The Taskforce on Nature-related Financial Disclosures (TNFD was formally announced in June 2021 to respond to the acceleration of global nature loss and decline. Based the success of the Task Force on Climate-related Financial Disclosures (TCFD), the TNFD aims to put nature at the heart of business decisions to reduce risks to nature and finance. EcoAct’s TNFD experts, Kimberley Lasi and Jess Chalkley, explain what TNFD is and why your business should adopt the TNFD recommendations.
What is the TNFD and what does it contain?
The TNFD builds upon the work of the TCFD but while the TCFD focuses on disclosure in relation to climate change, the TNFD instead focuses on the role of nature. Its primary aim is to allow decision makers to incorporate nature-related risks and opportunities into strategic planning. The recommendations from the TNFD are science-based and consistent with global policy goals and international sustainability reporting standards. They enable companies to get started now, with the aim to increase the ambition of their disclosure and targets over time.
In September 2023, the final recommendations for nature-related financial disclosures were released by the TNFD, outlining the four pillars of recommended disclosure. These pillars are consistent with the pre-existing and widely reported TCFD framework:
- Disclosing how nature-related dependencies, impacts, risks and opportunities for the organisation are governed internally.
- Disclosing any identified nature-related dependencies, impacts, risks and opportunities and how these impact operations, strategy, and financial plans for the organisation.
- Risk and impact management
- Disclosing how the organisation identifies and evaluates nature-related dependencies, impacts, risks and opportunities as well as the process employed to choose which areas to focus on and how to monitor progress.
- Metrics and targets
- Disclosing the organisation’s targets and metrics used to assess and manage any nature-related dependencies, impacts, risks and opportunities deemed as material to the organisation.
Given that much of the groundwork has already been put in place with the TCFD recommendations, we anticipate a much faster rate of adoption of the TNFD recommendations.
Why is the TNFD important?
Growing biodiversity decline is being caused by human-driven pressures, including overexploitation and climate change. As a result, we are at risk of losing the vital ecosystem services we as humans depend on.
There are four branches of ecosystem services that we depend on, which include provisioning services (e.g. pollination and food production), regulating services (e.g. climate control), supporting services (e.g. nutrient cycling and habitat provision) and cultural services (recreational and spiritual value).
In recent years, the loss of these ecosystem services has been given a monetary value in an attempt to emphasise the severity of biodiversity loss. A report from the World Bank in 2021 found that the collapse of just a few of these services could result in a decline in global GDP by 2.7 trillion USD per year by 2030. The financial impact of biodiversity loss is also being felt by businesses, through supply chain disruption, in particular global supply chains, and through increased physical risks which impact workforces and local communities. For example, the impact of increased flooding events as a consequence of deforestation, due to the loss of flood regulation services provided by trees.
It is more important now than ever that businesses take action to understand their nature-related issues. This includes the impact their operations are having on nature and in return, the risks that nature-negative outcomes pose to their operations. This is vital to achieve nature-positive outcomes rather than nature-negative ones, and the TNFD provides a clear pathway to get there.
Why should you adopt the TNFD recommendations?
Despite the robust evidence bank for the essential benefits that nature provides to humans, and the negative impacts (particularly the financial impacts) associated with biodiversity decline and the loss of these benefits, there are few organisations that have adopted a systematic approach to assessing and disclosing their nature-related risks and opportunities.
Currently, TNFD disclosure and alignment is voluntary, however, with nature-related disclosures gaining traction in the market and being integrated into upcoming regulations such as CSRD, TNFD alignment offers a great opportunity for businesses to start to adapt and evolve their risk management approach by integrating nature into their decision-making and corporate reporting.
This will become particularly important as new nature-related issues arise and become increasingly important in mainstream reporting as regulatory requirements increase. This is already evident in companies’ CDP disclosures, with this year seeing the introduction of a series of new biodiversity questions. Similarly, the introduction of science-based targets for nature earlier this year emphasises the importance of incorporating nature-related issues into corporate target setting.
How to get started with TNFD
The pathway to nature-positive and TNFD alignment will look different for every organisation. Getting started is the most important step.
Our tips for getting started:
1) Prioritise engagement and training across all levels of your organisation to bring the topic of nature and its benefits into regular conversation. This is key to understanding your organisation’s impact on nature and the opportunities to promote nature positive outcomes. EcoAct can support with delivering training sessions for your organisation through formal or informal workshops.
2) Understand where you stand in your sector and identify your nature-based goals as an organisation. EcoAct can support your organisation with peer-benchmarking and regulation review.
3) Once nature-related risks have been identified, involving input from all areas and levels of the business. Integrate these into your company risk register to begin considering the level of risk and the mitigation measures required. EcoAct can support with identifying and assessing the most material nature-related risks and opportunities facing your company.
4) Integrate nature-related risks and opportunities into your operational strategy and make time to regularly review, for example in board meetings and annual updates and review as new guidance is issued and nature-related requirements evolve.
5) Register your intention to adopt the TNFD recommendations here.