In today’s rapidly evolving environmental landscape, financial decision-makers must integrate foresight strategies, such as nature-climate scenarios, into their long-term planning. As our understanding of environmental science advances, particularly in nature and climate’s future, uncertainties persist. Nonetheless, this integration is essential for effectively assessing both risks and opportunities. Sustainable finance now stands as a cornerstone of business success in an unpredictable world. And so, urges companies to take proactive steps in future-proofing their strategies. This blog explores how incorporating nature-climate scenarios can enhance risk assessment, unlock investment opportunities, and ensure regulatory compliance. It also highlights examples of businesses at every maturity level that have adopted sustainable finance strategies.
The Role Of Nature-Climate Scenarios in Foresight
Nature-climate scenarios offer projections about future states of the environment based on different socio-economic pathways. These scenarios account for factors such as greenhouse gas emissions, land-use changes, and biodiversity loss, helping organizations see the interconnectedness of natural systems and human activities. Companies need to leverage this foresight to anticipate challenges that may not be immediately visible. They could, however, have significant financial impacts down the line.
Why Companies Must Embrace Nature-Climate Scenarios
1. Risk Assessment
Climate change presents physical risks (e.g., extreme weather), transition risks (as economies shift toward low-carbon models), and liability risks (e.g., lawsuits for environmental damage). By using nature-climate scenarios, organizations can assess these risks and build stronger mitigation strategies.
2. Investment Opportunities
Companies that align their strategies with nature-positive and climate-resilient approaches are more likely to attract sustainability-focused investors and gain access to emerging green markets. Early adoption of these strategies, positions these companies as leaders in resilience and sustainability. In consequence, it provides a competitive edge and opens doors to new investment opportunities. As more investors seek out sustainable and resilient companies, those who integrate nature-climate scenarios early on can differentiate themselves, attracting capital from investors prioritizing long-term sustainability.
3. Regulatory Compliance
Nature-climate scenarios allow companies to foresee policy changes and ensure compliance, reducing the risk of penalties and costly legal challenges. Government-mandated regulations worldwide continue to tighten across sectors, on emissions and biodiversity impacts. As such, companies that anticipate future policies through scenario planning will be better positioned to avoid disruptions and costly compliance challenges.
4. Stakeholder Engagement
A growing number of investors, customers, and employees are prioritizing sustainability. Incorporating nature-climate scenarios into business decisions can strengthen relationships with these stakeholders, enhancing reputation and trust, while also meeting rising expectations for environmental responsibility.
Practical Steps for Integrating Nature-Climate Scenarios Based on Business Maturity
The journey toward integrating nature-climate scenarios into financial decision-making is progressive, and companies will move through different stages of maturity as they refine their strategies. Each step builds on the last, offering a roadmap that evolves with the company’s growing commitment to sustainability.
Beginners
Companies new to sustainability often face resource and knowledge constraints. Initial steps include performing basic scenario analyses and stress testing.
Example: Coca-Cola has started using scenario analysis to understand the future availability of water resources, a critical input for its operations. By examining how different climate scenarios could affect water stress in key regions, Coca-Cola is beginning to assess the risks that climate change poses to its global supply chain.
Early Adopters
These companies already have experience with sustainability initiatives and are ready to go further. They should incorporate findings from scenarios into their strategic planning.
Example: Apple has used climate scenario planning to evaluate the potential impacts of a changing climate on its global infrastructure and supply chain. The company has integrated these insights into its strategy, focusing on reducing its reliance on fossil fuels and investing in renewable energy and sustainable materials to adapt to future regulatory and market conditions.
Best in Class
Mature companies in sustainability need to regularly update their strategies and collaborate with experts. At this stage, companies often integrate frameworks such as the Science Based Targets initiative (SBTi), which encourages businesses to set greenhouse gas reduction targets aligned with the latest climate science. Most of them also integrate the Science Based Targets Network (SBTN), which focuses on biodiversity targets like water use, land stewardship, and ecosystem health.
Example: Unilever has fully integrated nature-climate scenarios with both SBTi and SBTN frameworks. By developing scenarios that project future impacts on supply chains, agriculture, and deforestation, Unilever models different climate pathways to assess risks and opportunities. For instance, one scenario might explore heightened regulatory restrictions on deforestation, leading Unilever to prioritize sourcing from suppliers practicing regenerative agriculture. This ensures Unilever meets its SBTN targets for biodiversity while also adhering to its SBTi goals of reducing carbon emissions. By continually updating its scenario models, Unilever can dynamically adjust its strategies, ensuring that its climate and biodiversity goals are aligned with the latest environmental developments.
Integrating nature-climate scenarios into financial decision-making is no longer optional; it is a necessity for businesses aiming to thrive in a rapidly changing world. Governments are already using these scenarios to shape policies, and now businesses must follow suit. Those who fail to integrate these strategies risk falling behind, both in regulatory compliance and in market positioning.
How Cority Can Help
At Cority, we offer training and guidance on how to effectively use these scenarios to forecast, adapt, and build resilience.
Foresight strategy plays a central role in helping companies navigate an uncertain future. While we cannot predict everything, the ongoing evolution of climate science provides the tools to anticipate key challenges and opportunities. By integrating foresight strategies and nature-climate scenarios, companies not only secure their future but also set themselves apart as leaders in the transition toward a sustainable, resilient economy.
Cority supports businesses of all maturity levels by integrating nature-climate scenarios across planetary boundaries—biodiversity, climate, and beyond. We guide companies in refining their scenario analyses, aligning with frameworks like SBTi and SBTN to adapt to evolving risks and seize sustainability opportunities. Want to learn more? Talk to us!
