The investor-backed Taskforce on Nature-related Financial Disclosures (TNFD) has published first-of-its-kind guidance aimed at tackling the financial risks posed by nature loss.
The newly-formed TNFD is billed as the biodiversity-equivalent of the influential Taskforce on Climate-related Financial Disclosure (TCFD) and aims to replicate the success of the TCFD’s recommendations in driving global climate reporting with today’s release.
The TNFD’s ‘Nature-related Risk-management and Disclosure Framework’, which is still in prototype stage, is modelled after the TCFD’s four pillars of Governance, Strategy, Risk Management, and Metrics and Targets, and its corresponding disclosure requirements.
But there are no specific performance metrics which have been proposed by the TNFD at this stage beyond a number of leading questions aimed at sizing the nature-related dependencies, impacts and risks face by enterprises. Among the TNFD’s most pressing tasks will be to map existing climate-related metrics, such as Scope 1,2, 3 emissions and emissions intensity, to nature-based performance.
Unlike the TCFD – which is designed for a global context – the TNFD framework will be dependent on location-based considerations. According to the TNFD, “dependencies and impacts on nature are inherently local which is why consideration of location is a key feature”.
The TNFD has signalled that it will also pursue engagement with International Sustainability Standards Board (ISSB) to ensure alignment with the corporate sustainability disclosure standards which are being currently developed by the Board. However, no information was provided on how the ISSB’s risk-based approach – which focuses strictly on sustainability considerations with a direct impact on a company and not their external impacts – would be reconciled with the TNFD’s double materiality approach.
David Craig, co-chair, TNFD, said: “Building an improved understanding of nature and nature-related risks and opportunities is a critical enabler of better corporate strategy, better capital allocation decisions, better governance, and better risk management and disclosure practices. With climate change and nature-related impacts and risks increasing, it is essential companies incorporate natural assets into their strategic planning and risk management if they are going to succeed.”
A TNFD spokesperson said to RI that the framework will be voluntary for market adoption and it would be up to individual regulators to decide how it should be applied and enforced. He also indicated that the TNFD would look at “supporting” national-level consultations on the guidance, with more details to follow in the next few months.
The release of what has been dubbed the ‘beta’ framework kicks off an 18-month consultation process with market participants, culminating in the final release of the framework in September 2023. A further three iterations of the beta versions are planned for release in June, October and February 2023.
The TNFD will immediately focus on seeking comments for the beta framework. “Everything is open for market feedback,” it said.
In September, the TNFD appointed representatives from AXA, Blackrock, BNP Paribas, UBS and pension fund AP7 to its 30-strong board, in addition to launching a consultative body of institutional supporters and partners.