Maria Rampa:Hi I’m Maria Rampa and welcome to this episode of Engineering Reimagined.

For many businesses and industries, it’s never been more important to indicate which direction their moral compass points, in the fight against climate change.

In an effort to increase transparency, and respond to pressure from investors and consumers, some organisations are now seeking to go beyond ‘net zero carbon’ to become ‘nature positive’. This involves a complete assessment of their biodiverse credentials and overall impact on the environment, to actually improve the state of nature.

In this episode of Engineering Reimagined, Aurecon's Queensland Sustainability Leader, Jessica Holz, speaks with Adrian Ward, CEO of Accounting for Nature, about their methodology for measuring environmental health, understanding that accounting for our impact on nature is an opportunity to go one step further in caring for our planet.

Jessica Holz: So we met a very long time ago at the University of Queensland when I was studying engineering, but for my electives, I was doing business management in a carbon constrained world. And I also think we did carbon accounting, as well, back in the mid-2000s. But since then, I've been really interested in Accounting for Nature's work. Well, tell us a bit about that.

Adrian Ward: Accounting For Nature was a not-for-profit that was established about a decade or so ago. Well, actually, the idea was established back about a decade ago, the not-for-profit's only about three years old now. And I was the inaugural CEO to take over. But originally, the idea of Accounting for Nature goes way back to about 2008, when the Wentworth Group of Concerned Scientists had this idea that we should also measure the state of the environment alongside our normal financial indicators, such as GDP, because we really don't understand the state of nature and whether the trend in its condition is going up or down, or the money that we pour into it from a government perspective, or from a business perspective, is actually having any desired effect. To date, we haven't had a lot of metrics to actually measure it in a standardised way in terms of environmental health. And when I talk about environmental assets today, I'll be talking about things such as soil, native vegetation, our fauna, waterways, such as rivers, also our marine and coastal environments.

Jessica Holz: So Accounting for Nature has a robust, scientifically verified methodology for measuring environmental health and these assets that you just spoke about. What does this involve? And how does this system work?

Adrian Ward: It revolves very much around, very similar to how we actually do carbon methodologies at the moment. In that, there is a scientifically robust way to measure the condition of these environmental assets out there in the greater world. So we've got many wonderful scientists, you know, field ecologists who go out and they measure the changing condition of these environmental assets for assessing environmental impact, for statements, for assessing, for example, carbon offset projects. So Accounting for Nature's role is basically to bring together those methods, and standardise them to produce something called an ECON, which is environmental condition index. And that's a score from zero to 100, where, if you can imagine zero would be concrete and 100 would be your pristine state of nature. And if you look across the farm, you can basically take those scientific methods which have very complex array of indicators, depending on the asset type, you can imagine that measuring water quality, or the condition of rivers is very different to measuring for instance, koalas or native vegetation. But we can roll all those complex indicators into one score. And that makes communicating the scientific condition a lot easier, because intrinsically people kind of understand that 100 is probably good, zero is probably bad. Where do I sit on the scale? This first measurement that I do and then five years’ time when we measure it again, have we taken our ECON from 20 to a 40, for instance, and actually improved the condition? Off the back of that, people can then make credible environmental claims in the marketplace.

Jessica Holz: So can you tailor the environmental indicators, depending on the property holding or the type of holding?

Adrian Ward: Yeah, absolutely. Nature is very, very complex. And therefore. it requires a real flexible approach to measuring the state of your environmental assets on your farm or in your forestry division or fishery/ And so that flexibility means that we largely operate with our market proponents in a demand driven way in that they often bring their methods to us to accredit and Accounting for Nature runs an independent science accreditation committee, a lot of CSIRO scientists on that particular committee, and they will look at the methods that our proponents will bring to us and assign a confidence level according to how robust or scientifically credible that method is.

Jessica Holz: Is there an application for its use in urban settings?

Adrian Ward: Urban environmental accounting is quite tricky, actually. The peri urban is something that we're working through from a design perspective and adding to the framework over time. It's something that's also come up under this big initiative called the Task Force For Nature Based Financial Disclosure, which assigns different realms and one of the realms is urban. And, so it's something that we're looking at very carefully.

Jessica Holz: And interesting you should bring that up because the Taskforce on Nature-related Financial Disclosures is of great interest to us here at Aurecon. And I've seen it as this progression really from the Taskforce on Climate-related Financial Disclosures. And I'm just interested in your thoughts on that, and whether you see it as the next legislative reporting mechanism in the future.

