Draft TNFD Framework Paves the Way for Nature-Positive Roadmapping for Corporations and Financial Institutions

Coauthored by Agnes Bosch van Rosenthal and Ian Trim

Since the landmark Rio Earth Summit over 3 decades ago, environmental economists have been warning of the systemic risks to the economy posed by climate change and the depletion of the natural world. At a corporate level, climate change has arguably captured greater attention from investors than the risks posed by biodiversity and nature loss. This attention led to the development of the Taskforce on Climate-Related Financial Disclosures (TCFD) and its associated recommendations in 2017. Since then, a rapidly growing number of companies have been disclosing their climate-related risks and opportunities.

Now, 6 years later, the development of the Taskforce on Nature-Related Financial Disclosures (TNFD)—a disclosure framework that will provide corporations and financial institutions a methodology to assess and disclose their nature-related risks and opportunities—is aiming to close that gap. This blog seeks to highlight the similarities and differences between the two sets of disclosure requirements, emphasizing that companies should see biodiversity- and nature-related capital disclosures as a logical extension of their sustainability journeys, rather than a step into the unknown.

The TNFD released its final draft of the framework—the fourth and most comprehensive version—in late March 2023, ahead of the official release in September. The interlinkages with the TCFD continue to be a feature, and the framework emphasizes the need to address both nature loss and climate change in an integrated manner. It thus fits prominently in the emerging architecture for climate- and nature-related reporting (see Figure 1).

Figure 1. Where the TNFD Fits in the Emerging Reporting Architecture

(Source: TNFD)

TNFD Disclosure Metrics: Building on the TCFD Framework

TNFD consistency with the TCFD framework in terms of approach, structure, and language could enable early market adoption of nature-related corporate reporting as well. Figure 2 shows just how similar the two reporting methodologies are when compared.

The four pillars of TNFD disclosures are governance; strategy; risk and impact management; and metrics and targets. The key difference from the TCFD is the integration of impact management into the third pillar. In addition to risks and opportunities, reporting requirements now also cover the identification, assessment, and management of impacts and dependencies. This, of course, can include several indicators, varying across sectors, and the TNFD has attempted to give further guidance through a variety of suggested metrics.

For instance, ecosystem restoration initiatives (say, peatland restoration to enhance the availability of one of our most effective carbon sinks) can be disclosed if relevant to the institution. Third-party certification of raw materials, relevant to certain types of companies, can also be a disclosure metric. A notable inclusion in the disclosure metrics is the value of investment in nature-related community development programs intended to enhance positive impacts for indigenous peoples, thus continuing the focus on indigenous peoples’ rights in nature-based frameworks. What is evident from this diversity of available metrics is that nature-related reporting will be more complex than climate-related reporting and will be significantly sector specific.

Figure 2. The TNFD Builds on the TCFD Framework

(Source: TNFD)

What’s Next?

More is to come later this year, including further development of supplemental guidance for sectors and biomes, and linkages between climate and nature. Want to learn more about the TNFD methodology, including the underlying LEAP (locate, evaluate, assess, and prepare) process and how it works? In our follow-up blog, we will elaborate on it.