Bringing nature risk into business decision-making

When the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations were finalised in 2023, modelled after the Task Force on Climate-related Financial Disclosures (TCFD), many businesses expected nature reporting to follow a similar path. However, while most companies we speak to agree that nature matters, there is less clarity around what needs to be reported and how nature-related impacts may affect the business.

Expectations are becoming much clearer with two recent developments that provide greater certainty for businesses: the release of the TNFD’s Locate, Evaluate, Assess and Prepare (LEAP¹) updated version 2.0 on 12 October 2026, followed by the launch of the International Sustainability Standards Board’s (ISSB) new exposure draft on nature-related disclosures on 22 October 2026 in conjunction with the 2026 United Nations Conference of the Parties to the Convention on Biological Diversity (COP 17). 

Malaysia's current reporting landscape

The National Sustainability Reporting Framework (NSRF) requires public listed companies as well as large non-listed companies with revenue above RM2 billion to issue sustainability statements under the IFRS Sustainability Disclosure Standards (IFRS SDS) issued by the ISSB. Whilst the NSRF includes a transition relief that allows disclosure of only climate-related risks and opportunities during the transition period, that window is closing soon.

Group 1 companies—those listed in the Main Market with a market capitalisation of RM2 billion or more, will need to start reporting their remaining sustainability-related risks and opportunities for the financial year beginning 1 January 2027. This is followed by the remaining companies listed on the Main Market (Group 2) for the financial year beginning 1 January 2028; and ACE Market and large non-listed companies for the financial year beginning 1 January 2030.

Once the transition relief expires, nature-related risks and opportunities will come firmly into scope under the IFRS SDS—meaning Malaysian companies will now need to focus on how they will report on these considerations.

Different starting points for nature reporting

In practice, companies fall broadly into two groups. Some are mature sustainability reporters with years of disclosures on areas such as land, water, pollution, and biodiversity, although not necessarily in the terminology that the TNFD or the IFRS SDS now expects. For these companies—which include entities from the real estate, forestry, and agriculture sectors—the focus is largely about reshaping existing reporting practice to fit a new framework rather than starting from scratch.

Others are assessing nature for the first time. They need to identify what is important to their business from a nature perspective, and whether any of these are financially material. That answer often sits outside their direct operations, in the suppliers they buy from or the clients they finance.

Making sense of the ISSB announcement

Rather than issuing a standalone standard, the ISSB has proposed a Practice Statement that sits alongside the IFRS S1 'General Requirements for Disclosure of Sustainability-related Financial Information' (IFRS S1) and spells out what IFRS S1 expects on nature (with public comments open until 19 February 2027). Individual jurisdictions will decide how to integrate it. Simultaneously, Malaysia is considering how these emerging nature-related reporting expectations can be integrated in the local reporting landscape.

Two aspects of the draft stand out. First, TNFD's upgrade of the LEAP assessment approach (LEAP 2.0)—which many expected to be mandatory—is positioned as a helpful, optional process. Second, the draft explicitly defines nature-related risks and opportunities as arising from the reporting entities’ dependencies and impacts on nature, as well as the other parties. 

This is a good simplification as most companies are comfortable with the risk and opportunity lens, which relates to their own actions. Dependencies and impacts are a newer view for many businesses since they involve externalities more directly, yet understanding these concepts are essential to identifying your wider sustainability risks and opportunities under IFRS S1.

How far can the TNFD take you?

If IFRS S1 is the destination, the TNFD is the practical route to get there. LEAP 2.0 describes itself as an "on-ramp" to IFRS S1 and shares the same financial materiality baseline, meaning the TNFD does not have to be treated as a separate reporting exercise—used well, it represents how you build your IFRS SDS disclosures on nature.

Understanding which parts to prioritise is key:

• Lean on LEAP to identify your nature-related risks and opportunities. Because the TNFD's four-pillar structure mirrors those in IFRS S1, the insights from LEAP can feed directly into your IFRS S1 disclosures.

• Be selective with the TNFD's sector guidance and metrics. IFRS S1 primarily points to the Sustainability Accounting Standards Board (SASB) Standards for industry metrics, while the exposure draft allows you to draw on the TNFD metrics where they help meet and do not conflict with the requirements under IFRS S1. 

• Be clear on the materiality lens you’re using. While LEAP can be applied using a financial materiality lens, the wider TNFD framework also includes elements that go beyond IFRS S1 such as double materiality and standalone systemic risk categories. These may support broader sustainability objectives, but are not required for IFRS S1 reporting. Companies should be clear about their reporting objectives and apply the appropriate materiality lens. 

Where to start

While the ISSB’s exposure draft is not yet finalised, you don't need to wait for the final text to begin.  
 
Here are some recommendations on how the TNFD can be used immediately to move your IFRS SDS reporting forward:

• Scope with LEAP. Use LEAP 2.0's scoping phase for a quick, high-level scan of your sectors, value chains, and locations to form a working hypothesis of where nature matters to your business. Engage a senior sponsor early, and resist diving into the data too soon before determining what to measure and the right systems to use.

• Build on your climate reporting. Use LEAP alongside your existing climate work under the NSRF. Your climate risk processes, site data, and supplier due diligence give you a headstart, especially as the draft advises companies to connect their nature and climate disclosures rather than duplicate them.

• Turn identified hotspots into metrics. The Locate phase within LEAP's methodology maps where your assets and key suppliers sit relative to sensitive nature locations, such as areas important for biodiversity, or water stress. That gives you the starting point for the draft's proposed cross-industry metric on the amount and percentage of assets or activities vulnerable to nature-related risks (or aligned with opportunities), turning the hotspots you’ve identified into information you can measure and report.   

• Write it up in IFRS S1's terms. Report what LEAP surfaces under IFRS S1's four pillars using the ISSB's language, for example, using the term "environmental resources" as opposed to the TNFD’s "environmental assets".

The time to act is now

Assessing nature will always be more nuanced than counting carbon, but the direction of travel is clear enough to start taking practical steps now. With the climate-first relief ending for Malaysia's largest listed companies from the financial year beginning 1 January 2027, there is little reason to wait. Starting now gives companies time to learn, capture their material nature-related opportunities and reduce risks ahead of their peers, while using this experience as a baseline for improvement in the next reporting cycle. Those that act now will help shape what good looks like for nature reporting in Malaysia. It's time to make the leap forward.

The content and author information presented are accurate as of the time of publication.