Industry

TNFD Draft Offers Location-Specific Guidance on Biodiversity Risks  

Multiple versions will be open to feedback over 18-month period ahead of finalisation in 2023. 

The newly launched beta Task Force on Nature-related Financial Disclosure (TNFD) reporting framework includes guidance on measuring and disclosing location-based impacts and risks.  

“Dependencies and impacts on nature are inherently local, which is why consideration of location is an important feature throughout the TNFD framework,” the release noted. For example, the impact of water loss will be different in one location compared to another. 

TNFD is backed by Global Canopy, the UN Development Programme, the UN Environment Programme Finance Initiative and the World Wide Fund for Nature.  

The proposed disclosure framework addresses previous concerns raised by investors that existing shortcomings in biodiversity-related data from corporates have hindered progress in mitigating these risks and impacts. 

The TNFD draft comprises of three components: foundational guidance (key science-based concepts and definitions), disclosure recommendations (aligning with the structure of the Task Force on Climate-related Financial Disclosure), and practical guidance (nature-related risk and opportunity analysis for companies and investors).

The Taskforce has also published a discussion paper mapping existing data platforms and sources that can inform nature-related disclosures, including two practical examples of how this information can be used in the TNFD’s assessment process.

It aims to provide asset owners with nature-related data that can inform capital allocation decisions based on clarity, confidence, and trust in data relating to nature-related risks. Large asset owners and asset managers can also use their influence to ask organisations they invest in to provide nature-related financial disclosures and risk management aligned with the TNFD. 

It has been designed to align with existing standards, including the climate and general sustainability prototypes undergoing finalisation by the International Sustainability Standards Board (ISSB).  

“My hope is that governments [also] agree on an ambitious and effective post-2020 Global Biodiversity Framework, the negotiations of which are taking place this week in Geneva, that can then inform the metrics and targets work the TNFD will continue to develop in the coming months,” said Elizabeth Mrema, Co-Chair of the TNFD. This work will include further defining transition pathways to nature-positive targets. 

The TNFD is in dialogue with a range of standards-setting bodies and regulatory authorities to ensure continued alignment as it finalises the framework, so that it can be incorporated into international regulation in the same way as TCFD, placing an equal emphasis on climate and nature-related reporting. This will also ensure maximum flexibility for organisations reporting according to different materiality thresholds and regulatory requirements. 

A further three iterations of the TNFD draft will be released in June and October of this year, and February next year, with organisations encouraged to provide feedback at each stage. The finalised framework will be published by September 2023. An iterative approach based on market testing will maximise the relevance, usability and effectiveness of the TNFD’s final recommendations. 

Building an improved understanding of nature and nature-related risks and opportunities is a critical enabler of better corporate strategy, better capital allocation decisions, better governance, and better risk management and disclosure practices,” said David Craig, Co-Chair of the TNFD. 

“With climate change and nature-related impacts and risks increasing, it is essential companies incorporate natural assets into their strategic planning and risk management if they are going to succeed,” he said.  

A recorded webinar on the release of the TNFD draft is now available.

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