Company disclosure related to nature (TNFD)

Anna Triponel

March 31, 2023
Our key takeaway: We reported previously on the importance of COP15 in Montreal last year, and how this would herald a new wave of scrutiny on biodiversity risks. The Taskforce on Nature-related Financial Disclosures (TNFD) has just released its final beta framework for nature-related risk management and disclosure. The idea? Enable companies to disclose how they are identifying, assessing and disclosing their nature-related issues. Enable investors to compare across companies how well they are doing in considering nature-related issues. Enable the market to respond to Target 15 of the Global Biodiversity Framework that relates to corporate reporting. And push companies to do better when it comes to considering nature, similar to what the TCFD is doing for climate. You can road test it and provide comments - the consultation is open until 1 June 2023. If you’re not sure yet why the focus on business and nature is on the rise, take a look at our Content Hub - tag biodiversity.

The Taskforce on Nature-related Financial Disclosures (TNFD) released its fourth and final beta framework for nature-related risk management and disclosure (March 2023). You can find the executive summary here and the TNFD dashboard here. The current framework is open for consultation until 1 June 2023.

  • The process, with a focus on risk management and disclosure: TNFD started its work in October 2021, and the final recommendations will be published in September 2023. The current framework has already been subject to extensive feedback, with company participants broadly endorsing the three core elements of the draft framework: (1) the core concepts and definitions; (2) the proposed risk and opportunity assessment approach (LEAP); and (3) the draft disclosure recommendations aligned with those of the TCFD. This is similar to the Task Force on Climate-related Financial Disclosures (TCFD): this is a global framework for risk management and disclosure. TNFD makes clear that this is not intended to be a standard. The final draft in turn will inform relevant standards (e.g. those from the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI)).
  • Three tiers: There are three tiers of disclosure metrics. First, “Core Global Disclosure Metrics”: there are relevant for all companies and are reflected in global policy priorities (e.g. the Global Biodiversity Framework). Second, “Core Sector Disclosure Metrics”: these apply to companies within a sector. Third: “Additional Disclosure Metrics”: these enable companies to “include metrics that might be particularly relevant to their business model and nature-related issues.” The Taskforce has sought to strike a balance between “being science-based and yet practical for market participants to use as part of the annual reporting cycle and on a limited assurance basis” - with a tiered approach to enable this.
  • The approach: There is a new general requirements component, which captures six general requirements. Then the four pillars of the TCFD recommendations are present (Governance, Strategy, Risk Management and Metrics and Targets – with Impact Management incorporated into Risk Management). There are then 14 specific recommended disclosures organisations should include in their financial filings - aligned with TCFD's 11 recommendations and extended with an additional three for nature. TNFD then provides guidance for all sectors, as well as supplemental guidance for certain sectors and biomes. Draft disclosure metrics for financial institutions, agriculture and food and tropical forests have been issued as part of this draft of the TNFD beta framework. A note on value chains: TNFD has adapted the approach taken to incorporate value chain impacts (Scope 3 climate reporting) to the nature context as direct operations, upstream, downstream and financed.

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