Beyond Carbon: Why Nature and Climate Risk Are Redefining ESG

Keeshendra Kandiah
May 28
2 min read

As global frameworks evolve, businesses must prepare for a more holistic environmental lens—one that includes biodiversity, water, land use, and systemic resilience.

For years, the ESG conversation has focused heavily on carbon—understandably so. Climate change, driven by greenhouse gas emissions, remains the defining challenge of our time. But a new wave of sustainability priorities is rising fast: biodiversity loss, deforestation, water risk, and land degradation are now seen as material issues—not just for nature, but for business continuity and economic stability.

As global frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) gain traction, and Scope 3 pressures deepen across supply chains, organisations must expand their environmental lens. The next ESG frontier is not just about measuring tonnes of carbon—it’s about understanding how nature and climate risk are interconnected, and what that means for strategy.

Climate Risk is Broader Than You Think

Most businesses still equate climate risk with emissions reporting or carbon offsetting. But there are two distinct, and equally urgent, dimensions:

Transition Risk: Linked to policy, regulation, and market shifts as economies move to net zero.

Physical Risk: Disruptions from floods, droughts, heatwaves, and biodiversity collapse.

Both types of risk can derail operations, impact asset value, and threaten supply chains. And both are amplified by nature degradation.

Nature is Financial

Ecosystem services—pollination, soil fertility, water purification, and climate regulation—are not abstract environmental goods. They are real economic inputs, especially in sectors like agriculture, manufacturing, and infrastructure.

Yet most corporate strategies treat nature as external or intangible. The result? Exposure to hidden dependencies and liabilities, often buried in supply chains or overlooked in boardroom risk maps.

Why TNFD and Scope 3 Matter

The rise of TNFD is a clear signal: nature-related risk is being pulled into the ESG mainstream, much like TCFD did for climate. Paired with the growing pressure to disclose and act on Scope 3 emissions, companies must now account for what lies beyond their immediate operations—upstream and downstream.

This shift requires a new way of thinking: ESG not as a dashboard of emissions, but as an interdependent system of risk, value, and resilience.

A Strategic Way Forward

To prepare for this next frontier, businesses should:

Map Nature Dependencies: Identify how your business relies on natural systems, from raw materials to ecosystem services.
Start with Climate Risk Scenarios: Use scenario planning to assess physical and transition risk over time, and integrate these into strategy.
Think in Systems, Not Silos: Understand how climate, nature, and supply chain risks intersect. Addressing one in isolation is no longer enough.
Track Emerging Frameworks: Familiarise your teams with TNFD, SBTN, and science-based targets for nature—so you can respond early and credibly.