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TNFD launches with announcement of co-chairs and proposed technical scope

Separately, Pakistan's potential Nature Performance Bond attracts interest

The Taskforce on Nature-related Financial Disclosures (TNFD) has officially launched today, amid a series of other biodiversity-related announcements as the world gears up to mark World Environment Day tomorrow.

Styled on the Financial Stability Board’s Taskforce on Climate-Related Financial Disclosures and catalysed by UNEP FI, UNDP, Global Canopy, and WWF, the TNFD was first announced in July last year and is tasked with developing a framework for companies and financial institutions to assess, manage, and report on their dependencies and impacts on nature for 2023.

The Taskforce will be co-chaired by David Craig, CEO of Refinitiv and Group Leader of Data & Analytics Division at London Stock Exchange Group, and Elizabeth Maruma Mrema, Executive Secretary of the UN Convention on Biological Diversity, according to today’s announcement. It will consist of around 30 members from financial institutions, corporates as well as data and service providers. It will also be informed by a diverse Stakeholder Group, which is expected to consist of governments, regulators, multilaterals, financial and business consortia, NGOs, think-tanks, and research organisations.

“Better nature-related data that enables informed decision-making by financial institutions and companies is how we will solve the global ecological crisis,” said Craig. “Financial disclosures are essential to a market-based solution to nature loss. A properly functioning, informed market will price in risks appropriately and be empowered to channel investments to more sustainable opportunities.”

Alongside detailing its structure, the group published two reports.

One was prepared by an Informal Technical Expert Group to set out the proposed technical scope for the TNFD. It said the TNFD framework, just like the TCFD, will adopt a four-pillar approach focused on governance, strategy, risk management as well as metrics and targets. However, it noted the TNFD will have a broader definition of the term “risk and opportunities” in each pillar to recognise the particular challenges of measuring nature.  

The group recommended that “organisations should disclose not just how nature may (positively or negatively) impact the organisation’s immediate financial performance, but also how the organisation (positively or negatively) impacts nature”.

It said the framework will broadly seek to align with the two global targets in the Convention on Biological Diversity’s zero-draft Global Biodiversity Framework of no net loss by 2030 and net gain by 2050.  

The other document was prepared by the TNFD’s Informal Working Group (IWG), which was co-chaired by Banorte, BNP Paribas and the Green Finance Institute. Within Nature in Scope, the IWG proposed TNFD’s potential principles. The seven proposed principles include market usability, following a science-based approach, addressing nature-related risks, dependencies and impacts and employing an integrated approach to climate- and nature-related risks. 

The TNFD will be holding an official launch event next Thursday.

Separately on biodiversity metrics, the Global Reporting Initiative announced today that it has secured more than €150,000 to research, develop, and deliver a revised Biodiversity Standard.

Moving forward, the organisation is continuing to seek additional funders, to ensure the updated Standard is delivered by the end of 2022.

In other biodiversity-related news, Pakistan announced yesterday it is “endeavouring to establish” a Nature Performance Bond with a set of ambitious ecosystem restoration targets to provide it with accelerated access to finance for development. The plans have attracted interest from the UK, Canada and Germany, all of which issued a statement yesterday alongside the UNDP saying they are “looking forward to engaging in dialogue on the modalities of such a Nature Performance Bond that could enable a green recovery and accelerate natural capital restoration action in the country”.

Mark Halle, an Ambassador at Finance for Biodiversity (F4B), explained to RI that the initiative developed the idea of Nature Performance Bonds, did initial technical work, and contacted countries they thought fitted the needed profile. Subsequently, it has worked with Pakistan on a package of performance indicators and contacted its sovereign debt creditors to enter potential dialogues. He believes the three countries listed above, as well as Italy, are ready to engage in formal conversations. 

“The exciting thing is that if we are successful in launching a pilot and it achieves its purpose, then I think that will generate interest in the private debt markets between Pakistani banks, borrowers, and their private creditors abroad,” said Halle. 

He added F4B is also engaging with other countries, including, Angola, Gabon, Suriname, Costa Rica, and Ecuador, on either nature or climate performance bonds. 

Pakistan, which is the host country of this year’s World Environment Day, also announced it has completed its first assessment for blue bonds, according to Reuters.

Meanwhile, the Grand Duchy of Luxembourg and the Global Landscapes Forum have launched the Luxembourg-GLF Finance for Nature Platform – a multi-year partnership to “expand the emerging market for global sustainable finance and to promote nature-based solutions to climate change, ecosystem degradation and biodiversity loss”.

In addition, an EU project focusing on natural capital accounting has also progressed. At a webinar hosted by CDSB yesterday, Thomas Verheye, Principal Advisor on Green Finance & Investment at the European Commission, said the Transparent Project, which aims to develop standardised natural capital accounting and valuation principles for business in line with the ambition of the European Green Deal, intends to begin its public consultation at the end of the month.

The Project is funded by the LIFE Programme of the EU and is coordinated by the Value Balancing Alliance, the Capitals Coalition, and the World Business Council for Sustainable Development.