What is TNFD?
Here is what we know. More than half of global economic output, a total of US$44 trillion of value generation, is moderately or highly dependent on nature.2 Every dollar invested in nature restoration creates up to US$30 in economic benefits.3 And alarmingly, £300 billion of UK pension money is invested in companies and financial institutions that are exposed to high deforestation risk.4 Clearly, Earth’s ecosystems have massive value. But these systems are in jeopardy due to an unprecedented onslaught of human-induced biodiversity loss.
‘The sectors that are most immediately likely to be affected by the depletion of natural capital are those that exploit it most directly.’ – Mike Scott
Nature’s warning calls are at extreme levels. Global numbers of mammals, birds, fish, amphibians and reptiles have dropped by an average of 68% since 1970.1 Biodiversity loss and collapse of ecosystems from human-made damage has been widely recognised as an existential global threat. Despite the efforts of international economic and financial organisations to draft elements of nature into their growth models, there is still an absence of nature as an essential entity in our economic lives.
What is TFND and why should businesses engage and disclose with prior to release?
It is undeniable that a nature-positive approach to doing business is urgently required. Following the steps of the Taskforce on Climate-Related Financial Disclosures (TCFD), the Taskforce on Nature-related Financial Disclosures (TNFD) acts on behalf of nature. The Taskforce’s approach strikes a balance between science and market participants for clear, transparent, and comparable information. Decision-making can place nature-related risks front and centre, capital reallocation can be catalysed to protect and restore nature. By fostering knowledge, sharing and collaborating on nature-related risks and opportunities, the TNFD creates and delivers a risk management and disclosure framework for organisations of all sizes. The plan is to guide financial institutions and companies to act on evolving nature-related risks, as well as to identify opportunities that ultimately shift global financial flows to nature-positive outcomes. On the release of their second prototype framework, the TNFD outlined overall guidance and illustrative metrics to be consulted by global stakeholders with the inaugural framework being released towards the end of 2023.
Core concepts include:
- Metrics and targets that include a cross-sector approach
- Additional guidance materials to assist market participants
- Nature-related risk and opportunity assessment for financial institutions
Importantly, it is possible for companies of all sizes to engage in nature and biodiversity to promote innovative solutions to a global problem. To ensure success, it is vital to focus on internal drivers and recognise an organisation’s impact from the outset. Nature can be included across all aspects of ESG with the social aspects reflected in business through the conscious creation of urban biodiversity as well as nature-related employee perks.
So, what is on the horizon for businesses, financiers and nature-related risks and opportunities?
As the business community is navigating its expanding role as a key driver of sustainable growth, there is a broad range of market-led, science-based measures to take. By acknowledging that people are part of nature, businesses can engage from a range of aspects across the full spectrum of environmental, social and governance (ESG).
Since the time for action is now, there is an increasing number of leading companies recognising that a prosperous business relies heavily upon nature. However, businesses will be at different stages in their journey to nature net gain – an approach outlined by TNFD to managing an businesses impact that leave the natural environment in a measurably better state than it was beforehand.5 Larger companies will already be reporting nature-related metrics and targets against current ESG frameworks that include GRESB, Global Reporting Initiative (GRI), and non-GHG pollution. For smaller companies, there are many waves to move nature to be the centre of their brand. By engaging with restoration projects on a corporate level and introducing sustainability into procurement strategies leading to reduced impact on natural resources and greater engagement by working with suppliers that meet circular economy targets.
As has been done with climate in the past, these efforts can be built upon by embedding nature into governance through introducing nature into risk management. Recognising the high material financial risk that nature loss poses, it is important to integrate this exposure into decision-making to locate risks and opportunities. Transition opportunities will be high on the agenda, especially relating to evolving markets and policy. A robust understanding of the physical and financial risks and opportunities can guarantee subsequent control measures will be implemented in a timely manner. In light of the Green Claims Code, there is great potential to be transparent about diversifying portfolios into the growing market of green finance and taxation.
At Simply Sustainable, we understand that putting things right will take collaborative action to enable the natural world to flourish abundantly. Our work includes supporting international businesses from across the economy to align their reporting to current disclosure and frameworks related to nature through GRI, GRESB, and communication reviews. We welcome the market-led science-based TNFD framework to promote year-on-year improvements on a company’s journey to full disclosure.
1 World Wildlife Fund. Living Planet Report.
2 UN Environment Programme. Cutting Edge Biodiversity Module.
3 UN Environment Programme. Ecosystem Restoration for People, Nature and Climate 2021 Report.
4 Global Canopy Organisation. UK pensions.
5 UK GOV. Biodiversity Net Gain.
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