The Taskforce on Nature-related Financial Disclosures (TNFD) is a market-led, science-based global initiative that aims to develop a risk management and disclosure framework for organizations to report and act on evolving nature-related risks and opportunities. The TNFD framework is designed to enable businesses and financial institutions to assess, disclose, and manage nature-related risks, dependencies, impacts, and opportunities. It builds upon the success of the Task Force on Climate-related Financial Disclosures (TCFD) and aims to broaden the scope of environmental risk management to include aspects of natural capital such as biodiversity and ecosystem services.
The TNFD's work is guided by seven principles to ensure the framework's effectiveness:
(1) market usability, (2) science-based approach, (3) focus on nature-related risks, (4) purpose-driven orientation, (5) integrated and adaptive design, (6) consideration of the climate-nature nexus, and (7) global inclusivity.
More than half of the global economy, approximately $44 trillion in economic value, is moderately or highly dependent on nature. The TNFD released its final recommendations in September 2023, marking a significant milestone in encouraging and supporting action on nature. These recommendations are designed to be consistent with and complement existing sustainability reporting frameworks, including the International Sustainability Standards Board (ISSB) Standards.
Financial institutions and businesses interested in adopting the TNFD framework can consult the Sector Guidance for Financial Institutions and the Getting Started Guidance co-authored by UNEP FI. The TNFD also encourages organizations to join the TNFD Forum and explore additional guidance and capacity-building materials available in the Knowledge Hub.
The LEAP Approach
The TNFD has developed an integrated approach called LEAP (Locate, Evaluate, Assess, Prepare) to help organizations identify and assess nature-related issues. This approach is designed as a voluntary internal process to assist entities in understanding and managing their interactions with nature.
The four main components of the LEAP approach are:
Locate: Organizations identify their interface with nature by considering their business footprint, the biomes and ecosystems they interact with, impacted locations, and affected sectors or business units.
Evaluate: This step involves identifying environmental assets and ecosystem services, determining dependencies and impacts, and conducting a dependency and impact analysis.
Assess: Organizations evaluate nature-related risks and opportunities, considering existing mitigation controls and opportunity management processes. They determine areas requiring further work and identify material elements for inclusion in TNFD disclosures.
Prepare: This final step focuses on responding to identified risks and opportunities and reporting on them. It includes strategy and resource allocation, as well as disclosure actions such as determining what to include and how to present findings.
The LEAP approach is intended to be iterative and can be applied by both corporates and financial institutions. It helps users evaluate the scope of their assessment, understand location-specific nature-related risks, consider how these risks may change over time, and conduct scenario analyses.
While not mandatory, the LEAP approach serves as a practical tool to guide organizations in evaluating their nature-based risks and opportunities, ultimately informing their strategy and disclosures aligned with TNFD recommendations.
TNFD framework
The nature-focused disclosure framework (TNFD) is structured around four main pillars, mirroring the approach of climate-related disclosure recommendations (TCFD);
Impact of companies on the biodiversity
The impact of companies on biodiversity can vary significantly across industries. While some sectors have obvious connections to nature, many organizations may not fully comprehend their dependencies on or impacts to biodiversity. Industries dealing with commodities like soy, beef, palm oil, leather, chocolate, coffee, rubber, and wood often have material impacts on nature and are increasingly subject to regulations such as the EU Deforestation Regulation.
Less apparent impacts can arise from activities like land clearing for construction or pollutant release into waterways. Importantly, these effects may occur indirectly through the value chain rather than in direct operations.
The TNFD framework closely aligns with the climate-focused TCFD, which has gained significant traction since its 2017 recommendations. Additionally, initiatives like Nature Action 100, inspired by Climate Action 100, demonstrate growing investor interest in managing nature and biodiversity risks in their portfolios.
With the global economy heavily reliant on nature, integrating nature-related risks and opportunities into strategic planning is crucial. The TNFD framework, though currently voluntary, is seeing a lot of traction in terms of new adopters, with over 400 companies as of June 2024.
Governments and regulators are increasingly recognizing biodiversity risk, as evidenced by the commitments made under the Global Biodiversity Framework in December 2022. Additionally, the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) acknowledges biodiversity loss as a systemic risk alongside climate change.
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