In September 2023, the Taskforce on Nature-related Financial Disclosures (TNFD) launched its new biodiversity framework. It was a landmark moment that enables companies and financial institutions to better integrate nature into decision-making.
Why does this matter?
Nature plays a critical role in the global economy, contributing approximately $44 trillion in economic value generation – more than half of the world's total GDP. However, many companies and investors are still overlooking the risks and opportunities associated with nature.
As the natural world and biodiversity face increasingly greater threats, exacerbated by extreme weather events, there is a growing impact on both the economy and wider society.
Companies need to look beyond addressing climate change. They must also enhance resilience through nature-based solutions, adopting science-based targets and integrating nature into financial decision-making.
Understanding TNFD
The TNFD’s framework is a vital tool in helping organisations to address their impact on nature while ensuring a more sustainable future. Supported by a global, multidisciplinary group of respected and influential institutions, the TNFD is likely to become cross-sector standard practice.
Much like its climate-focused counterpart, the Task Force on Climate-related Financial Disclosures (TCFD), the TNFD is based around four key pillars:
- Governance
- Strategy
- Risk and impact
- Metrics and targets
Why organisations should take note
Identifying and managing nature-related risks is essential for long-term business resilience and stakeholder alignment on key issues. Companies should consider the importance of:
Preparing for compliance: embracing TNFD early allows businesses to proactively adapt to evolving regulations that may transition from voluntary to universal or mandatory, as seen in other frameworks.
Risk identification and management: by integrating nature-related risks into decision-making and disclosing relevant information, businesses can identify and manage these factors, enhancing resilience and long-term operational sustainability.
Investor and stakeholder confidence: TNFD adherence enables businesses to meet stakeholder expectations, fostering confidence, enhancing reputation and uncovering potential investment and partnership opportunities.
How you can get started
There are a few manageable actions businesses can take to kickstart the process of aligning with the TNFD. We recommend following the LEAP approach, an assessment framework that is already mandatory for adhering to the European Sustainability Reporting Standards (ESRS) and Corporate Sustainability Reporting Directive (CSRD).
Locate your organisation’s interface with nature
Organisational assets, processes, products and services interact with nature through supply chain locations. Identifying these interactions is key to managing risks that affect business resilience and value.
Evaluate your dependencies and impacts
Analysing the organisation's business model and ecosystem services reveals crucial dependencies and impacts. This involves engaging stakeholders through a comprehensive assessment, allowing for prioritised, effective actions.
Assess risks and opportunities
Organisations should assess nature-related risks and opportunities in four stages: identification, exploration of mitigation strategies, management and measurement through materiality assessment.
Prepare to respond to and report nature-related risks and opportunities
After these initial three phases, analysts should present an integrated evaluation of significant risks and opportunities to company executives for external stakeholder reporting. This includes guidance on disclosing nature-related risks in line with TNFD recommendations.
Get in touch with us to learn more about how we can help you get started with TNFD alignment, and check out our TNFD guide to understand more about how to increase resilience from nature-related risk.