Adrian Ward: So TNFD is the sister initiative to the TCFD. If you talk to fantastic organisations, such as the Responsible Investment Association of Australia, they'll verify the interest amongst their members from the investment side of the equation in this and the TNFD has also been driven by industry, by investors. I think the last count is that they had about $18 trillion of assets under management amongst the members to the TNFD forum. So it's massive, it's driven by the Black Rocks of the world, and others, there's a few governments involved, including the Australian and French governments. It's a complex thing, the TNFD will not be finished until the end of 2023. And they’re going through a very careful process of working out what how you actually do it. But it's measuring nature to make credible green claims so you're not crossing those boundaries, around false and misrepresentation of what you're doing in your supply chains, or on your property. It's actually really challenging. And so that task, it's not simply just stepping up from the TCFD to a TNFD, it’s actually taking a lot more thought around how we actually assess for nature risk and nature opportunity in our value chains, which are often very complex. A lot of the organisations we work with, who are who are very interested in also informing the process of forming up the TNFD over the next 18 months. So yeah, huge amount of interest in TNFD. And I think the market is probably running ahead of itself potentially in many ways, before this actually gets straightened out.

Jessica Holz: Getting quite excited about it.

Adrian Ward: Very excited.

Jessica Holz: To many this idea of valuing nature, when previously, we've just drawn down on this natural capital and it's been this kind of common good that we've exploited, is a really new concept for a lot of people. So it's quite interesting that the market’s pushing forward with this idea when perhaps we still don't fully understand it, or a lot of players don't fully understand it. What role do you think that engineers or specialists or designers can play in getting the market to understand this better and understand the role of nature and TNFD reporting and Accounting for Nature?

Adrian Ward: I think the TNFD is fantastic, because it sets a framework into a way that we start to think about nature systematically and particularly across the value chain for companies and from a corporate disclosure point of view. And that's really critical, particularly in the context of a lot of the stuff that's happening with greenwashing. Barely a day goes by at the moment where there's not a mention of greenwashing in the newspapers. But yeah, we don't want to run too fast on this and so I think the real role service providers, such as Aurecon can play is actually just taking a step back and working with clients to say, well what is biodiversity? Which is always good question, because I think biodiversity can be a very wide thing. So breaking that down and the TNFD talks a lot about realms and environmental assets. In the first instance, if you look at your business and you look at your value chain that your business plays into, where are the impacts and dependencies? Where are the touch points for your business and nature? Where do your operations directly, indirectly touch rivers, where do they touch populations? And then what are the material things that you think you should be measuring from that perspective? That's probably the best place to start. Down the track, when we start thinking about making claims, and requiring to have scientifically credible metrics, that's when Accounting for Nature plays a role. And so when you're going out to the market, you know you've got an environment account that backs up what you're saying, I've got a sustainable farm, because of this reason, because I know I've improved the condition of native vegetation or the rivers that are on my property or in my supply chain. And I've gotten an environmental account from Accounting for Nature to back that up that's been independently verified and certified. And it sits beneath it, just like we have carbon accounts, which sit beneath carbon accounting. And also going a step further, is to then look at the nature opportunity side, which is where nature-based solutions, buying carbon offsets from projects that have got verified, environmental care outcomes through frameworks is very important. And also looking at cultural condition from a traditional owner perspective is also critical. So look, I think, take a step back, take it slow, try and work it out. We know there's a lot of people who are still a very world leading, but there's also a lot of others who are still catching up on the climate side of things and trying to work out what climate risk means for them, let alone nature risk, which is again, as I said, very complex to work out.

Jessica Holz: Casting your mind forward, if we had a market that better understood nature risk and had a better grasp on accounting and understanding the effects of projects, could that potentially make certain projects such as renewables projects, unviable?

Adrian Ward: I think it would feature in decision making. Yeah, look, it may do in some respects. But it can also inform how you mitigate those risks. So you still might, not be unviable, but it points to some of the things that you might have to do if you want to make claims. Well, if you want to make sure you can say, this is nature positive, or at least, there's no harm being done in the first instance. Environmental accounting in general, which has been prescribed by the UN stands for environmental economic accounting, adopted by the UN Statistical division, and Australian Government advocates, it's an account as a way to inform, and therefore manage. The old mantra is that you can't manage what you haven't measured? Well, that's very true. And so if you measure it, and you find out some things that are not great, at least you can have a chance at managing them before they become a problem. And that includes for renewable energy projects, and potentially citing those bird populations. Unless you measure it in incredible way, you can't manage that risk, or capture those opportunities.

Jessica Holz: How can technology play a role in environmental accounting? And nature conservation?

Adrian Ward: Yeah, so technology is critical. The old days of having field ecologists go out and wrap their arms and measuring tapes around a tree are still there.

Jessica Holz: Counting what's in your hoop?

