A Step Closer to Nature-related Financial Disclosures

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    Stockholm (NordSIP) – The Taskforce on Nature-related Financial Disclosures (TNFD) has an ambitious aim to support a shift in global financial flows away from nature-negative and toward nature-positive outcomes. The initiative is now starting to deliver on its promise to develop a comprehensive and consistent risk-management and disclosure framework for organisations to report and act on evolving nature-related risks. On 15 March, TNFD unveiled the first beta version of its nature-related risk-management and disclosure framework. It is still very much a work in progress. The taskforce is now inviting stakeholders to participate in the development process by testing and providing feedback on the prototypes through an interactive online platform.

    Sweden’s Seventh AP Fund (AP7) joined TNFD early on and is, alongside Norges Bank Investment Management, one of only two Nordic representatives to actively contribute to developing the new framework. “Given that so much of the world’s economy depends on nature and its services, we find it necessary that companies we invest in should start reporting on their nature-related risks,” comments Flora Gaber, Manager ESG Analysis at AP7 (pictured). “We want to know how they manage these risks and what opportunities they see to mitigate or adapt to the challenges. This means examining the risks and opportunities not only in their direct operations but also along the supply chain. In other words, we need to understand companies’ dependencies and impacts on nature in order to get a holistic view of our risks and opportunities, now and in the future,” she adds.

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    The prototype framework marks the first attempt to incorporate nature-related risk and opportunity analysis into the heart of corporate and financial decision making. It has three main components. Apart from providing foundational guidance to help market participants understand nature and nature-related risks and opportunities, the framework also offers disclosure recommendations and practical ‘how to’ advice for companies and financial institutions to consider incorporating into their enterprise risk and portfolio management processes.

    The financial disclosure landscape is getting increasingly complex which underscores the need for consistency with the existing standards, metrics and data. Therefore, it is encouraging to see that the new TNFD framework builds on work done by the Task Force on Climate-related Financial Disclosures (TCFD), adopting the same four pillars and aligning its high-level disclosure recommendations as much as possible. The beta framework is also designed for future alignment with the global baseline for sustainability standards under development by the International Sustainability Standards Board (ISSB) while providing flexibility for those organisations that wish to, or need to, report to different materiality thresholds and regulatory requirements.

    The release of the beta version is just the beginning of an 18-month process of consultation and development together with a broad range of market players and stakeholders. By following an open innovation approach, TNFD hopes to accelerate the framework’s evolution and steadily improve its relevance, usability, and effectiveness before releasing its recommendations in the 3rd quarter of 2023.

    “The point of releasing a beta version first is to allow the market to participate in its development,” explains Gaber. “Nature-related risks and opportunities are inherently local, and we need the framework to be applicable to a variety of regions, areas, and ecosystems. We hope, therefore, that stakeholders from many different sectors covering a wide range of geographies will test the framework,” she adds.

    “The final framework should be directly applicable and useful to both companies and investors. We want businesses to be involved in developing the framework so that they too can see the benefits of having a common standard,” concludes Gaber.



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