This is what you need to know about the TNFD
TNFD released its final recommendations
Last week, the scientific journal Science Advances published an update on our progress on the planetary boundaries. The study reveals that we have crossed six of the nine planetary boundaries, such as climate change, loss of biodiversity and land system change. To move back into the safe zones of these planetary boundaries, we must act. This week, on the 18th of September 2023, the Taskforce on Nature-related Financial Disclosures (TNFD) launched their final recommendations. These recommendations will help companies to report and act on emerging nature-related issues. After two years of intensive work, 90,000 reviews and over 200 organisations pilot testing, the TNFD is now ready to use. In this blog, we will tell you what you need to know.
Why should you act on nature-related issues?
Nature is fundamental to the prosperity of our societies and economies. On the one hand, the economic value of nature and its services adds up to 44 trillion USD, which means more than half of the world's GDP is exposed to risks due to nature loss. On the other hand, nature-based transition could generate 10 trillion USD in business opportunities. Moreover, companies both impact the nature and are dependent on the services that nature has to offer. Add the fact that six of nine planetary boundaries have been crossed and we are approaching a sixth mass extinction, and it becomes clear that we should act upon nature-related issues. But how could companies do this?
Source: Science advances, Earth beyond six of nine planetary boundaries
The TNFD Recommendations
The TNFD Recommendations aim to build a risk management and disclosure framework that can be used by all types of organisations to identify, assess, manage and disclose their nature-related issues. The four building blocks of the TNFD framework, which are collectively referred to as “nature-related issues” are: 1) nature-related dependencies, 2) impacts, 3) risks, and 4) opportunities (aligned with Global Biodiversity Framework Target 15). Organisations are recommended to disclose around four key pillars: Governance, Strategy, Risk & Impact Management, and Metrics & Targets, which is also aligned with the TCFD.
One of the challenges of the TNFD is that there is no single measurement metric for nature change, like the CO2e for climate. This creates challenges for organisations trying to manage and/or report on nature-related issues. The TNFD takes these complexities into account and provides a simplified, systematic process to account for these differences.
The TNFD consists of 14 recommended disclosures arranged around the four above mentioned pillars. To build upon the TCFD, all 11 TCFD recommended disclosures are carried over, with reference to nature-related issues instead of climate. Additionally, 3 further disclosures are added, covering three important areas for nature: engagement with local communities and indigenous people, prioritisation of sensitive locations and consideration of the value chain (rather than own operations only). The TNFD disclosures are also consistent with the TCFD, ISSB and the GRI Standards.
Please, see the figure below for the 14 recommended disclosures:
Source: TNFD Recommendations of the Taskforce on Nature-related Financial Disclosures
The LEAP approach
Along with the above disclosure recommendations, the TNFD has also created a voluntary process for assessing and managing nature-related issues, called the LEAP approach. This is merely meant for internal assessment, whereas the disclosure recommendations are meant for external reporting. The LEAP approach includes four phases:
- 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
The LEAP approach helps organisations to assess nature-related issues and ultimately embed the related risks and opportunities in their risk and portfolio management. It is also aligned to the requirements of new standards such as the ISSB and the CSRD.
Source: TNFD Recommendations of the Taskforce on Nature-related Financial Disclosures
What should be disclosed?
The TNFD applies a three-tiered approach to provide comparability (for report users) and flexibility (for report preparers):
- Core global metrics: for cross-sector comparability
- Core sector metrics: for sector comparability
- Additional metrics: where relevant and decision- useful
For now, the core global metrics are the most relevant. These 14 indicators are chosen as they apply to most business models across various sectors:
- 9 indicators are organised around dependencies and impacts, for example related to the drivers of nature change (e.g., pollution, climate change, land-use change).
- The other 5 indicators are organised around risks and opportunities stemming from nature-related issues. These include, for example, assets that are vulnerable to nature-related transition or physical risks, or revenue increase stemming from products or services with positive impacts on nature.
What are the first steps to take?
The TNFD recommends how organisations could act upon and disclose on nature-related issues. The first step is to assess if and how “nature and its biodiversity” is a material topic for your company. This requires gaining an understanding of the fundamentals of nature. TNFD’s “Getting started guidance” and the LEAP approach provides further guidance.
A double materiality assessment would also help your company understand its organisational context and the related material matters. See also our blogs about double materiality here and here.
Next, TNFD has also provided several additional guidance documents for sectors and biomes, scenario analysis, target setting and engagement with indigenous people, local communities and affected stakeholder. All these documents are publicly available on their website: https://tnfd.global/
In the long run, shifting away from nature-negative outcomes and toward nature-positive outcomes will be beneficial for both companies and living organisms including us as human beings. The TNFD is expected to drive the necessary action on nature-related issues.
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Would you like to know more about how 2Impact can assist your company in reporting on the TNFD disclosures? Contact us at sandra@2impact.nl
Sources
Earth beyond six of nine planetary boundaries | Science Advances
Half of World’s GDP Moderately or Highly Dependent on Nature, Says New Report
TNFD Recommendations v1.0
