The unprecedented rate of nature and biodiversity loss is threatening the foundations of society and presents substantial risks to corporates and financial institutions alike. In response to this, the Taskforce on Nature-related Financial Disclosures (TNFD) launched in June 2021.
Businesses that seize the opportunity to align with the principles of the TNFD can build sustainable value and resilience in their operations and supply chains, as well as boosting stakeholder confidence and managing growing regulatory risk.
The mission of the TNFD is to deliver a risk management and disclosure framework for organisations to report and act on nature-related risks and opportunities, with the ultimate aim of supporting a shift in global financial flows toward nature-positive outcomes. PwC is supporting the framework’s development by leading the Data and Analytics Working Group and sitting on the Taskforce as one of 34 members.
In March, the TNFD published the first beta iteration of its framework and a discussion paper that sets out the landscape of nature-related data. The framework outlines disclosure requirements that are aligned to those of the Taskforce on Climate-related Financial Disclosures (TCFD), which is forming the bedrock of globally aligned environmental disclosure standards. Global alignment is a crucial element of the kind of systemic economic reform we need to see to address issues like nature loss and climate change. Wider stakeholders and investors need more types of high-quality information to make the right decisions. That information needs to be as comparable and robust as the financial information they can access today.
Moving forward, organisations will be encouraged to disclose around the same four key pillars as TCFD:
Governance: the organisation's governance around nature-related impacts, dependencies, risks and opportunities.
Strategy: the actual and potential effect of the organisation's impacts and dependencies on nature as well as the associated risks and opportunities on its business, strategy and financial planning.
Risk Management: the processes used by the organisation to identify, assess and manage its impacts and dependencies on nature and associated risks and opportunities.
Metrics and Targets: the metrics and targets used to assess and manage relevant impacts and dependencies on nature and associated risks and opportunities.
The framework also sets out initial ‘how-to’ guidance for organisations to follow when preparing disclosures. This includes Locating an organisation's interface with nature, Evaluating dependencies and impacts, Assessing risks and opportunities and Preparing to respond to nature-related risks/opportunities (the LEAP process). Further guidance on topics such as metrics and targets and scenario analysis will be released in subsequent beta versions of the framework in June 2022, October 2022 and February 2023, before a final version is expected in September 2023.
TNFD disclosures will be voluntary, however, there is a high chance that their recommendations will be adopted by regulators in due course in a similar way to how the TCFD now informs mandatory climate regulations in a growing number of jurisdictions. Corporates and financial institutions should start to explore and act on the TNFD’s guidance now by focusing on ‘no regret’ actions ahead of subsequent iterations of the beta framework, and actively engaging in the development process.
Four things you can do now:
Governance: Assign roles and responsibilities for nature-related risks and opportunities, to increase your board's oversight and understanding of their relevance throughout your operations and supply chains.
Locate: Nature-related risks and opportunities are highly specific to location. Organisations should start collating geospatial data for their operational and supplier assets, a key early step in the TNFD LEAP process. More information here.
Tools: Utilise available tools that have already been developed to assess dependencies and impacts, and risks and opportunities. A non-comprehensive list of available tools can be found in the TNFD data discussion paper here (p.38) alongside two theoretical case studies for inspiration.
Feedback: Engage and co-create the TNFD framework by providing your feedback on the interactive Beta v0.1 framework now, and for future iterations as they are published. Businesses and financial institutions have a unique opportunity to help shape the framework and share their insights into sector-specific guidance.
If you would like support on any of these actions, our experienced team is ready to help you with your TNFD journey.