Nature-related risks in practice: a closer look at the TNFD

What is the TNFD?

The TNFD is the Taskforce for Nature-related Financial Disclosures. It is a body of organisations, groups and individuals with the common goal of ‘supporting a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.’ It is made up of the TNFD Alliance and its founding follows the creation of the TCFD (Taskforce for Climate-related Financial Disclosures) in 2015 which recommends on climate-related issues.

When was the TNFD created?

It was announced on 4 June 2020, with the preparatory phase of the initiative running from September 2020 until June 2021.

The TNFD framework comes at a crucial time when there is little awareness around nature positivity, which also requires suggestions, frameworks and systems for data and reporting.

How is the TNFD structured?

The TNFD Alliance refers to the body of experts, organisations, and groups working together towards the common goal. It is ‘market-led, science-based and government-endorsed’. The two Co-Chairs, David Craig and Elizabeth Maruma Mrema, lead the Taskforce and direct its strategy.

There are 4 groups within the Alliance: the Taskforce Members, the TNFD Forum, the TNFD Secretariat, and the Knowledge Hub. 

The Taskforce members are a group of 34 senior executives from financial institutions, corporates and market service providers, with one more to be elected to make the maximum number of 35 members. They represent “a market capitalisation of over US$3.1 trillion, manage over US$18.3 trillion in assets and have a footprint in over 180 countries. Members are selected for their individual subject-matter expertise across nature and finance, as well as their sector and geographical coverage.”

The Forum is a ‘multi-disciplinary consultative group of institutions with over 350 Forum members.’ It incorporates a large range of company types, including academic organisations, financial institutions, and governmental organisations. 

The Secretariat is a team of 4 individuals working to support the activities of the Taskforce Members and Co-Chairs. They “coordinate the TNFD Forum, and direct the TNFD Knowledge Hub.”

The TNFD Knowledge Hub is a “globally-distributed network of subject matter experts and advisory partners providing best in class scientific knowledge and insights on biodiversity, natural capital, market standards and reporting practice.” TNFD’s core knowledge partners include 13 leading science and industry bodies, including the GRI, the UN Statistics Division, and the WWF. 

What is its purpose?

The Taskforce on Nature-Related Financial Disclosures will develop recommendations that organisations can follow when disclosing information about the exposure of their companies to natural hazards.

Why is nature given a central role in the TNFD?

This is important because “More than half of the world’s economic production – with an economic value of $ 44 trillion – is moderately or heavily dependent on nature.” The reliance on the natural world by businesses is dangerous and recommendations and strategies need to be developed to mitigate these risks. Further, having a positive effect on the environment has a positive effect on humanity; “A positive environmental transformation effort can generate up to $ 10.1 trillion in business value annually and create 395 million jobs by 2030.”

Adonai Herrera-Martinez, Director of Environment and Sustainability at the European Bank for Reconstruction and Development (EBRD) echoed this sentiment in a recent interview with APlanet. He explained that “Nature provides the services, the goods that are basic for life, from clean air, water, and soil to underpinning the living natural resources that drive all our economic activities.” The EBRD works with the TNFD Forum to develop methodologies and recommendations for the complex task of measuring nature-related risks.

What are the challenges?

When David Craig, Co-Chair of the TNFD, participated in the Economist’s Sustainability Week he mentioned the challenge of the capability gap. This challenge businesses face is given by the lack of skills and understanding for tasks such as mapping CO2 emissions. To bridge the capability gap it is important to work with educational institutions (i.e. engaging business schools) and have a common nature-related risk language in order to be on the same page.

Beccy Wilebore, Chief Scientist at Natural Capital Research identified a challenge in the form of data. In order to have effective frameworks, high quality, accurate data tunderpinning them is needed. She placed the emphasis on outcome-based metrics. The challenge comes in sifting through the petabytes of data and identifying what is relevant to the Taskforce to create effective recommendations for businesses. And this same condition can be applied to businesses themselves and their data: in order to report on their sustainability operations and activities, businesses need to ensure they have accurate, clean, relevant data to create their reports which are all-important for stakeholders.

Reflecting on the role of APlanet, it is clear that our platform in managing ESG data is crucial for businesses aiming to create accurate ESG reports for their stakeholders and even more so as the importance of nature-related financial reporting comes to the fore.

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Compared to climate, the metrics for nature are challenging. For climate change, the goals and metrics are relatively clear – we need to keep global warming to less than 1.5C and we can measure emissions in CO2 equivalent – but what is meaningful data for nature-related reporting? As Adonai Herrera-Martinez explained:

“nature has multiple performance indicators. They are strongly localised and they depend very much on the local baseline, so assessing nature related impacts in orders of magnitude is more complex [than assessing climate related impacts].”

APlanet ATalk: Sustainability at the EBRD

That said, he remained positive, adding, “It’s an incredibly complex topic, but the fact that it’s so incredibly complex doesn’t mean that we shouldn’t act on it.” 

This is the one of the many challenges the TNFD faces in order to recommend and direct companies to the correct methods and results.

There is also little knowledge of nature-related reporting, as well as nature-related risks. We are clear on the climate and what it will mean if the Earth warms further, but perhaps it is not so clear for the public and business leaders what it means to affect soil quality or destroy animal habitats.

That said, it is important not to treat climate and nature as two separate entities. Instead, we should aim to treat their interdependent relationship as an opportunity to reduce harmful effects on the environment.

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