Adrian Ward: Yeah, that's right. Your hoop, your quad. But it's expensive. And if we're going to do this at scale, particularly, and we're going to mainstream it, under the TNFD and other systems, we need a cost-effective way to do that. And so, bringing sensors and drones with thermal imaging and Lidar and bringing obviously satellites earth observation and a vast array of technology devices and then integrating them to produce environmental accounts is absolutely critical to mainstreaming this. You don't need to sacrifice scientific credibility. You can have really high confidence methods and underpin those with technology solutions to actually get both, high quality environment accounts that are cost effective to do, and particularly at scale.

Jessica Holz: You mentioned biodiversity before and how it's something that's not understood. Just for our listeners who might not be familiar with that term. Could you give a quick explanation?

Adrian Ward: Biodiversity is actually a very wide term. And it, as the name suggests, bio being a life form and diversity, diversity of life forms, is that when we look at the landscape, you could look at it from a biodiverse rainforest, for instance, which we know has got many, many species, plants, animal, microbe, in the water, in the land in the soil, up in the trees, and that would be biodiverse in that, the life form has been so spread, we have low incidence of diseases, maintains genetic diversity, and therefore minimises the problems that you might have. On the other side, where you might create, for instance, a monoculture landscape where you might have one or two species, which often promotes disease, and you lose a lot of your genetic diversity in plants and animals. And so, biodiversity basically, is what we aim for. And internationally, there's targets set by the UN, such as 30 by 30 targets, sustainable development goals, and various others, that help promote this need for biodiversity, for the preservation of ecosystem services in particular, and the preservation of the species. And we know that a non bio-diverse landscape, you've got much greater chance of losing plant and animal species because they don't cohesively work together as a system. So that's biodiversity. But from a measurement perspective, biodiversity actually gets really complex, because we often get a lot of organisations come to say, we want to measure biodiversity. And then the question is, okay, so what do you want to measure for biodiversity and this is where the TNFD really helps, as we can break it down into different environmental assets, native vegetation, so what unique plants, that you might have animals, fauna, biodiversity of rivers, biodiversity in soil, soil microbes, all those sorts of things. And when organisations then go, Well, okay, what do I measure? Well, you measure what is material to your organisation. So what biodiversity do you have on your farm? What aspects? Do you have this native vegetation or this fauna species or whatever? And you work out, what are the most important things to measure from, not only an ecological perspective. So it might be, for instance, your threatened species, but it might also be what's material reputationally to you. Are you restoring a landscape? Then you should measure those species that you're trying to restore as part of that landscape. So the challenge is in natural capital, environmental accounting, is to try and work out what you measure and for what purpose, whether that's nature risk disclosures, under TNFD, or maybe its nature opportunities, such as carbon plus nature-based solutions, carbon offsetting. Because you can't measure everything. You can't measure every aspect of biodiversity, it would simply cost you too much, currently at least. So you’ve got to work out what are the key things you need to measure.

Jessica Holz: Could those measurements ultimately lead to the valuation of environmental indicators or the valuation of biodiversity?

Adrian Ward: 100% yeah, and there's a lot of work being done around commercialisation or monetisation of unitisation of positive improvement to nature and environmental assets. We still have a long way to go because there's a lot of challenges. There's a big opportunity to build on the work and the lessons learned through carbon markets, particularly from a monitoring, reporting and verification perspective.

Jessica Holz: I guess that links back to that idea of greenwashing that you raised before and the prevention of greenwashing. We're seeing this heightened mistrust in the market as there's more pressure put on governments, corporations to reach those net-zero targets. So it's a significant barrier to progress.

Adrian Ward: Indeed, it is. Climate positive is the current buzzword. Nature positive is the term that we're starting to hear. The question is, what makes nature positive or a net gain in biodiversity? What constitutes those things? The ACCC just strengthened its guidelines on greenwashing. And I think we all want to be cognisant that we want to do this properly. And we want to avoid some of the mistakes that we've had integrity around measurement, and an issuance of credits for the sake of the market, because we're never gonna get to a market of integrity without solving some of those challenges that we've gotten, stepping it out in a systematic way.

Jessica Holz: I've always thought, working in sustainability for as long as I have, but the thing I found most interesting is trying to calculate that difference. So what's your baseline? What are you trying to be better than? So if you're nature positive, or climate positive, or any kind of sustainability metric, you're always justifying this reference case.

Adrian Ward: That's right, and attributing your management action back to that positive change in environment condition. So linking those together. So you can actually claim the benefit, whether that’s through a monetised way, or maybe that's just putting something up on the website, or in your ESG report to say, we've planted all these riverbank vegetation and it resulted in clearer water quality in a river and better river conditions.

Jessica Holz: So the World Bank has forecast that biodiversity loss could cause $2.7 trillion loss of global GDP by 2030. So is this a way to save our biosphere by saying, hey, developers, owners investors, we need you to monetise these natural systems and these environmental indicators and make it part of your assets and part of your economy?

