Make the UK first to mandate TNFD reporting, says Scottish Widows   

Plus: ShareAction analysis finds world's largest asset managers lacking biodiversity voting and engagement policies.

Scottish Widows has called on the UK government to become the first to mandate economy-wide Taskforce on Nature-related Financial Disclosures (TNFD) reporting when the final framework is agreed upon. 

The pension giant made the recommendations as part of a new report, Nature and Biodiversity: The Pensions Imperative, which outlined several policy and pension fund recommendations to convene industry action on the issue and enable nature-positive asset allocation throughout the financial services sector. 

Launched in June 2021, the TNFD is set to publish its risk management and disclosure framework in September for organisations to report and act on evolving nature-related risks and opportunities.    

The upcoming work is seen as a key enabler in operationalising target 15 of the Kunming-Montreal Global Biodiversity Framework, which calls on governments to take legal, administrative or policy measures to encourage and enable business to disclose “and in particular to ensure that large and transnational companies and financial institutions” assess and disclose their nature impact and dependencies. 

In this week’s report, Scottish Widows said: “We encourage government to leverage the opportunity to make the UK the first country to mandate economy-wide TNFD reporting when the final framework is agreed upon.” 

Last year, Conservative peer Zac Goldsmith flagged his hopes that the UK could be the first nation to mandate TNFD reporting, as it did with the framework’s climate predecessor, the TCFD. 

Likewise, the UK’s pensions regulator (TPR) previously told Responsible Investor it was keeping “very close tabs” on the work of the TNFD as it looks at the future of sustainability reporting.

A regulator for carbon offsets

Scottish Widows also called for the establishment of a UK regulator for carbon offsets to drive the establishment of high-quality standards, address the nature financing gap and support actions on decarbonisation and the preservation of nature.

The creation of regulated standards for “nature-related offsets” as a way to unlock private investments into nature recovery was also highlighted in the report in an interview with Natural England chair Tony Juniper.

“If such standards were owned by the government and accredited by a relevant agency, this would act as an important accelerator, giving investors confidence in these nature-based solutions,” Juniper said.

“In the past, we have seen some carbon offsetting initiatives actually harming nature, for example via planting non-native trees and reducing biodiversity of an ecosystem through monoculture planting. What we must do instead is find ways of combining the pursuit of carbon benefits with other nature-related benefits that can be layered on top.

“Improving water quality, reducing flood risk, creating environments that are open to the public to enjoy for health and wellbeing reasons and, of course, restoring depleted biological diversity – all of this is possible.” 

Scottish Widows also suggested ways for fellow pension funds to ramp up action to tackle biodiversity risks. Among the four key recommendations were assessing portfolio exposure and supporting corporate engagement and transformative action. 

Maria Nazarova-Doyle, head of responsible investments and stewardship at Scottish Widows, said: “While overseeing trillions of pounds worth of investments, pension funds play a huge role in the economy. Yet, as we mark two years since the publication of the Dasgupta Review on the Economics of Biodiversity, the financial services industry has yet to make ample progress on nature action.” 

Tuesday also saw Scottish Widows publish a separate paper detailing its efforts to drive industry-wide action to limit deforestation across pension portfolios and supply chains. 

Asset managers failing on biodiversity

In related news, a ShareAction analysis of the world’s 77 largest asset managers has found that just over one-third included the issue of biodiversity in their voting policies, and just under half included it in their engagement policies. 

The research – based on questions sent to the asset managers about their governance and stewardship standards – found there was regional variation, with 46 percent of European asset managers having a biodiversity voting policy, compared with 32 percent in the US and 23 percent in Asia-Pacific. 

ShareAction also highlighted the need for further action to ensure gender equity on boards, as well as calling for a renewed focus on transparency. The report found that, while the vast majority of asset managers now disclose votes publicly, only three of those surveyed pre-declare their voting intentions.