Developed over nearly two years, the new standard has been established to deliver a risk-management and disclosure framework for organisations to report and act on nature-related risks and opportunities. It includes 14 core disclosure metrics to cover both an organisation’s impacts to and dependencies on nature, as well as the financial risks and opportunities resulting from this interconnectivity.
David Craig, Co-chair, TNFD, explained: ‘Building on the language and structure of the TCFD and consistent with the ISSB’s sustainability reporting baseline, the adoption of the TNFD Recommendations represent a step-change in the momentum and capacity for business and finance to identify, assess and disclose their exposure to nature-related issues in a manner consistent with climate-related-reporting.’
Aligning the landscape
For business leaders concerned that the TNFD is yet another discrete framework to drop into an already-complex puzzle of global legislation and disclosure standards, the good news is that it hasn’t been created in a vacuum, rather with close industry input – with learnings from recently established climate-disclosure standards.
Led by 40 Task Force members, the TNFD’s recommendations announced this week build on those of the Task Force on Climate-related Financial Disclosures (TCFD) and are, likewise, aligned with the standards created by the International Sustainability Standards Board (ISSB) and the impact materiality approach used by the Global Reporting Initiative (GRI).
Sue Lloyd, vice chair of the ISSB championed the framework, hailing it as a ‘major milestone’, adding: ‘We are pleased to note the high level of consistency within the finalised TNFD recommendations and the ISSB standards, which both incorporate the architecture of the TCFD recommendations.’
In addition, the Task Force worked alongside key scientific organisations, such as the International Panel on Climate Change (IPCC) and the Convention for Biological Diversity (CBD), during the design and development phases, and received more than 3,000 pieces of feedback from the market, science experts, policymakers and regulators.
Joining the dots
The result of this work by the TNFD provides risk managers with the framework to understand, quantify and mitigate risk using a similar lens to that employed for climate-related disclosures.
While climate reporting is, understandably, at a more mature place, offering additional data and tools, and greater experience, there is overlap in the analysis of physical and transition risks for both climate and nature.
For example, the availability of water for future business activities is driven both by future climate patterns and by ecosystem services from natural capital, so it makes sense to address water-use as a nexus of both climate and nature in the process of reporting.
Likewise, when considering transition models there is overlap. Assessing risk changes in market demand, for example, as consumers evaluate whether to purchase a product or service, can be based on their environmental credentials, more broadly, rather than just those related to climate.
Understanding this connection for business will enable leaders to see the bigger picture more quickly, and report and act upon environmental risks more efficiently to seize associated opportunities.
Build it and they will come
While TNFD reporting is voluntary, early adoption could earn credit from investors and consumers alike, while the very real prospect of nature-related risk impacting the business bottom line looms large.
‘Nature loss is accelerating, and businesses today are inadequately accounting for nature-related dependencies, impacts, risks and opportunities,’ explains Craig.
‘Nature-risk is sitting in company cash flows and capital portfolios today. The costs of inaction are mounting quickly. Businesses and financial institutions now have the tools they need to take action.’
Many brands understand this need for action, now, and have demonstrated their commitment by implementing pilots using the LEAP framework – an approach that aims to help organisations conduct due diligence necessary to inform disclosure statements aligned with the TNFD – and the broader TNFD 0.4 recommendations.
In addition, other standard-setting bodies are using the LEAP framework as the proposed assessment framework for understanding nature-related impacts, dependences, risks and opportunities. Most notably, the EU’s Corporate Sustainability Reporting Directive (CSRD) is proposing LEAP as the framework of choice.
The release of the 1.0 recommendations sets the direction for how to report on nature-related risks. This provides visibility to businesses on how to structure a blueprint to implement future, nature-related disclosures.
The last word
The arrival of TNFD 1.0 brings with it coherent and robust recommendations for reporting on nature, with the advantage of having multiple stakeholder backing to drive adoption across geographies and sectors.
As the nature space plays catch-up to climate, expediting learning with new data and tools to address the challenges, such as effective biodiversity monitoring and traceability, will enable companies to create a joined-up approach to reporting on both nature and climate, understanding where they diverge and overlap.
But now is the time for action. Businesses need to hold themselves accountable through transparent reporting of their impacts – implementing rapid and extensive mitigation activities across the value-chain and taking the initiative to restore and regenerate landscapes to be resilient, so that nature can provide extrinsic and intrinsic value to us all.