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Fauna & Flora is pleased to welcome the launch of the Recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD) and celebrates the significant collaborative effort that has gone into creating them, and the detailed guidance that underpins them.
The TNFD Recommendations represent a big step forward for companies and their investors. They contain a set of disclosures for nature-related risks and opportunities and are built on the premise that this transparency will facilitate greater accountability and better investment decisions for nature by corporates, investors and lenders.
The TNFD provides a clear signal from – and to – the financial community of their role in achieving the global goal of halting and reversing nature loss by 2030. Addressing nature-related risks is not only essential to preserving financial stability but can help financial institutions use their influence to restore nature through the activities they choose to fund.
Why is TNFD needed now?
Currently, just 20% of financial companies measure their exposure to nature-related risk, compared to 85% who calculate climate risk. But, the momentum behind the TNFD Recommendations reflects increasing global recognition of the impacts and dependencies of business on nature.
Every business relies on nature for resources and ecosystem services such as water, food, minerals, climate regulation, crop pollination and water filtration, both in their direct operations and their supply chains. In fact, more than half of the world’s economic output – US$44tn of economic value generation (PDF) – is moderately or highly dependent on nature.
While every business is reliant on nature, every business can also have a negative impact on nature through their operations and supply chains, be this through pollution, the exploitation of natural resources, land use change or their contribution to climate change.
This can create a vicious circle where businesses’ impact on nature also creates real and immediate risks to their bottom line. These risks could be physical, for example, habitat disruption leading to supply chain disruption, or market-based, such as the growing expectations from consumers for corporates to take responsibility for their impact on nature, and to be ambitious in setting nature-related ambitions.
While sectors with relatively high and immediate burdens on nature – such as mining, energy and infrastructure – have taken significant strides in understanding and mitigating their impact, for many industries, nature is not yet prioritised in Environment, Social and Governance (ESG) strategies. This needs to change urgently in line with the planetary emergency we are facing, and the TNFD can play a key role in making this happen.
Aerial view of shrimp farm close to Belize City. Juan Pablo Moreiras / Fauna & Flora
Aerial view of shrimp farm close to Belize City.
Going beyond disclosure
Disclosure of nature-related risks and opportunities is the first step, but to have a true impact on halting and reversing nature loss, businesses need to go beyond disclosure to taking meaningful action.
While not required for adoption of the TNFD Recommendations, the TNFD does provide detailed guidance to support companies in developing a positive approach to nature. The LEAP (Locate, Evaluate, Assess and Prepare) approach is intended to support companies to first identify and assess nature-related issues, and then take a strategic approach in preparing to address them.
This is supplemented with, amongst other documents, guidance for sectors and biomes, target setting and engaging Indigenous Peoples and local communities (IPLCs). This additional guidance is essential to ensuring that TNFD goes beyond disclosure and encourages companies to understand their nature-related risks, opportunities, dependencies and impacts, to set targets to manage these and to publicly disclose their progress.
Measuring success
The success of the TNFD Recommendations as a disclosure framework will depend on their widespread adoption. This is currently looking positive; the majority of corporates surveyed by TNFD plan to start disclosing by 2025 or earlier.
The real effectiveness of the TNFD Recommendations, however, should be defined by the difference they make to nature ‘on the ground’ and the extent to which they raise the level of understanding and ambition of companies with respect to nature.
Disclosure must go hand-in-hand with accelerating the pace and scale of business action on nature.
Our tips for businesses adopting the TNFD recommendations
Companies considering adopting the TNFD Recommendations first need to ensure they are well prepared internally, and that nature is an organisation-wide priority. This means resource and responsibility should be assigned beyond the ESG team, to include a senior level champion and risk and procurement leads.
Companies at the start of their nature journey should draw on TNFD guidance materials to understand their relationship with nature, set organisational targets that can be integrated into existing strategies and policies, and establish systems for collecting and reporting data. Those already on their journey should use the TNFD Recommendations and guidance to review existing ambitions and approaches and to incorporate additional nature-related data in external reporting.
Whether already engaged with nature risk assessment or not, TNFD will undoubtedly challenge businesses to go further as it has a strong focus on supply chain risks. To be prepared, companies need to get ahead of the curve by engaging with their supply chains and, in particular, looking for opportunities to avoid or mitigate risks related to the procurement of high nature-impact commodities. Collaboration and knowledge-sharing will be key to this.
TNFD will also require early engagement with those living in the landscapes in which a business operates. Companies will need to ensure they have undertaken stakeholder mapping and have plans in place to engage with IPLCS, to understand their views and to ensure they have an agreed approach to minimising negative effects on their livelihoods and cultural heritage while identifying nature-related opportunities.
Above all, our top piece of advice is to be ambitious. This is essential if we are to secure a nature-positive future for humanity within our planetary boundaries – and also critical for business in the face of increasing scrutiny from investors, governments and society. Go beyond impact and risk mitigation, understand how to create a net positive impact on nature through operations, and go further still to meaningfully contribute to restoring and regenerating nature by 2030.
How Fauna & Flora can help
Fauna & Flora piloted the TNFD with Anglo American, one of 40 Taskforce Members, who provided valuable input into the wider mining and metals sector guidance. Beyond TNFD, we have been working with businesses to reduce their biodiversity impact for over 20 years, drawing on our technical expertise and practical ‘on the ground’ understanding of how to create a real impact for nature, people and the climate.
Get in touch with our corporate sustainability team to find out more: [email protected].
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