Business Is Facing Up to the Risks of Destroying the Natural World

Hundreds of businesses have volunteered to measure and report their impact on the natural world, as they recognise the growing risks to their own operations from environmental degradation, including a denuded Amazon rainforest and dying coral reefs.

While many businesses are struggling to meet coming requirements to report their climate impact, more than 300 banks and companies are pledging to go much further. Early movers from across sectors and countries have promised to regularly publish nature-impact information as set out by the Taskforce on Nature-Related Financial Disclosures, or TNFD, a United Nations-backed initiative.

The first adopters represent $4 trillion in market capitalisation and around $14 trillion in assets under management. They include seven of the world’s 29 globally systemic banks, Japanese investor SoftBank, Norway’s sovereign-wealth fund, Gucci parent Kering, miner Anglo American and pharmaceutical majors GSK, AstraZeneca and Novo Nordisk.

Take-up by sector leaders should encourage peers to accelerate their efforts, said Tony Goldner, executive director of the TNFD. The framework is aligned to the Kunming-Montreal Global Biodiversity Framework agreed to in 2022 by nearly 200 countries. It recommends disclosures in governance, strategy, risk and impact management, as well as sector-specific metrics and targets for reducing impact.

Biodiversity impact is both a new type of risk and a new opportunity, said Valentin Alfaya, sustainability director at Spanish-listed infrastructure group Ferrovial, one of the first movers. “As a consequence of the implementation of the TNFD and our own natural capital assessment program, sometimes investments are going to be left aside,” Alfaya said.

“When you are interacting with those protected areas that are very relevant in terms of ecological value…it’s really risky for the company, not just in terms of reputation but also in terms of operations and even finance,” he said.

Using the framework will guide investment and help integrate nature into financial decision making, said Marisa Drew, chief sustainability officer at lender Standard Chartered. The move is a “significant opportunity for us to facilitate financial flows toward nature-positive outcomes,” Drew said.

Gauging impact is central to business decisions and managing risk, said Jennifer Motles, chief sustainability officer at tobacco giant Philip Morris International. “The TNFD recommendations and guidance will support us as we continue to focus on nature-related dependencies, impacts, risks, and opportunities,” Motles said.

The ramp-up in disclosure comes amid heightened awareness of the threat posed to the world by such natural degradation. The top four medium-term risks are all environmental, according to the World Economic Forum’s global risk report published earlier this month. They include extreme weather events, critical changes to the Earth’s systems, a collapse of the ecosystem and natural-resource shortages. “The collective ability to adapt to these impacts may be overwhelmed,” the report warns.

The World Bank estimates that the global economy could lose $2.7 trillion by 2030—which would mean a 10% drop, on average, in the economic output produced across all nations—if certain at-risk ecosystems collapse, such as fisheries or pollination by bees.

Adoption of the TNFD is “a clear signal that investors, lenders, insurers and companies are recognising that their business models and portfolios are highly dependent on both nature and climate,” the taskforce’s co-chair, David Craig, said. Natural risk should be treated both as a strategic risk and an investment opportunity, Craig said.

But reporting the damage done to the natural world isn’t the same as stopping it, said John Tobin-de la Puente, a professor of corporate sustainability at Cornell University. Disclosure is less about encouraging companies to change than it is about giving investors clear information on risk, he said.

Unlike carbon emissions, which can be assessed in terms of metric tons, there isn’t consensus on how to gauge environmental impact—whether, for example, in terms of protected species, general biodiversity, or a bundle of measures, said Tobin, a tropical ecologist and corporate lawyer by training. Some efforts have been made to create units of ecosystem impact, but for now, no universal metric exists, he said.

Alternatives to current business models will also need to be created, just as renewable energy has been developed to replace fossil fuels, Tobin said. “Will we get there at some point soon, before it’s too late for the biosphere?” he asked. “That question is still open.”

Chip makers are fighting to assure investors that the artificial-intelligence boom is racing forward. Wall Street might not believe it until Nvidia’s NVDA -0.98%decrease; down pointing triangle Jensen Huang says so.

When Huang steps up to the mic for his company’s earnings call Wednesday, he will have the world’s attention. What he says about Nvidia’s present will preview the future of AI, dictate the path forward for a tech-crazed stock market and influence an American economy increasingly tethered to hopes that the boom won’t go bust.

