The Taskforce on Nature-related Financial Disclosures (TNFD) has published its recommendations, which aim to provide companies and financial institutions with a risk management and disclosure framework for nature-related issues. This comes amongst a growing recognition that “nature risk is financial risk”, according to TNFD Co-Chair Elizabeth Mrema. Business depends upon the inputs and benefits that we source from nature – inputs and benefits which, until recently, had always been externalised from business models.
Released on 18th September after nearly two years of development, the TNFD disclosure framework includes a conceptual framework, a set of general requirements, and a set of recommended disclosures. These are structured around the same four pillars as the Taskforce on Climate-related Financial Disclosures (TCFD) framework: governance, strategy, risk and impact management, and metrics and targets.
What are the disclosures?
TNFD’s framework includes 14 recommended disclosures, as follows:
Governance:
- The board’s oversight of nature-related dependencies, impacts, risks and opportunities.
- Management’s role in assessing and managing the same.
- Human rights policies and engagement on human rights from the board with respect to indigenous people and local communities.
Strategy:
- Identification of short-, medium- and long-term dependencies, impacts, risks and opportunities.
- Effect of nature-related issues on the organisation’s business model, value chain, strategy and financial planning.
- The resilience of the organisation’s strategy to nature-based risks.
- Sensitive locations of assets or activities in direct operations, as well as in upstream and downstream value chains.
Risk and impact management:
- How an organisation identifies, assesses and prioritises nature-related issues in its direct operations.
- How it does the same in both its upstream and downstream value chains.
- Processes for managing nature-related dependencies, impacts, risks and opportunities.
- How nature-related processes are integrated into the overall risk management process.
Metrics and targets:
- Metrics used to assess and manage nature-related risks and opportunities.
- Metrics used for dependencies and impacts.
- Targets and goals set in relation to nature.
TNFD has published a useful diagram summarising all 14 of the recommended disclosures.
The framework also includes scenario analysis and science-based targets. For financial services, it looks in particular at firm’s exposure to key sectors with high nature-related dependencies and impacts, as well as their exposure to companies operating in high-risk locations.
Who are the early adopters?
The TNFD framework aims to encourage companies to report on their nature-dependent risks and opportunities in a consistent and harmonised manner, making it simpler for investors to source and compare data. Whilst reporting is not yet mandatory, several businesses, including Reckitt, Holcim and Natura&Co have already been trialling TNFD adoption, and GSK has stated its intention to produce its first TNFD-aligned report in 2026. TNFD will track voluntary adoption through an annual update report, beginning in 2024.
What is the degree of interoperability?
The TNFD’s recommendations are intended to be aligned with the global policy goals in the Kunming-Montreal Global Biodiversity Framework. In terms of reporting standards, they are designed to be interoperable with the approach taken in the sustainability standards of the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI).
In particular, the TNFD is very keen to see integrated nature and climate disclosures. The TNFD has aligned its recommendations as far as possible with the approach of the TCFD and ISSB’s IFRS standards to encourage integrated reporting. The taskforce worked with a forestry organisation to create an example integrated report covering both climate and nature.
Where should we start?
The TNFD website has a wide variety of resources and guidance, including a guide on getting started with adopting the TNFD recommendations. It covers:
- Deepening your understanding of the fundamentals of nature
- Making the business case for nature, securing buy-in at board and management level
- Leveraging existing work and reporting
- Planning for progression over time, communicating your plans
- Encouraging collective progress through engagement
- Monitoring and evaluating your adoption progress
- Registering your intention to begin adopting the TNFD recommendations
The TNFD also has further FAQs on its website.
