As a new standard and aggregator, TNFD will accelerate pace of change in nature-related risk analysis, says Co-chair.
Investors and policymakers stand at a pivotal moment in reversing biodiversity loss ahead of the introduction of nature-related policy frameworks and disclosure requirements, Executive Secretary of the Convention on Biological Diversity Elizabeth Mrema told City & Financial Global’s Natural Capital Summit yesterday.
Mrema, also Co-chair of the Taskforce on Nature-related Financial Disclosures (TNFD), said financial institutions can no longer look at nature transition in isolation and must now factor it in to their day-to-day activities. Now is the time for investors and policymakers to “take account of nature loss,” she said.
Mrema’s message comes ahead of UN Biodiversity Conference, COP15, in Montreal in December, where the Global Biodiversity Framework, informally referred to as the Paris Agreement for plants, is expected to be agreed upon and signed.
The agreement will provide a framework to protect nature, including targets and commitments for signatory countries on conservation and restoration. For the finance sector, attention will be fixed on the practicalities of aligning financial flows to the goals of the framework.
Biodiversity finance overshadowed
In a pre-recorded address, Montreal-based Mrema said US$10 trillion of new investment opportunities can be generated by 2030, alongside 350 million jobs.
She called on the financial services sector to utilise its role as the “main mechanism for allocating resources and distributing risk” to advocate for more resources to address biodiversity loss.
“There have been increases in domestic resources for biodiversity in some countries, while resources have remained broadly constant for others.
Financial resources available for biodiversity through international flows and official development assistance have roughly doubled,” she said.
However, she pointed to the disparity between capital allocated to reversing biodiversity loss and flows that still support activities harmful to nature.
“When all sources of biodiversity financing are considered, the increase in biodiversity finance does not appear to be sufficient to address the current need. Moreover, these resources are overshadowed by support for activities harmful to biodiversity,” she said.
Shifting financial flows
Mrema cited the TNFD’s work in ensuring a dialogue between stakeholders from finance and business to better understand nature-related financial risks and opportunities.
“The goal of the TNFD is to shift financial flows from nature-negative to nature-positive outcomes. As we work towards this shift, the TNFD will propose a practical framework for assessing and reporting on nature-related risks and impacts that are material to business organisations,” she said.
That framework will not only be a “new standard”, Mrema said, but an aggregator of the best tools, materials and initiatives that already exist to promote worldwide consistent nature-related reporting.
She said reliable data is available across the financial market to describe a range of nature-related factors, but systemic improvements must be made over time to improve and broaden these metrics to measure nature impacts.
Central to this will be improved reporting and accounting procedures.
Mrema said: “Consistent reporting means better information, and better information means more effective action. It will allow financial institutions to embed nature-related risks and opportunities into their strategic planning process in a consistent and robust manner.”
The TNFD released version 0.2 of its beta framework for nature-related risk and opportunity management and disclosure in June, providing more information on its approach to metrics and specific sector guidance, and additional guidance to support pilot testing.
The TNFD is also aiming to boost the accessibility and quality of data on nature-related risks, impacts and dependencies, while developing its framework to ensure it can be incorporated into the disclosure standards of existing sustainability standards bodies, and also utilised by national policymakers.
In July, the TNFD launched its Nature-related Data Catalyst – an initiative to bring together actors from across the nature-related data landscape, covering diverse segments and geographies.
More than 80 market participants have joined already, with findings being fed back to the taskforce’s Data & Metrics Working Group.
The aim is to identify shortcomings in current nature-related data and analytics and accelerate the development of, and access to, nature-related data and tools.
Commercial imperative
Mrema noted the emergence of strategies to mitigate climate risks in carbon-intensive sectors, such as agriculture, forestry, transportation, and infrastructure, insisting that the impact of nature loss presents “a major threat” that financial institutions must factor in alongside climate risks.
“TNFD will demand an accelerated pace of change in nature-related risk analysis once the final framework is released in 2023,” she said.
To this end, financial institutions will have to improve their ability to cooperate and collaborate to tackle nature-related risks while maximising nature-related opportunities.
Mrema said such an approach will become “a commercial imperative” as businesses will not want to find themselves “unprepared when over 50% of the global economy is highly dependent on nature.
“Financial institutions and businesses should be prepared to take whatever action is necessary,” she added.
