On September 19, 2023 the Taskforce on Nature-related Financial Disclosures (TNFD) published its final Recommendations for nature-related risk management and disclosure, providing a comprehensive framework for businesses and financial institutions to report on their dependencies on nature and nature-related risks and opportunities.
The Recommendations are intended to serve as a starting point for organizations to begin identifying, assessing and disclosing the nature-related issues in their own time, and subject to their own strategy, materiality, cost and capability considerations. In addition to helping organizations better understand and manage the financial risks and opportunities associated with nature loss and degradation it also aims to help investors and other stakeholders make more informed decisions about the organizations they invest in and engage with.
The TNFD’s recommendations are structured around four key pillars:
- Governance: How does the organization manage nature-related dependencies, impacts, risks, and opportunities?
- Risk and Impact Management: How does the organization identify, assess, and manage nature-related risks?
- Strategy: How does nature-related risk and opportunity affect the organization’s business model, strategy, and financial planning?
- Metrics & Targets: What metrics and targets does the organization use to measure and manage its nature-related performance?
The launch of the TNFD’s 14 disclosure recommendations comes after two years of design and development. The Recommendations are voluntary, but the organization is encouraging early adoption by companies and financial institutions around the world. It is also working with regulators to promote the adoption of its framework.
| TNFD’s 14 disclosure recommendations |
| Governance | Strategy | Risk and Impact Management | Metrics & Targets | |
|---|---|---|---|---|
| A | Describe the board’s oversight of nature-related dependencies, impacts, risks and opportunities. | Describe the nature-related dependencies, impacts, risks and opportunities the organisation has identified over the short, medium and long term . | (i). Describe the organisation’s processes for identifying, assessing and prioritising nature-related dependencies, impacts, risks and opportunities in its direct operations. (ii). Describe the organisation’s processes for identifying, assessing and prioritising nature-related dependencies, impacts, risks and opportunities in its upstream and downstream value chain(s). | Disclose the metrics used by the organisation to assess and manage material nature-related risks and opportunities in line with its strategy and risk management process. |
| B | Describe management’s role in assessing and managing nature-related dependencies, impacts, risks and opportunities. | Describe the effect nature-related dependencies, impacts, risks and opportunities have had on the organisation’s business model, value chain, strategy and financial planning, as well as any transition plans or analysis in place. | Describe the organisation’s processes for managing nature-related dependencies, impacts, risks and opportunities. | Disclose the metrics used by the organisation to assess and manage dependencies and impacts on nature. |
| C | Describe the organisation’s human rights policies and engagement activities, and oversight by the board and management, with respect to Indigenous Peoples, Local Communities, affected and other stakeholders, in the organisation’s assessment of, and response to, nature-related dependencies, impacts, risks and opportunities. | Describe the resilience of the organisation’s strategy to nature-related risks and opportunities, taking into consideration different scenarios. | Describe how processes for identifying, assessing, prioritising and monitoring nature-related risks are integrated into and inform the organisation’s overall risk management processes. | Describe the targets and goals used by the organisation to manage nature-related dependencies, impacts, risks and opportunities and its performance against these. |
| D | Disclose the locations of assets and/or activities in the organisation’s direct operations and, where possible, upstream and downstream value chain(s) that meet the criteria for priority locations. |
The 14 recommendations contained in the framework are consistent with the global sustainability standards of the International Sustainability Standards Board (ISSB) and the impact materiality approach used by the Global Reporting Initiative (GRI) and incorporated into the new European Sustainability Reporting Standards (ESRS).
Early adopters
The TNFD encourages and supports voluntary market adoption of the Recommendations. Following the example of the TCFD, the TNFD will track voluntary market adoption on an annual basis through an annual status update report beginning in 2024.
In a recent survey of the TNFD Forum, over 86% of 239 respondents from 36 countries and across 11 sectors indicated that they felt they could start reporting on the TNFD recommended disclosures by calendar year 2026, based on their financial year 2025 outcomes.
The TNFD has already gained support from a number of leading businesses and financial institutions, including GSK, HSBC, and Aviva. These early adopters have committed to publishing their first TNFD disclosures in the coming years.
TNFD will announce an inaugural list of TNFD adopters – companies that have indicated their intention to start adopting the Recommendations – at the World Economic Forum at Davos in January 2024.
Transition to a nature-positive economy
The Recommendations are a significant step forward in the development of a comprehensive framework for nature-related risk and opportunity management. The framework is expected to play a critical role in helping businesses and investors transition to a nature-positive economy.
David Craig, Co-Chair of the TNFD and founder and former CEO of Refinitiv said: “Nature loss is accelerating, and businesses today are inadequately accounting for nature-related dependencies, impacts, risks and opportunities. Nature-risk is sitting in company cash flows and capital portfolios today. The costs of inaction are mounting quickly. Businesses and financial institutions now have the tools they need to take action. Building on the language, structure and approach of the TCFD and consistent with the ISSB’s sustainability reporting baseline, the adoption of the TNFD Recommendations represent a step-change in the momentum and capacity for business and finance to identify, assess and disclose their exposure to nature-related issues in a manner consistent with climate-related-reporting.