The Taskforce on Nature-related Financial Disclosures (TNFD) provides companies with the tools and responsibilities clearly defined to drive corporate transformation towards a more sustainable, nature-positive future. Earth.Org takes a closer look.

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The world is currently dealing with a triple planetary crisis: climate change, pollution and biodiversity loss. In 2022, the World Wildlife Fund (WWF) released the Living Planet Report. The study highlights the current status of biodiversity and embraces a nature-positive approach and promotes the idea that embedding nature more explicitly into financial and economic systems can help drive more sustainable choices. 

Although the need for action is evident, many businesses and financial organisations currently lack the information required to fully comprehend the risks and opportunities arising from their impacts and reliance on nature. The Taskforce on Nature-related Financial Disclosures (TNFD) aims to address this gap by integrating nature into corporate reporting and strategic planning, providing improved information to decision-makers.

The TNFD Framework for Corporate Reporting

Announced in June 2021 as a response to a global decline in nature and biodiversity, the taskforce intends to position nature at the core of business decisions through its recommendations and guidelines.Released in September 2023, the TNFD framework is based on the structure of the Taskforce on Climate-related Financial Disclosures (TCFD). This is to ensure faster adoption of its principles in the market. Recommendations of the TNFD are also consistent with Target 15 of the Global Biodiversity Framework (GBF), which requires businesses to assess, disclose and reduce biodiversity-related risks and impacts. This target, along with other targets of the GBF, is to be achieved by 2030.

The TNFD recommends 14 voluntary disclosures organised around four pillars:

1. Governance: Companies should provide details regarding their governance processes and controls used to monitor and manage nature-related issues. This information helps assess if these issues are given adequate focus by the board and the management, and if the organisation’s governance bodies possess the necessary skills and expertise to address these concerns effectively.
2. Strategy: This relates to the approach that the organisation uses to manage nature-related issues. Companies should describe how these concerns may affect the business model or financial planning. Such information indicates the resilience of the business strategy and provides insights into the future performance of the organisation.
3. Risk and Impact Management: Organisations are recommended to disclose processes used to identify, assess, prioritise and monitor nature-related concerns, and whether these processes are integrated into existing risk management frameworks. 
4. Metrics and Targets: Disclosures should also include performance of the company, including progress towards any targets set. Metrics highlight the overall exposure of an organisation to nature-related risks and reveal progress in managing or adapting to those issues. Such disclosures also help investors and other stakeholders compare organisations within a sector or industry.

Along with a comprehensive guidance on the recommended disclosures, the TNFD has also designed the LEAP approach to provide direction on identifying and assessing nature-related issues. This integrated approach involves four stages:

• Locate interface with nature;
• Evaluate dependencies and impacts on nature;
• Assess nature-related risks and opportunities, and,
• Prepare to respond to and report on material issues, aligned with TNFD’s recommended disclosures. 

This structure is compatible with other popular reporting frameworks such as the IFRS Sustainability Disclosure Standards. A new tool has also been designed in a collaborative effort with the Global Reporting Initiative (GRI) to help align GRI reporting with TNFD. 

The TNFD framework goes beyond disclosures – it serves as a strategic tool for corporations and financial institutions to direct their investments wisely. With the TNFD guidelines, information on risks and opportunities is streamlined. This helps align investments with environmental goals, ensuring that financial decisions support a greener future.

Integrating TNFD Reporting and Nature-Based Solutions

To reverse environmental damage and mitigate climate impact, nature-based solutions (NbS) have emerged as a promising and innovative approach for organisations. These solutions harness the power of natural processes and ecosystems to tackle numerous environmental and social challenges. 

Unlike traditional interventions, NbS work with nature, rather than against it. Solutions range from restoring wetlands to absorbing floodwaters and developing urban green spaces. However, in spite of the growing impetus received from international organisations such as the UN Environment Programme (UNEP), NbS remains severely underfunded. 

As per the 2023 State of Finance for Nature report, current finance flows to NbS of US$200 billion are massively outweighed by finance flows with direct negative impacts on nature of almost $7 trillion. The latest report on NbS published by WWF highlights that inadequate information on returns and impact have been restricting NbS investments. Due to inconsistent reporting, investors do not have clarity on risks, opportunities and impacts of NbS. To resolve these issues, the LEAP approach and the TNFD framework can be used to assess and evaluate NbS projects in terms of project design, governance, and implementation. 

Preparing Businesses for Nature-Related Disclosures

Developing processes to support the TNFD disclosures can take time. Companies may encounter several challenges pertaining to data availability, quality of information and determining materiality of issues. While adoption pathways could be different for each company, as first steps, organisations can start with a few disclosures depending on how much information they currently possess. A gap analysis between TNFD requirements and the existing processes can be helpful to identify which areas or parameters need more work subsequently. Companies can also join the TNFD Forum, which supports collective progress through engagement and collaboration. To facilitate adoption, the TNFD released a suite of Additional Sector Guidance documents this year. 

As of June 2024, more than 400 organisations have adopted the TNFD recommendations. The list includes companies such as IKEA, Standard Chartered, Sumitomo Corporation, Bank of America and AstraZeneca.

With the TNFD, companies now have the tools and responsibilities clearly defined to drive corporate transformation towards a more sustainable, nature-positive future. Going forward, the Taskforce will continue concentrating efforts on promoting and facilitating voluntary market adoption by addressing knowledge gaps and capacity-building of the participants.