Adrian Ward: Look, I think in part, yes. So, we need to be cautious because if we run away and we monetise everything it can lead to, as we find out all the time, perverse outcomes in the market. And public policy failure. Just measuring the condition of nature in the first instance, to bring it next to the financial balance sheet is a good first step, because we can see what is happening to nature at the expense of making a profit. The way the TNFD sets it out, is to actually disclose those risks initially, and then go down the measurement path, but at least being aware and cognisant of where our impacts are on nature is of critical importance. So that's the first thing. And then, as we carry things forward, naturally companies will find ways to monetise this thing. And turn it into a competitive advantage around nature positive. And hopefully, that leads to having investment pile into, restoring landscapes and conserving landscapes. But ideally, not at the expense of course of productivity and financial returns. And I think there's a lot of investors are seeking out there that initially, what they want to do is they want to have disclosures, so they can tick a box around nature risk and that they're not buying into an investment or a product that comes from a property or a farm that's just trashing the environment. So I think that's really important from a risk disclosure. And then let's see where the opportunities actually lie after that. And although there's been a huge amount of research in terms of what the opportunities are, it's still very high level, and we're still yet to see how natural capital is actually monetised. Whether that's unitisation, whatever, in a scaled way, so we're starting to see some really good examples of that in Australia and overseas on integrated farm management with sustainability and fencing off those riverbank vegetation zones, and putting off stream watering points for cows. But how that actually translates into a scaled investment business case proposition will be interesting. And then going back to it, how that saves the world or cuts that loss that the World Bank is forecasting, will be interesting to see. And I still think we're seeing the climate side catch up on that respect to, but systematic change is happening, but it does take a little bit time to actually realise those gains.

Jessica Holz: So you recently attended the World Economic Forum's Davos conference, the first meeting of Global Climate Leaders since COP26. So what were your top takeaways?

Adrian Ward: My top takeaway is that there is a huge amount of interest in climate and nature. I think a lot of organisations are still grappling with what it means, they're grappling with key terms such as biodiversity, such as natural capital, what that means and what they do next. I think the TNFD is a really good first step in building a framework to disclose this stuff and getting awareness at least on the table around nature and biodiversity. Back to your earlier question around whether this will be regulated, from a government perspective, there were discussions at Davos to regulate the TNFD, or other biodiversity disclosure sort of frameworks, impact frameworks, at a national level in several countries, including Switzerland and New Zealand. But I think it'll take quite some time for that to happen. So the regulatory space will move very slow on this. It would be brilliant to have it in Australia, alongside NGER, for example, which is our National Greenhouse and Energy Reporting Act, how we report carbon and energy use. But biodiversity, it'll come but it'll take some time. I think in the meantime, Davos and key events such as that, who really speak to the business community, because they're very industry centric, is that they will talk this stuff over, and the awareness will be generated, and it becomes more of a peer pressure exercise, that if you're not doing the TNFD, if you not disclosing risk and your competitors are, then you're not in the game anymore. And I think that'll actually come a lot quicker than Davos. So the takeaway is, there's a huge amount of interest. It’s just making sure that the implementation is done with some credibility.

Jessica Holz: So is this going to be the decade of action for nature or the decade of inaction before action?

Adrian Ward: Try not to get too political, Jessica. Hopefully, it's actually the first decade of mainstreaming the awareness around nature risk, at least, if I'm going to be completely conservative. We hope for more so we under promise and over deliver.

Jessica Holz: Earlier in my career, I used to do this presentation called biodiversity in the built environment where I’d go speak to architects about what they could do to enhance nature outcomes on buildings projects, and I used to get this baffled response, as though, how is this relevant? Or how is that important? Whereas now, it's already becoming part of the part of the language that we're seeing in the industry, which for me I get quite astonished by it, actually. And there's also been some interesting progress by organisations like the Green Building Council of Australia. So, their new nature category and their Green Star third party voluntary sustainability rating tool actually looks at quantifying biodiversity and looking at biodiversity on building sites and making sure that it's not affected by the development or impact potentially enhanced. So I guess that's why I was interested in the applications of something like Accounting for Nature on a building site, it would be really interesting to see that scientific rigor around measuring that improvement, hopefully, from before buildings built till after, it would be amazing to see biodiversity improved, in a measurable way, in urban settings. Hopefully, that's the future. Thank you, Adrian.

Adrian Ward: Thank you, Jessica, it’s been great.

Maria Rampa: We hope you enjoyed this episode of Engineering Reimagined.

Will the new catch-cry be ‘nature positive’? It will be interesting to watch this space to find out.

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Until next time, thanks for listening.