Head of Environmental Issues | Head of Planning | Real Estate
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The Taskforce on Nature-related Financial Disclosures (TNFD) has now published its final recommendations for nature-related risk management and disclosure.
The publication comes against a backdrop of increasing biodiversity decline, recently evidenced in the UK by the publication of the 2023 State of Nature report, and widespread recognition of nature as a strategic risk management issue for businesses, investors, and lenders.
The overall aim of the TNFD recommendations is to "support a shift in global financial flows away from nature-negative outcomes and towards nature-positive outcomes".
The recommendations intend to do this by the provision of better-quality information through corporate reporting on nature to supports decision making and risk management.
The recommendations follow a similar approach to the Taskforce on Climate-related Financial Disclosure (TCFD) recommendations; however, they encourage integrated climate and nature related reporting which considers additional factors such as natural resources, ecosystems, and biodiversity.
It additionally extends to human rights policies with respect to Indigenous peoples, local communities, affected and other stakeholders.
The recommendations provide companies and financial institutions with a risk management and disclosure framework to identify, assess, manage, and disclose nature-related issues. Nature-related issues are defined by the TNFD to include:
“the key concepts and approaches shaping the design of the recommendations”
These include that the recommended disclosures have been organised around the “four pillars” which were developed by the TCFD. Namely, that the recommended disclosures concern:
“six general requirements that cut across the four pillars of recommendations”
These requirements are to be used by organisations who use the TNFD’s recommendations to create consistency in the information they disclose in their reports.
“14 recommended disclosures that organisations should provide alongside financial statements as part of the same reporting package to provide decision useful information”
These are “aligned with TCFD’s 11 recommendations and extended with an additional three for nature”.
The TNFD has additionally developed:
A set of recommended indicators and metrics to assist organisations in in assessing their nature-related issues and to support consistent disclosures.
Additional guidance to support organisations in adopting the recommendations. This includes guidance concerning:
The recommendations are designed to be used by organisations of all sizes, across all sectors and along value chains. Adoption of the recommendations is currently voluntary, as was the case when the TCFD recommendations were published.
In the UK government's Mobilising Green Investment 2023 Green Finance Strategy, the government confirmed its commitment to supporting the work of the TNFD and that it would explore how best the TNFD framework should be incorporated into UK policy and legislative architecture, in line with Target 15 of the Global Biodiversity Framework. It remains to be seen whether a similar approach to the TCFD framework will be taken, when the UK became the first G20 country to require TCFD aligned disclosures across the economy.
The similarity of the TNFD framework to the TCFD framework ultimately provides organisations with a familiar starting point to build upon their existing climate-related assessment and reporting to incorporate nature-related issues.
However, organisations are likely to need to invest resources in gathering and analysing the data required for TNFD-aligned disclosures. Whilst compliance with the recommendations is currently voluntary, it would be prudent for organisations to begin familiarising themselves with the framework in anticipation of nature-related reporting becoming mandatory in the future.
The TNFD has published a guidance document: Getting started with adoption of the TNFD recommendations.
If you would like to discuss the TNFD recommendations, please contact Christian Silk.