TNFD, Explained
Introduction to TNFD
The Task Force on Nature-related Financial Disclosures (TNFD) officially launched its disclosure recommendations and implementation guidance (hereby, the “TNFD Recommendations”) at the NY Climate Week NYC in September 2023. Following a two-year development process, the TNFD Recommendations are designed to bridge the relationship between nature, business, and financial capital. They aim to help shift capital flows to nature-positive outcomes and align businesses to global biodiversity goals such as the 30 by 30 initiative under the Kunming-Montreal Global Biodiversity Framework.
The TNFD Recommendations are a significant development in the landscape of reporting architecture, following the publication of International Sustainability Standards Board (ISSB) standards and the EU Sustainability Reporting Standards (ESRS) in 2023. Based on public statements of interest by the ISSB and ESRS to integrate TNFD Recommendations into these reporting standards, businesses can expect future regulatory compliance requirements to report on nature-related disclosures.
Building a business case for nature
Many businesses depend on natural capital and the ecosystem services it provides. With the present spotlight on reversing climate change impacts, it is crucial to note that nature loss and climate change are inseparable challenges. By seizing the opportunity to align to the TNFD Recommendations, businesses can benefit by actively managing current and growing nature-related risks alongside climate risk, complying to regulations, building sustainable value, and boosting stakeholder trust and confidence.
TNFD Framework
Inspired by the Task Force on Climate-related Financial Disclosures (TCFD), the TNFD Recommendations is centred around the same four core elements: Governance, Strategy, Risk Management, and Metrics and Targets. The final set of 14 disclosure recommendations aims to provide organisations with a risk management and disclosure framework for nature.
Figure 1 : Summary of disclosures under TNFD Recommendations
In recognition of the complexity, uncertainty, and importance of long-time horizons when dealing with nature, the TNFD has designed a model assessment approach (known as the LEAP approach) to support nature-related risk and opportunity assessment within corporates and financial institutions. The approach draws on existing assessment methodologies and frameworks, including the Natural Capital Protocol developed by the Capitals Coalition and the target setting methods developed by the Science Based Targets Network (SBTN).
To ascertain and evaluate an organisation’s nature-related issues, the LEAP approach recommends the following 4 steps:
Figure 2 : Summary of LEAP Approach under TNFD Recommendation
Businesses can take the first step in addressing nature loss by identifying and understanding their nature-related dependencies, impacts, risks, and opportunities. Companies should also start to consider relevant biodiversity metrics (such as land use, pollution, resource use, etc) to set a baseline, set targets, as well as to track and inform their progress in managing nature-related impacts and risks.
To further support businesses in assessing nature-related issues, TNFD has consolidated a comprehensive tools catalogue which provides an overview of sector-specific and biome-specific nature-related data tools available today.
Our outlook on TNFD
Both climate change and nature loss collectively contribute to the planetary crisis the world is facing today. As such, achieving net zero should not be the sole goal of the organisation – it is time to reach further and consider nature-positive outcomes.
With the publication of the TNFD disclosures, Paia foresees the potential for the TNFD framework to be adopted similarly to the TCFD and expects to see increasing expectations on nature-related disclosures amongst investors, financial institutions, and government bodies. As such, Paia seeks to stay ahead of forthcoming regulations on nature-related disclosures by keeping our clients informed and collaborating with them to ensure their preparedness.
With 20 years of experience in sustainability advisory, Paia has been instrumental in influencing local organisations to further their sustainability journeys. Paia leverages on our expertise in the sustainability space to drive and enhance the sustainability maturity of our clients. With TCFD strategy and implementation being one of Paia’s key service lines, we are well-placed to support our clients with getting started on managing nature-related risks and opportunities.
Get in touch with Paia for more information insights on how we can support your organization. If you would like to learn more about how to start reporting against the TNFD framework, you can reach out to us via info@paiaconsulting.com.
References
[1] Kunming-Montreal Global Biodiversity Framework
[2] Paia Insights: TCFD Demystified
[3] Recommendations of the TNFD
[5] TNFD Tools Catalogue: Nature-related tools aligned with TNFD’s LEAP approach
