Industry

We Can’t Wait for Perfect Data on Nature-related Risks – TNFD’s D’Ath

TNFD to build on second iteration of disclosure framework with “catalyst” exercise to address data challenges.

The new version of the Taskforce on Nature-related Financial Disclosures’ (TNFD) beta framework aims to help corporates and institutions leverage today’s “imperfect” tools and data to pursue a collaborative and iterative path to effective nature risk management and disclosure.

Released this week, TNFD’s version 0.2 includes a first iteration of the assessment metrics that will be used to report nature-related impacts and dependencies when the framework goes live in Q3 2023.

At a webinar co-hosted by the UN Environment Programme Finance Initiative, James D’Ath, Data and Analytics Technical Lead at the TNFD, emphasised the need to build on existing capabilities and best practice.

“There are lots of tools and platforms analytics available. And we will not be anywhere near perfect soon. So, we have to use what we have in the best way possible,” he said.

Version 0.2, which follows the initial version released in March, outlines TNFD’s approach to metrics and targets via a draft architecture and an illustrative set of assessment metrics. It also includes additional help to market participants wishing to start pilot testing, as well as guidance on identifying priority locations as part of TNFD’s LEAP approach, which supports internal, nature-related risk and opportunity assessments in preparation for using the framework.

The TNFD framework is being developed in response to the growing need for disclosure of businesses’ nature-related risks and impacts, partly stimulated by the planned Global Biodiversity Framework (GBF), using similar principles to those used by the Task Force on Climate-related Financial Disclosures (TCFD).

Harnessing nature-related data

D’Ath said TNFD’s iterative process – two further versions of the beta framework are planned – would help organisations prepare for nature-related disclosures both through guidance and metrics, but also by supporting the further development of tools and data.

“There will be data available to populate the metrics that we recommend. We can’t wait around for perfection, because that will not happen. So, let’s look and see what we can use,” he said.

To improve data quality around nature-related risks, said D’ath, TNFD will launch a “catalyst” exercise on 7 July which will invite expert input from parties including data aggregators, analytics providers, fintechs and academics.

“There is an inordinate amount of data out there, but there are lots of issues around it. Access and relevance are limited, there is a variance in measurement approaches, there are spatial and temporal biases, and differences across nature categories,” he said, pointing also to difficulties in disclosing information in consistent formats.

Through the catalyst exercise, TNFD hopes to progress discussions around centralising nature-related data and also address technical challenges to data access, according to D’Ath. Later this year, TNFD intends to offer training modules “to try and ensure and users can engage in a way with the most relevant tools analytics”.

Information on business impacts on the environment, including water use, deforestation and plastic pollution, has increased in recent years, but there remain many challenges over completeness and accuracy, making it hard to incorporate into business and investment decisions.

Concerns over the implications of biodiversity loss, including those related to climate change, have increased demand from investors for a more comprehensive approach to disclosure of nature-related risks.

This demand has been further stimulated by the GBF, due to be finalised in Montreal at COP15 in December, which was originally planned to take place in Kunming, China. The GBF, sometimes dubbed ‘Paris for plants’, is expected to include clauses requiring private sector finance flows with its goals.

Assessment and disclosure metrics

In a statement accompanying the new release, TNFD said the update distinguished between assessment metrics and disclosure metrics, “recognising that, as with mainstream financial management and reporting, what gets disclosed to report users is only a sub-set of what gets analysed internally to inform risk management and decision making”.

The first beta of the TNFD focused on the framework and definitions, as well as introducing the LEAP framework, an acronym for Locate- your interface with nature; Evaluate- your dependencies and impacts; Assess- your risks and opportunities; and Prepare- to respond to nature-related risks and opportunities and report.

LEAP offers voluntary guidance intended to support internal, nature-related risk and opportunity assessments, informing strategy, governance, capital allocation and risk management decisions. This includes disclosure decisions consistent with the TNFD’s draft disclosure recommendations. The approach aims to encourage users to consider the scope of their assessment before commencing and encouraging analysts and preparers consult with relevant stakeholders.

The first version of the beta framework released generated “an overwhelmingly positive response”, according to TNFD, with more than 500 contributions from more than 130 market participants and stakeholders.

D’ath said that, as a member-led initiative, TNFD was keen to receive further input in response to version 0.2. “It’s very important that all the feedback gets fed back into the system and then we can continue developing the framework.”

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

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