Nature Accounting: Metrics, Ecosystem Services, and Disclosure

When I talk with boards about nature, the first question is usually: what exactly are we measuring? Biodiversity and ecosystem services are related, but they are not the same accounting subject. Biodiversity concerns the variety and condition of living systems. Ecosystem-service accounts track the services supplied by ecosystems and used by people and businesses. If you blur those two together, your numbers stop meaning anything.

Start with an official framework, not a marketing metric

The UN's SEEA Ecosystem Accounting (SEEA EA) gives us a common structure. It organizes habitat and landscape data, measures services, tracks ecosystem assets, and links them to economic activity. Importantly, it is an official statistical framework, not a company valuation standard. The UN Statistical Commission adopted it in March 2021. Its five account types include ecosystem extent and condition, plus physical and monetary ecosystem-service flows. That distinction matters: physical accounts record service supply and use in physical units; monetary accounts express those flows in money. Monetary values can help you compare nature with economic activity, but they should never obscure ecological condition or the underlying physical evidence.

Flows are not assets

Here is a mistake I see often. An ecosystem asset's condition and extent are not the same thing as the annual flow of services it supplies. Before drawing conclusions, identify the asset, the service, the beneficiaries or users, the spatial boundary, the period, and the valuation basis. Skip those and you are just guessing with a spreadsheet.

Use metrics that fit the place

TNFD guidance calls for location-specific measures, suitable baselines or reference conditions for ecosystem-state measures, and, where possible, absolute values, rates of change, and intensity ratios. It also recognizes qualitative and quantitative measurement, and advises validating proxy data against location-specific evidence. In plain terms: a global average will not tell you what is happening in your watershed.

Disclosure is not the same as accounting

TNFD provides disclosure recommendations, not a specific accounting or valuation standard. Its 2023 framework sets out 14 recommended disclosures across governance, strategy, risk and impact management, and metrics and targets. LEAP is a voluntary assessment process: Locate interfaces with nature, Evaluate dependencies and impacts, Assess risks and opportunities, and Prepare responses. TNFD says LEAP is not required to use its disclosure recommendations. And please, do not treat unlike impacts as automatically offsettable. TNFD recommends reporting positive and negative impacts separately rather than netting them, relating measures to a clear baseline or reference condition where possible.

What this means in Hong Kong

HKFRS S1 and S2 became available for use from 1 August 2025, but are currently voluntary absent a mandate. HKICPA says the standards are fully aligned with IFRS S1 and S2. S1 covers material sustainability-related risks and opportunities that could affect an entity's prospects; S2 addresses climate-related disclosures. Hong Kong's stated direction is phased adoption. The HKICPA FAQ says large publicly accountable entities are expected to adopt HKFRS Sustainability Disclosure Standards no later than 2028, with a first batch of listed entities expected to face a proposed mandatory effective date of 1 January 2028, subject to consultation and regulatory action.

Scope matters for valuers and assurance teams. HKFRS S1 and S2 do not themselves constitute a biodiversity-specific valuation method. In practice, document the purpose, unit of account, spatial and temporal boundaries, evidence and assumptions, valuation technique, uncertainty, and how the result relates to financial prospects and disclosure materiality.

If you want a deeper mathematical treatment, see Biodiversity and Ecology Service Accounting: A Mathematics Guide for Sustainability Professionals. For the official framework, start with SEEA Ecosystem Accounting and the white cover version. For disclosure, read the TNFD Recommendations and the LEAP approach guidance. For Hong Kong, see the ESG Quick Guide and the HKICPA FAQs.

My advice: keep the physical evidence visible, label your boundaries, and never let a monetary number stand in for an ecological fact.