The Taskforce on Nature-related Financial Disclosures has published its final recommendations on disclosing nature risks in a framework launched at the New York Stock Exchange on Monday, to help companies and investors address these. 

 

Nature risk disclosures are widely expected to be regulated in future, but in the meantime, the TNFD has published a voluntary framework of 14 disclosure recommendations on governance, strategy, risk and impact management, and metrics and targets. They are the result of two years of work with input from science experts, indigenous communities and multiple sectors of the economy.  

 

“We need to avert a financial, economic and societal crisis... We've disregarded the importance of nature,” said David Craig, co-chair of the TNFD and founder of data platform Refinitiv, speaking at a launch webinar on Tuesday. The world’s system uses valuable resources from nature for free, and cash flows depend on nature’s services, he added. 

 

There are not only risks, but also opportunities to reposition businesses and portfolios to be more resilient in future while creating a more natural system at same time, he stressed, saying the TNFD framework offers a tool that enables organisations to start now if they have not already done so. 

 

The framework builds on the 11 recommendations by the Task Force on Climate-related Financial Disclosures – with an additional three focussing on engagement, sensitive locations and value chains – to make it easier for organisations to adopt. An illustrative example of an integrated TCFD and TNFD report has been made available on the TNFD website, as well as a TNFD ‘getting started’ guide.

  

The TNFD stressed that it did not want to add to the “alphabet soup”, ensuring it is aligned not just with the TCFD but also with the language of the International Sustainability Standards Board. 

 

 

At present, the TNFD recommendation includes 14 core global metrics, nine on dependencies and impact, and five measuring risks and opportunities, but further work is in the pipeline on metrics. The TNFD plans to produce sector-specific metrics in 2024. It is seeking input on sector metrics through its discussion paper. 

 

A second discussion paper is seeking feedback on value chains until the end of November, as the TNFD is trying to address challenges in measuring scope 3. 

 

Taskforce member Hirotaka Hideshima, counsellor on global strategy to the president and the board of directors of Norinchukin Bank, recommended that companies that have already worked through scope 3 greenhouse gas emissions or looked at human rights in their value chains, and which are thinking of doing the same for nature risks, might want to do all of their value chain analyses together. 

 

 

Recognising that financial institutions have differing requirements from other sectors, the taskforce has published additional guidance for financial institutions, such as asset owners and asset managers, which covers: 

 

• identification and assessment of nature-related issues – the TNFD’s ‘locate, evaluate, assess and prepare’, or LEAP, approach;  

• sector-specific guidance on the LEAP approach and sector metrics;  

• biome-specific guidance; and  

• additional guidance on two components of the LEAP approach:  

 

"One key thing to understand is for financial institutions, their disclosures have a dependency on corporate disclosures, so until that corporate data really starts flowing out in a consistent, comprehensive manner it’s a little bit challenging for financial institutions to make disclosures on detailed impacts and dependencies,” said Judson Berkey, taskforce member and chief sustainability officer at UBS. 

 

The TNFD suggests that financial firms should therefore look at their portfolio exposures at a sector level for now, disclosing the percentage that is in sectors which are known to have a high impact or dependencies on nature.  

 

“We think that has value, it helps focus, it helps prioritise,” Berkey said. “It’s not actual risk, it’s potential for risk, but at least it gives some focus." 

 

The guidance also recommends that financial institutions disclose the percentage of companies that operate in sensitive locations. 

Berkey said in the long term, financial institutions should be able to disclose actual impacts and dependencies but that more time is needed for this work to progress and mature.  

 

“We will probably revisit it at a future point in time,” he said, noting that some regulatory regimes are beginning to encourage nature disclosures. 

 

Is your organisation planning to disclose in line with the TNFD recommendations?