Quick guide: biodiversity disclosures under the new TNFD

The Taskforce on Nature-related Financial Disclosures (TNFD) released its new framework at September 2023 Climate Week NYC in September, providing greater clarity and structure for companies as they begin assessing emerging nature-related risks and opportunities.

The recommendations in the report are the product of a two-year innovation and engagement program that has sought to balance the complexity of the science with the creation of practical, cost-effective action by business and financial institutions within the annual corporate reporting cycle.

With the final framework now released, companies are encouraged to start measuring, managing and disclosing their nature-related risks and opportunities, ultimately supporting a shift in global financial flows toward nature-positive outcomes.

What is the TNFD and why is it important?

The TNFD is a global, market led initiative that supports companies and financial institutions to report and act on evolving nature-related dependencies, impacts, risks and opportunities. The taskforce consists of 40 members representing leading financial institutions, corporates, and market service providers, with over US$20 trillion in assets under management.

The TNFD is a global, market led initiative that supports companies and financial institutions to report and act on evolving nature-related dependencies, impacts, risks and opportunities. The taskforce consists of 40 members representing leading financial institutions, corporates, and market service providers, with over US$20 trillion in assets under management.

World Economic Forum, 2023

The new TNFD framework will enable organisations to:

• deliver comparable, reliable, and consistent disclosures that will help investors, stakeholders and lenders evaluate and price nature-related risks;
• improve nature credentials and trust with stakeholders as nature information becomes scrutinised as much as financial information;
• assess nature risk and exposures to inform an organisation’s short- and long-term strategic planning; and
• strengthen the broader financial market by improving the understanding of nature-related risks.

How does the TNFD framework interrelate with the TCFD framework?

The TNFD framework has been closely modelled on the existing Taskforce for Climate-related Financial Disclosures (TCFD) framework. Organisations that already report under the TCFD can now take a similar approach to TNFD disclosure.

The recommendations have been designed to be consistent with the language, structure and approach of both the TCFD and International Sustainability Standards Boards (ISSB). The goal is to enable integrated climate and nature-related reporting, replicating the four disclosure pillars and all 11 TCFD recommended disclosures, which have now been incorporated into the ISSB Standards (IFRS S1 and IFRS S2) and thus its global sustainability reporting baseline.

What are the key pillars of the TNFD framework?

The framework is centred around nature-related dependencies, impacts, risks and opportunities and is structured around four disclosure pillars:

TNFD recommended disclosures

• Governance
  Disclose the organisation’s governance of nature-related dependencies, impacts, risks and opportunities.
• Strategy
  Disclose the effects of nature-related dependencies, impacts, risks and opportunities on the organisation’s business model, strategy and financial planning where such information is material.
• Risk & impact management
  Describe the processes used by the organisation to identify, assess, prioritise and monitor nature-relates dependencies, impacts, risk and opportunities.
• Metrics & targets
  Disclose the metrics and targets used to assess and manage nature-related dependencies, impacts, risks and opportunities.

Will my company be required to report under the TNFD framework?

The framework has been designed for organisations of all sizes, across all sectors and along all value chains. Although not yet compulsory, it is anticipated that the new guidelines will be adopted as the global baseline of nature disclosure – similar to the TCFD – and eventually mandated by individual countries over the coming years.

When should my company start adopting the framework?

Organisations can choose to voluntarily adopt the recommended disclosures immediately.

To help organisations conduct the due diligence necessary to inform disclosure aligned with the TNFD recommendations, the Taskforce has developed the LEAP approach. It is expected that this will support organisations to adopt the Framework sooner than expected.

This approach provides guidance on four phases of assessment:

• Locate the interfaces with nature across geographies, sectors and value chains;
• Evaluate dependencies and impacts on nature;
• Assess nature-related risks and opportunities to your organisation; and
• Prepare to respond to nature-related risks and opportunities, including reporting on material nature-related issues to shareholders and other stakeholders.

What questions should I be asking as an executive or director?

There are several top-line questions that company executives and directors should be asking to ensure they adequately understand and have oversight of biodiversity risk:

• Have we assessed the materiality of biodiversity on our company, including financial performance, operational impacts or access to future opportunities?
• Are biodiversity risks and impacts embedded in the company’s risk management framework?
• Does the company have a strategic biodiversity plan to align with the company’s overarching strategy and purpose?
• Do I have the necessary skills and knowledge to understand how biodiversity affects my company?
• What are the expectations of regulators, investors and other stakeholders in applying the TNFD framework?

How can Morrow Sodali help?

Morrow Sodali can assist companies to assess their readiness and prepare for reporting under the TNFD framework, while also supporting with integration and disclosure.

Morrow Sodali has the expertise and know-how to:

• review and uplift governance practices to ensure that appropriate structures are in place to oversee nature-related risks and opportunities;
• analyse investor and stakeholder expectations, and conduct industry and peer benchmarking;
• conduct materiality assessments with investors and other stakeholders to identify and prioritise nature-related risks and opportunities;
• assist in preparing disclosures that align with the TNFD Framework and meet rapidly evolving stakeholder expectations; and
• upskill directors and executives in what will be required under the new TNFD framework, along with other reporting and regulatory requirements such as incoming climaterelated reporting.