Taskforce on Nature-Related Financial Disclosures (TNFD)

The TNFD is an international initiative that builds on a model developed by the Taskforce on Climate-Related Financial Disclosures (TCFD). Its aim is to provide a framework which enables organisations to address nature-related dependencies, impacts, risks and opportunities with the end result that capital is channelled into nature-positive action.

Funding for the TNFD is provided by governments (including those of Australia, the Netherlands, Switzerland and the United Kingdom), the UN and a number of philanthropic foundations.

Its work is guided by seven principles: market usability, science-based, nature-related risks, purpose-driven, integrated & adaptive, climate-nature nexus and globally inclusive.

Like the TCFD, the TNFD has developed a global framework, rather than a standard.

The aim is to provide market participants with a risk management and disclosure framework to identify, assess, respond and, where appropriate, disclose their nature-related issues, thereby supporting "a shift in global financial flows away from nature-negative outcomes and towards nature-positive outcomes".

The published framework draws from a number of relevant standards including those from the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI).

The framework has four principal elements:

• core concepts and definitions;

• the “LEAP” risk and opportunity assessment approach (“Locate” the interface with nature, “Evaluate” the priority, dependencies and impacts, “Assess” the risks and opportunities and “Prepare” to respond and report);

• the disclosure recommendations align with the four key pillars within TCFD (Governance, Strategy, Risk Management and Metrics and Targets); and

• additional guidelines for different sectors, scenario analysis, target setting and engagement with Indigenous Peoples, and Local Communities, among others.

The TNFD recommended disclosures are designed to ‘meet the corporate reporting needs of a wide range of organisations across geographies, sectors and jurisdictions, including different approaches to materiality’.

This is global framework designed to provide recommendations and guidance of relevance to a wide range of market participants, including:

• Investors and financial institutions
• Analysts
• Corporates
• Regulators
• Stock exchanges
• Accounting firms
• Environmental, Social and Governance (ESG) data providers, credit rating agencies and financial service providers

It provides an opportunity for organisations in all sectors to look at their nature dependencies and impacts, and determine the opportunities and risks they hold for their business model in all the jurisdictions in which they operate.

The TNFD is new to market and is a voluntary framework. However, TNFD is not something that can be implemented overnight and organisations that wish to get ahead of the curve will be looking to implement this sooner rather than later.

Given the huge support from governments and regulators around the world, TNFD is likely to rapidly weave its way into normal business practices through incoming policy and regulation. In addition to regulation, we’re also likely to see nature-related disclosures play an influential role in decision-making relating to access to capital and ESG-ratings, as sustainable investment into nature continues to grow and ratings agencies begin to understand the materiality of nature-related risks and opportunities.