Content Coms Explains: Taskforce on Nature-Related Financial Disclosures
Taskforce on Nature-related Financial Disclosures (TNFD) was established in 2021 in response to the growing need to factor nature into financial and business decisions.
“The goal of the TNFD is to provide a framework for organisations to report on risks from biodiversity loss and ecosystem degradation.”
TNFD: An introduction to the framework
- TNFD is a global, market-led initiative with the mission to develop and deliver a risk management and disclosure framework for organisations to report and act on evolving nature-related risks and opportunities.
- The ultimate aim is to deliver a risk management and disclosure framework for organisations to report and act on evolving nature-related risks and opportunities, with the ultimate aim of supporting a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.
- TNFD improves the availability of data and information to enable organisations to integrate nature-related risks more accurately and reliably into decision making
- TNFD recommends companies disclose on the full set of nature-related dependencies, impacts, risks and opportunities, including climate, of their operations and across their value chain.
Why do companies need to prepare for TNFD?
There is a growing need to factor nature into financial and business decisions. According to the World Economic Forum, over half the world’s GDP is moderately or highly dependant on nature and its resources.
Adopting a framework that encompasses nature-related risk and opportunity helps future-proof companies against biodiversity degradation.
Using a market-led approach, TNFD is designed to be scientifically rigorous and easy to adopt by businesses.
TNFD’s formally launched June 2021, after an extensive 8 month preparatory phase.
They have now released their 4th and final beta version, which is undergoing a pilot before formal release in September 2023.
Who is the TNFD framework designed for?
- Investors and financial institutions: clarity, confidence and trust in data relating to nature-related risks.
- Analysts: Enable high-quality and timely analysis that incorporates nature-related risks to support the determination of potential and likely impacts on future cash flow
- Corporates: Inform better corporate strategy, governance and risk management decision making, and the incorporation of nature-related risk assessments alongside, and ideally integrated with, climate-related risk reporting in statutory reporting to markets and regulators.
- Regulators: Ensure recommendations and guidance align with existing disclosure mechanisms, standards and other jurisdiction-specific regulatory requirements.
- Stock exchanges: Support and encourage consideration of new voluntary and mandatory listing requirements linked to nature-related risks, as well as opportunities for new listed equity offerings that encourage nature-positive outcomes.
- Accounting firms: Enable comprehensive company assurance that incorporates nature risk and opportunity considerations, and support internal risk functions.
- Environmental, Social and Governance (ESG) data providers, credit rating agencies and financial service providers: Enable support to investors and financial decision makers with consistent and robust data and insights on how corporates manage their nature-related risks.
[As identified on the TFND website]
How is the TNFD different from the TCFD?
TCFD is focused solely on disclosure of climate-related risks and opportunities. Meanwhile the TNFD recommendations encourage integrated climate-nature disclosures, rather than just nature disclosures, as well as the development of risk management processes and identification of nature-related opportunities.
Who is using TNFD?
- TNFD is yet to be adopted by regulators as the template for nature-related disclosure requirements. However, regulators and standard setters are monitoring developments.
- A pilot scheme involving 23 global companies began at the end of October 2022, with insights and recommendations being analysed before the framework’s final release in September 2023
- The pilot is covering three sectors: energy, land use (including food, agriculture and forestry) and the built environment. According to WBCSD, these value chains encompass 90% of current pressures on biodiversity.
- The pilot involves 23 member companies, unlisted but made up from their 40 member companies. Announced companies include:
- FSD Africa through the African Natural Capital Alliance (ANCA)
- Global Canopy | Report on their Pilot version1 experience
- World Business Council for Sustainable Development (WBCSD)
Here at Content Coms, our ESG & Sustainability Comms team will be keeping an eye on what comes next for TNFD – particularly when the final framework is released in September 2023. We’ll keep you up to speed as we learn more.