The Taskforce on Nature-related Financial Disclosures (TNFD) has published a fourth and final beta version of its disclosure framework, the last step before releasing final recommendations in September. 

Among several key updates, the TNFD has for the first time outlined its approach to metrics that would support its disclosure recommendations. 

Launched in June 2021, the TNFD is tasked with developing an integrated risk management and disclosure framework for organisations to report and act on evolving nature-related risks and opportunities.  

The disclosure metrics outlined in the latest update should provide users with comparability across and within sectors. At the same time, the approach seeks to provide report preparers with flexibility, acknowledging the differences in nature-related issues across sectors and business models.

The draft disclosure indicators and metrics are structured in a tiered approach of core global metrics for all sectors – reflected in global policy priorities such as the Global Biodiversity Framework – core sector metrics, and additional disclosure metrics, such as those particularly relevant to a user’s business model.

The core group of metrics is divided into nine relating to nature impact and dependencies and five focused on risks and opportunities. 

Notably, a key proposed disclosure metric for nature-related opportunities is the value of capital allocated to such opportunities “with reference to a government of regulator green investment taxonomy”.

Also published on Tuesday was a financial institutions metrics supplement, which suggests firms report the percentage of investments that make a substantial contribution to defined objectives, such as the EU taxonomy’s objective surrounding the protection and restoration of biodiversity and ecosystems, or to a relevant SDG.

The volume of financial flows to deliver nature-based opportunity, such as green bonds issued with use of proceeds related to nature-specific activities, is also suggested.

Returning to the core metrics, users will also be expected to disclose the proportion and value of assets exposed to nature-related physical risks and transition risks, as well total annual revenues or value of assets with substantial dependence on ecosystem services or with a high impact on nature. 

The TNFD also reiterated that its framework draws from and “is designed to inform” relevant standards including those from the International Sustainability Standards Board and the Global Reporting Initiative.

Nature scenarios gaining traction

The TNFD has also released draft guidance on scenarios for corporates. This follows on from a November discussion paper on a proposed approach to nature-related scenario analysis. 

Specific guidance on scenarios for financial institutions are set to come out in the September release. 

In related news, Swiss Re Foundation, EY, WWF and AXA Research Fund are also looking at the topic.

The group is seeking applicants to write peer-reviewed papers on nature-related scenarios work, which will ideally be presented at the World Biodiversity Forum in June 2024 and at the WEF in January 2025.

Maud Abdelli, WWF’s greening financial regulation initiative lead, told Responsible Investor: “These scenarios should be useful for livelihoods, businesses and planners, to get a better understanding of the drivers and impacts active in a region that lead to nature loss.”

She noted that the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services has a Nature Futures research programme, the Network for Greening the Financial System has a taskforce focused on nature, and the TNFD is looking at scenarios. “We have been in discussion with all of them. The topic is that complex, especially across stakeholders and regions, that we do not see a potential for duplication.”

Throughout the research the group will hold progress workshops with the awarded teams, and potentially invite few selected stakeholders who also work on scientific scenarios.

Returning to Tuesday’s update, the TNFD has also issued new draft guidance on engagement with affected stakeholders and risk assessment methods, as well as additional draft guidance for four sectors – agriculture and food, mining and metals, energy and financial institutions – and for four biomes, including tropical forests. 

Consultation on this final draft is open from 30 March to 1 June. 

Once the complete TNFD recommendations are published in September, the taskforce will focus on encouraging and scaling voluntary market adoption of the framework, as well as engaging with policy makers and regulators following their commitment to implement nature-related corporate reporting (Target 15) in the Global Biodiversity Framework.

Banks behind asset managers on targets and metrics

In related news, Baringa has published an analysis of how a dozen banks have started including nature-related information in their 2022 annual reporting.

Among the consultancy firm’s findings is that, while few banks have board members with domain experience or expertise in nature and biodiversity, some are starting to address this skills gap through capability-building.  

The analysis suggests banks are behind asset managers on metrics and targets. According to Baringa, none of the banks reviewed provided replicable metrics or targets on nature and biodiversity, “contrary to the asset management sector where forward-thinking managers have already published them, such as BNP Paribas Asset Management reporting the results of its biodiversity footprint”. 

It also found that there is “hope that TNFD’s metrics can be used in sustainability linked financing structures and thus play a central role in unlocking private capital flows”.