The $5 trillion chip maker has provided the key building blocks for AI since the launch of ChatGPT in 2022 set off a race for dominance among OpenAI, Anthropic and established Silicon Valley giants. Now, as Nvidia backstops sprawling data-center projects and an exotic money pipeline to boost chip demand, the company’s influence is arguably bigger than ever.

But there are signs of trouble ahead. Political pushback to AI is growing. A bond selloff propelled borrowing costs to their highest levels in years. The hyperscalers that include some of Nvidia’s key customers—once cash-printing machines—are relying more on debt. OpenAI recently told investors its revenue rose by a tepid 18% in the second quarter while its losses deepened.

Nvidia is increasingly stepping in to shore up potential weak points across the market. Earlier this month, the company teamed up with six of Wall Street’s biggest firms on a $500 billion AI-financing plan, pledging to backstop lending to customers that can’t afford its chips otherwise. The chip maker last week also took a stake in Cloverleaf Infrastructure, which arranges power for data centers, and struck a $6 billion deal with startup Poolside aimed at developing a powerful open-weight AI model.

After watching shares in other chip makers and the so-called Magnificent Seven tech companies swing wildly in recent months, Wall Street is hoping Nvidia can beat expectations—again. The countdown is on.

“It’s kind of becoming more and more like the World Cup final than the Super Bowl at this point,” said Brian Mulberry, chief market strategist at Zacks Investment Management. “It’s just gotten to be that big.”

The company has smashed analysts’ earnings estimates for each of the 14 quarters since the AI boom kicked into high gear. Nvidia posted 210% annual growth in net income in its last three-month period, according to FactSet, making Wall Street’s 126% projection look pedestrian.

Expectations for a blowout second quarter have risen rapidly over the course of this year. All Nvidia will have to do to beat this target: outrun 95% annual earnings growth to more than $51.5 billion. Analysts project the chip maker will report record sales of $92 billion for the period, up from a forecast of $78 billion at the start of this year.

In July, big-tech earnings sparked volatility. Concerns about runaway capital spending spread across the sector after Alphabet’s and Tesla’s results, driving a $890 billion wipeout that contributed to the unwind of hedge fund Situational Awareness. Microsoft posted the largest one-day gain in market capitalization by any company, ever, after a quarter proving that it could still show investors the money. SpaceX rocketed higher after a record-breaking initial public offering, only to see $1 trillion in value evaporate.

Surging memory prices and borrowing costs have fueled fears that those and other companies will be unable to keep plowing more money into supplies including Nvidia chips. Shaia Hosseinzadeh, founder of OnyxPoint Global Management, has recently bought dips in AI-infrastructure stocks when Wall Street has strained to absorb massive debt issued by Silicon Valley.

“The macro data is really quite robust,” he said. “Of course, there’s a level at which everything breaks.”

Investors have kept pumping money into the AI trade despite concerns around chip consumers—and to the benefit of chip producers. That is why Nvidia’s outlook for semiconductor demand could send ripples through counterparts such as Micron Technology and Sandisk, developers of the data centers in which their chips reside, and a supply chain of power producers, contractors and other specialists that underpin the globe-spanning AI build-out.

“We joke internally that we’re all Nvidia analysts now,” said David Lefkowitz, head of U.S. equities at UBS Global Wealth Management.

The irony is that investors have tended to sell Nvidia stock immediately after blockbuster earnings, with shares falling each trading session after its four past quarterly reports. Some are betting that will be the case this time around, too.

The options market is pricing in a 5.3% swing, higher or lower, in Nvidia shares during the session following earnings, according to Option Research & Technology Services. That is higher than the 4.8% average move in Nvidia’s stock over the last 12 months after the company reports quarterly results.

In recent days, some of the most actively traded Nvidia options have been put contracts tied to the stock falling from its Friday value of $214.75 to $205 and $210 apiece, according to Cboe Global Markets data. Put options give the right to sell a stock by a set price and typically represent a bearish wager.

Many analysts remain optimistic. Frank Lee, global head of tech hardware and semiconductor research at HSBC Global Investment Research, recently raised his price target for Nvidia shares to $360 from $325, citing, among other things, Nvidia’s strategic partnerships with suppliers and its role as a top contributor to open-source AI.

Business Is Facing Up to the Risks of Destroying the Natural World

Companies from around the globe have volunteered to report their impact on nature

Nvidia’s earnings will test Wall Street’s confidence in the AI boom.