create new streams of revenue.

A big step forward has been the release of recommendations by the Taskforce on Naturerelated Financial Disclosures, which will help companies around the world to assess the materiality of risks linked to the decline of natural assets and disruption of ecosystem services. This information will be powerful for aligning capital flows with nature-positive outcomes and protecting businesses, investors and society from the harmful consequences of environmental degradation.

Indeed, regulators already require public companies to disclose their material risks, and many are now disclosing their climate-related risks, such as the impact of carbon costs on their bottom line. And TNFD is the new means for standard setters and regulators to understand and communicate these risks and opportunities.

For business leaders, now is the time to assess your relationship with nature. Canada has reaffirmed its commitment to corporate disclosures on nature with its nature strategy and supporting legislation, announced last week. As regulators are considering mandatory sustainability reporting, the early adopters will be rewarded. There is recognition that this is difficult, but necessary, and that we can’t let perfect be the enemy of the good.

Nature reporting is the vital first step on a journey that will prepare our economy for the future and leave a better world behind for the generations that follow.