TNFD Publishes Final Recommendations

TNFD Publishes Final Recommendations

The Taskforce on Nature-related Financial Disclosures (TNFD) has released its final recommendations for assessing, disclosing and managing nature-related dependencies, impacts, risks and opportunities. Developed over the past two years, the framework builds on previously released drafts and incorporates input from over 200 pilot testers. The TNFD in its final form presents 14 recommended disclosures and provides implementation guidance.

The recommended disclosures are split into four pillars:

1. Governance includes disclosures regarding board oversight and management’s role, as well as human rights policies and engagement with indigenous peoples, local communities and other affected stakeholders.
   
   
2. Strategy includes disclosures of nature-related dependencies, impacts, risks and opportunities and their material impacts, resilience to these effects, and priority locations.
   
   
3. Risk and impact management includes descriptions of processes for identifying, assessing, prioritizing and managing nature-related issues in direct operations and value chains and how these processes are integrated into overall risk management.
   
   
4. Metrics and targets includes disclosures regarding the metrics, targets and goals used.

 

These disclosures recognize that organizations and people are embedded within nature. For example, industries that rely directly on natural resources and ecosystem services – such as agriculture, construction and pharmaceuticals – are particularly exposed to risks from loss of biodiversity (see Verdantix Strategic Focus: Navigating Nature-Related Risks). By understanding and disclosing these interdependencies, businesses can better prepare for the observed and predicted changes in ecosystems worldwide.

The taskforce has also published guidance documents addressing practical concerns. For example, because nature-related dependencies, impacts, risks and opportunities are highly location-dependent, the taskforce has outlined the LEAP (locate, evaluate, assess, prepare) approach to help identify, manage and disclose the unique nature-related issues an organization faces. There is also separate guidance on how to apply the LEAP approach in specific biomes.

Much like the Task Force on Climate-related Financial Disclosures (TCFD), the TNFD recommends using scenario analysis. In its Guidance on Scenario Analysis, the taskforce presents two dimensions of uncertainty that should be considered. The first – ecosystem service degradation – ranges from moderate impacts with incremental costs to severe disruption due to ecosystem collapse or declines in multiple interconnected ecosystem services. The second dimension is the alignment of market and non-market forces and refers to whether factors – such as consumer attitudes and policies across jurisdictions – push organizations in the same direction or conflict with each other. Combined, these two dimensions of uncertainty define four nature-related scenarios to consider, but the taskforce stresses that the specific narratives of each scenario should be developed by the business itself.

Other guidance documents cover setting science-based targets for nature, engaging with indigenous peoples, local communities and other affected stakeholders, and recommendations for financial institutions. Additional sector-specific guidance is forthcoming.

All of the above may sound intimidating, but to mitigate some concerns and ease organizations’ paths, the taskforce has released guidance on how to get started. Although there is no single way to start, key steps include understanding the fundamentals of nature, making the business case for disclosing, leveraging existing work, and planning for, encouraging, monitoring and evaluating progress. Other important first steps that Verdantix has identified are locating assets, conducting a baseline assessment, exploring nature-positive products and preparing for regulation.