The recommendations of the Taskforce for Nature-related Financial Disclosures (TCND), aims to guide thinking for organisations to report and act on risks relating to nature. The intention is that this will help shift global financial flows away from nature-negative outcomes and toward nature-positive outcomes. Government departments and businesses have been quick to endorse the ambitions and framework.
This brief article sets out what the TNFD is, what it means for organisations, and how it to act on it. this has been developed in consultation with several Borrowed Time clients.
More than half of the world’s economic output – US$44tn of economic value generated – is dependent on nature. Financial institutions and companies don’t have the information they need to understand this dependence, and their relationship with nature.
Changes to nature may affect companies’ immediate financial performance, or the longer-term financial risks that may arise from how the organisation, positively or negatively, impacts nature.
A future economy that aims to have a positive effect on nature needs an accurate flow of nature-related information. Any prosperous business needs this too. The theoretical attraction of the TNFD is that it will lead the market to discover how to incorporate nature into its financial planning, strategic thinking and everyday decision making[1].
The TNFD framework is in its beta version and other elements are expected to be added before the final version.
The first beta version of the TNFD framework includes three core components:
An outline of fundamental concepts and definitions for understanding nature
Early work has been the identifying and defining a standard set of fundamental concepts to understand, assess and report nature-related risks and opportunities.
There doesn’t yet exist a standardised business lexicon for nature, as there is for climate change for example. This is necessary to help inform corporate and investment decisions
TNFD’s draft disclosure recommendations for nature-related risks and opportunities
This gives a structure for comparable sustainability and reporting:
Governance
Disclose the organisations governance around nature-related risks & opportunities.
Strategy
Disclose the actual and potential impacts of nature-related risks and opportunities on the organisation's businesses, strategy and financial planning where such information is material.
Risk Management
Disclose how the organisation identifies, assesses and manages nature-related risks.
Metrics & Targets
Disclose the metrics and targets used to assess and manage relevant nature-related risks and opportunities where such information is material.
Guidance for corporates and financial institutions to undertake nature-related risk and opportunity assessments
This offers practical guidance for how to go through a nature-related risk and opportunity assessment process. It is called the LEAP approach and follows the following steps.
Locate your interface with nature
Evaluate your dependencies and impacts
Assess your risks and opportunities
Prepare to respond to nature-related risks and opportunities, and report to stakeholders
The TNFC framework is still in its beta phase. However, it is likely to follow in the TCFD’s footprints and become a core part of sustainability management and reporting. We offer a few pieces of guidance to consider as TNFD comes into sharper focus.
We can help clients to distil what TNFD means for them, including readiness reviews, gap analyses, and developing roadmaps for action. We have helped many clients assess and sustainability risks and opportunities (including following the recommendations from the TCFD), integrating them into strategic planning and communicating them effectively to stakeholders.
