On 15 March, the Taskforce on Nature-related Financial Disclosures (TNFD) released the first beta version of their framework, building on the recommendations developed by the TCFD.
The TNFD was launched in June 2021 to develop a risk management and disclosure framework compatible with TCFD and the standards being brought out by the International Sustainability Standards Board (ISSB). The framework considers nature-related risks and supports a shift in global financial flows away from nature negative outcomes and toward nature positive outcomes. The first beta framework has been published and is expected to be iterated over the next 18 months with final publication set for Autumn 2023.
The framework is based on three key components:
- An outline of science-based concepts and definitions that the TNFD recommends market participants use when understanding and disclosing their nature-related risks and opportunities;
- TNFD’s draft disclosure recommendations, aligned with TCFD;
- Practical guidance for corporates and financial institutions to undertake nature-related risk and opportunity assessment to integrate into strategy and risk management processes.
One of the key messages throughout the framework is the importance of location in nature-related disclosures. Corporate and financial institutions will interact with nature differently depending on where they a situated, so a place-based approach must be taken to identify the dependencies, impacts, risks and opportunities nature brings to businesses.
The third component of the framework uses feedback from market participants, addressing the need for practical guidance on incorporating nature into enterprise and portfolio risk management processes. TNFD has developed a ‘LEAP’ approach in assessing risk and opportunities; this is:
- Locate your interface with nature;
- Evaluate dependencies and impacts;
- Assess risks and opportunities; and
- Prepare to respond to risks and opportunities, and report to investors
For organisations and individuals looking to provide feedback on the framework, the taskforce have set up a useful portal for stakeholders to submit their feedback easily on each section to support the development of future versions.
We welcome the new framework and encourage the profession to begin assessing their organisation’s impacts and dependencies on nature. This comes after the Global Accounting Alliance, of which ICAEW is a member, signed a call to action urging the profession to commit to reversing nature loss. Aligning corporates and financial institutions with the tools to assess their relationship with nature brings us one step closer to tackling the three-fold crisis of climate change, biodiversity loss and growing social inequalities.