Stockholm (NordSIP) – The Taskforce on Nature-related Financial Disclosures (TNFD) chose this year’s New York Climate Week to launch its long awaited final recommendations. The overriding message to financial market participants from the organisation’s co-chair David Craig and his colleagues is clear: “Get started!” While there is an acknowledgement that data gaps remain and work on the framework will continue, the TNFD emphasises that the current recommendations are built on a solid science-based methodology and interoperability with international sustainability standards.
The launch of the recommendations is accompanied by the publication of a range of supporting documents: an overview of the Locate/Evaluate/Assess/Prepare (LEAP) approach, guidance on biomes and sectors, and glossary. The TNFD has also released several discussion papers focusing on a proposed global nature-related public data facility, sector metrics, and the approach to analysing value chains. These discussion papers are part of a public consultation to be completed by end-November 2023.
TNFD Executive Director Toby Goldner explains how the taskforce endeavoured to build on and incorporate existing biodiversity metrics and sustainability-related disclosure frameworks. “We don’t need to add to the alphabet soup,” Goldner says, and this appears to be borne out by the fact that all 11 TCFD disclosures have been retained, with only 3 nature-specific disclosures added to complete the framework. The language, structure and approach of the International Sustainability Standards Board (ISSB) is also incorporated with the TNFD recommendations. The long-term goal is for the climate and nature strands to converge, offering the market a fully integrated reporting framework.
Pragmatic approach to metrics
There is no shortage of nature and biodiversity related metrics, but few of them are suitable for use in a financial or investment context. TNFD Technical Director Emily McKenzie explains: “We conducted a survey of existing standards early on and identified over 3,000 nature-related metrics. The Taskforce found that there were relatively few for dependencies on nature, there were no widely accepted metrics for nature-related risks and opportunities for an organisation and most of the existing metrics focused on drivers of impact.” The TNFD therefore set about creating a simplified framework for financial institutions that follows a logic previously established by the TCFD.
Judson Berkey is Chief Sustainability Officer at UBS, and a member of the TNFD’s Financial Services working group: “Financial institutions depend on corporate disclosures, so until that data starts flowing out in a consistent, comprehensive manner it is a challenge for financial institutions to make detailed disclosures on impacts and dependencies. We therefore decided to go back to an approach started by the TCFD, based on disclosure of exposures to key sectors in terms of lending, investments, and insurance coverage. The sectors have been identified by the Science-Based Targets initiative, ENCORE, and Finance for Biodiversity as having high impacts or dependencies on nature.”
The time to start is now
Alongside the full recommendations paper, the TNFD has provided a Getting Started Guide, along with specific additional guidance aimed at financial institutions. Co-chair David Craig reiterates the importance of taking action now: “If regulation is not already there it is definitely coming, and it takes time to build the necessary skills. Asset owners are also encouraged to ask their portfolio companies to begin making these additional disclosures. Pilot testing has shown that the impression of complexity gradually dissipates as work progresses.” Organisations are invited to confidentially signal their intention to report according to the new recommendations via the TNFD website. A survey of TNFD forum members revealed that 70% of them intended to report their 2024 financials using the new framework. The TNFD is planning to reveal aggregated adoption rates at the World Economic Forum 54th Annual Meeting in January 2024. Feedback on the public consultation on the three discussion papers will also be presented during COP28, which begins on 30 November in Dubai.