With nature loss becoming as much of a concern as climate change, Alison Dundjerovic highlights a new disclosure framework for organisations seeking to act on nature-related risks and explains how it fits in with current and future sustainability standard-setting initiatives.
When asked about the environmental challenges companies face, climate change immediately comes to mind. However, with nature loss at unprecedented levels and threatening the capacity of the natural world to provide critical services on which a company depends, nature-related risks are rising quickly up the corporate agenda. In recognition of this, the Taskforce on Nature-related Financial Disclosures (TNFD) was established in 2021.
With nature loss at unprecedented levels, nature-related risks are rising quickly up the corporate agenda
What is the TNFD?
The TNFD is a global, market-led, science-based and government-supported initiative to help organisations incorporate nature into their decision-making. The Taskforce’s objective is to develop a risk management and disclosure framework for organisations to report and act on evolving nature-related risks. Its ultimate aim is to support a shift in global financial flows away from nature-negative outcomes and towards nature-positive outcomes.
What has the TNFD published?
In September this year, the TNFD published its finalised disclosure framework.
Comparisons can be drawn between the TNFD framework and that of the Task Force on Climate-related Financial Disclosures (TCFD). Like the TCFD, the TNFD has developed a global framework, with recommended disclosures split across four pillars which are broadly aligned with those used by the TCFD.
The four pillars, as described by the TNFD, are:
| Governance | The governance processes, controls and procedures the organisation uses to monitor and manage nature-related issues |
| Strategy | The approach the organisation uses to manage nature-related issues |
| Risk and impact management | The processes the organisation uses to identify, assess, prioritise and monitor nature-related issues |
| Metrics and targets | The organisation’s performance in relation to nature-related issues, including progress towards any targets the organisation has set or is required to meet by law or regulation |
Across the four pillars, there are a total of 14 disclosure recommendations. Within each pillar, the recommendations are based on four conceptual building blocks – nature-related dependencies, impacts, risks and opportunities.
The recommendations are accompanied by guidance presenting TNFD’s LEAP approach for assessing and managing nature-related issues and informing nature-related disclosures. This approach consists of four phases (which are preceded by initial scoping of organisational priorities):
Locate the interface with nature
Evaluate dependencies and impacts
Assess risks and opportunities
Prepare to respond and report
Current UK requirements and developments
While the TNFD framework is a voluntary framework, the output of the TNFD is intended to feed into current developments in nature-related standard-setting.
Use of the TNFD framework is not currently mandated in the UK. However, in its 2023 Green Finance Strategy, the UK government included a specific reference to the TNFD, stating that the government intends to consider how the final TNFD framework could be incorporated into UK policy and legislation. Additionally, in December 2023, the UK government announced it would provide a further £2m of funding for the TNFD to “support capacity building and boost market adoption of the TNFD recommendations”.
Use of the TNFD framework is not currently mandated in the UK. However, the government intends to consider how the final TNFD framework could be incorporated into UK policy and legislation
The International Sustainability Standards Board (ISSB) has shown interest in nature-related matters, seeking feedback on adding a research project on biodiversity, ecosystems, and ecosystems services as part of its first consultation on agenda priorities. Consistent with its approach of building upon the work of market-led initiatives grounded in current best practice and thinking, the ISSB will consider the work of the TNFD and other existing nature-related standards and disclosures relevant to the information needs of investors.
The ISSB’s intentions are relevant in a UK context given the government’s support for UK adoption of the ISSB’s IFRS Sustainability Disclosure Standards and commitment to decide on endorsement of the IFRS Sustainability Disclosure Standards to create UK Sustainability Disclosure Standards. The Financial Conduct Authority (FCA) has also stated that it will consult on proposals for mandatory sustainability disclosure requirements, based on these anticipated UK-endorsed IFRS Sustainability Disclosure Standards.
How does the TNFD framework interrelate with other reporting standards and frameworks?
As mentioned, the disclosure recommendations within the TNFD framework are broadly consistent with the TCFD, which itself has been used as the basis for developing the ISSB’s Climate-related Disclosures standard (IFRS S2).
For companies that will come into scope of the EU’s Corporate Sustainability Reporting Directive (CSRD), it is useful to note that the European Sustainability Reporting standards (ESRS) on Pollution, Water and Marine Resources, Biodiversity and Ecosystems, and Resources and Circular Economy reference the LEAP approach, stating that the materiality assessment in those ESRSs may be conducted in line with the first three phases of the LEAP approach.
Further reading
For further information on the TNFD, including its next steps, visit the TNFD website.
For a more detailed summary of the TNFD disclosure recommendations, read Deloitte’s Need to Know publication on the topic.
Alison Dundjerovic, Director, Deloitte
