Everything you need to know about the TNFD (Taskforce on Nature-Related Financial Disclosures)

December 21, 2022
6
min read

The Taskforce on Nature-related Financial Disclosures (TNFD) is a market-led, science-backed, and government-supported initiative developing and delivering a risk management and disclosure framework for organizations to report and act on evolving nature-related risks. This comprehensive guide helps you understand what to expect from the TNFD and anticipate future regulations that would result from the TNFD.

What is the TNFD?

The Taskforce on Nature-related Financial Disclosures (TNFD) is an initiative currently developing an integrated framework for nature-related risks and impacts reporting. The TNFD aims to help organizations and businesses report and act on evolving nature-related risks, with the hope of shifting financial flows from nature-negative projects to nature-positive projects.

The TNFD was informally established in 2020 and published its first draft in 2021. To date, the taskforce has published three drafts and plans to deliver its final report in 2023.

40 individual Taskforce Members from financial institutions, corporates, and markets service providers with over US$20trn in assets lead the TNFD. On top of that, the taskforce is supported by multiple scientific organizations, hundreds of institutions, and backed by major governments.

For businesses, both today and in the future, nature loss presents risks and opportunities. More than half of the global economy, or US$44 trillion worth of economic value, is somewhat or heavily dependent on nature. However, financial institutions currently don’t have access to the resources to properly quantify these nature-related risks and opportunities. The TNFD believe better information will enable businesses and financial institutions to address environmental risks and possibilities when making judgments about their strategic planning, risk management, and asset allocation.

The Taskforce on Nature-related Financial Disclosures is built on seven principles: market usability, science-based, nature-related risks, purpose-driven, integrated & adaptive, climate-nature nexus, and globally inclusive.

In this Academy article, we'll take an in-depth look at TNFD's preliminary work, its timeline, and how it plans to help organizations around the world restore nature.

What are the recommendations of the TNFD?

In its latest draft in November 2022 (v0.3), the TNFD released several recommendations for businesses and financial institutions to report on their impacts on nature. Following four pillars: Governance, Strategy, Risk & Impact Management, and Metrics & Targets, these recommendations offer guidance for all sectors to measure and act on nature-related risks and opportunities.

From the outset, the TNFD's approach to developing its set of recommendations has focused on ease of use across sectors. Market participants wanted a consistent and clear framework to ensure rapid adoption by businesses and financial institutions, to facilitate the shift to a fully integrated view of sustainability, covering both climate and nature.

TNFD recommendations from the latest draft (v0.3) following the taskforce four pillars - TNFD Beta Framework

Alongside its set of recommendations, the TNFD developed an easy-to-use methodology to make reporting accessible to all companies and financial institutions, helping them to understand how to respond to nature-related risks and opportunities. This integrated assessment process is called the LEAP approach, and must be followed by any organization that want to disclose their nature-related impacts. Here are the details of the LEAP approach:

  • Locate your interface with nature: Organizations’ resources, business processes and products often intersect with natural ecosystems. Dependencies and impacts on nature are frequently location-specific.

  • Evaluate your dependencies and impacts: A first, crucial step to better understanding nature-related risks is to make dependencies more transparent in corporate and investment decision-making.

  • Assess your risks and opportunities: The TNFD provides four key components to produce a high-qulaitity assessment of organization’s nature-related risks and opportunities based on the previous work of the TCFD.

  • Prepare to respond to nature-related risks and opportunities and report: In this phase, analysts should prepare to report on nature-related risks and opportunities to executives and to present recommendations based on the TNFD. Alike the third phase, the TNFD offers four guiding questions to head the disclosure process to success.

What is the TNFD timeline?

A group of 75 members, including representatives from financial institutions, governments, consortiums, and corporations got together to informally launch the TNFD initiative. From September 2020 to June 2021, these members worked on a preparatory phase, focusing on the scope and work plan of the TNFD.

The TNFD Framework was officially launched on June 2021. In March 2022 the Taskforce released its first draft (v0.1), followed by a second one in June 2022 (v0.2) and latealy by the third one (v0.3) in November 2022. The final TNFD’s draft will be published in February 2023.

The TNFD implementation timeline - from 2021 to 2023

In March 2022, along with its first draft, the TNFD released a beta version of the TNFD Framework, inviting contributors to give feedback to iterate and develop the final version of the framework. The TNFD framework can also be pilot tested by businesses and financial institutions to see how it might perform in their particular organizational setting.

In September 2023, the Taskforce on Nature-related Financial Disclosures will release its final recommendations for businesses and financial institutions to report and atc on nature-related risks to protect and restore natural ecosystems.

Who is behind the TNFD?

Elizabeth Mrema, a Montreal-based Tanzanian biodiversity lawyer, and David Craig, a London-based former CEO of Refinitiv and board member of numerous global organizations, lead the TNFD.

Alongside the co-chairs, with more than $20 trillion in assets, 40 individual Taskforce members from financial institutions, corporations and market service providers are actively working to develop the TNFD framework. Examples include HSBC, BlackRock, Bank of America, Deloitte, LVMH, Nestlé, Bayer.

On top of that, many other groups support the TNFD’s work, from scientific organizations to major govermnents and individual experts:

  • The TNFD Forum, a consultative grouping of over 800 institutional supporters;
  • The TNFD knowledge partners, a group of 18 leading scientific organisations and standard setting bodies;
  • TNFD Consultation Groups, informal groups convened in select countries and regions to expand outreach and engagement;
  • The TNFD Stewardship Council, which represents the founders and funders of the TNFD;
  • The TNFD Secretariat, which manages and coordinates the Taskforce, the TNFD Forum and the TNFD knowledge partners.

The TNFD is fully transparent about its funding, stating in the “WHO WE ARE” page its website:

“Funding for the TNFD is provided by governments, the UN, and philanthropic foundations, including the governments of Australia, France, the Netherlands, Switzerland and the United Kingdom; the Children’s Investment Fund Foundation (CIFF), the Global Environment Facility (GEF), the Macdoch Foundation, and the United Nations Development Programme (UNDP).
The TNFD also benefits from pro-bono support offered by Taskforce member organisations, TNFD Forum organisations and governments.”

Is TNFD related to TCFD?

The TNFD comes after the TCFD (Taskforce on Climate-related Financial Disclosures), which was established back in 2017. Although both initiatives are built on the same four pillars of recommendations, their scope of work differ. While the TCFD solely focus on climate-related risks and carbon accounting, the TNFD is developing a framework to address problems related to natural ecosystems: ocean pollution, deforestation, soil erosion, biodiversity loss and many more.  

Nevertheless, according to the IPCC and the IPBES (equivalent to the IPCC for biodiversity), climate change and biodiversity are systemic problems that interconnect and must be dealt with with a combined approach. Therefore, both the TCFD and the TNFD point to each other to complete their sets of recommendations.

On a structural level, both initiatives are very similar. The TNFD and the TCFD are built on the same principles: Governance, Strategy, Risk Management, Metrics. The implementation process of the TNFD is also very similar to that of the TCFD: approximately 18 months of consultation until finalization, then the path to mandatory reporting will be determined.

How can Coolset help you to be TNFD compliant?

As mentioned above, climate, nature and biodiversity protection are strongly linked and dependent. Thus, a good first step to integrate these issues into your business is to measure your organization’s carbon footprint.

Coolset offers autonomous analysis of your carbon emissions, our carbon analysts outline emissions hotspots and we provide you with the right tools to deploy an effective emission reduction strategy while restoring natural ecosystems.

Book a demo and learn how Coolset will help you fight for a better future.

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