Taskforce for Nature-related Financial Disclosures

TNFD: Five tips to help you prepare

Our planet's natural ecosystem, our most vital resource, underpins all economic activity. According to the World Economic Forum, more than half the world’s total GDP is moderately or highly dependent on nature. However, we are witnessing an unprecedented decline in nature due to unsustainable human activity, including deforestation, overfishing, wildlife poaching, and the physical impacts of climate change. The WWF Living Planet Report revealed: a 69% decrease in global wildlife populations since 1970; one million species threatened with extinction; and 400 ocean dead zones – areas where oxygen levels are so low that sea creatures cannot survive – caused by plastic and waste pollution. The climate and nature crisis extends beyond an environmental issue, encompassing economic, development, security, social and ethical dimensions.

Businesses are already facing higher raw materials prices and backlash from consumers and investors. As regulatory scrutiny, business risks, and stakeholder demands intensify, businesses are now under increasing pressure to evaluate, disclose, and actively address nature-related risks. Nature has evolved past a mere corporate social responsibility concern, emerging as a critical aspect of strategic risk management.

Taskforce for Nature-related Financial Disclosures

The United Nations Biodiversity Conference of the Parties (COP) in October 2022 culminated in a historic agreement by almost every nation to safeguard 30% of Earth’s land and ocean area as protected zones by 2030. A protected zone refers to a location in which human presence or the exploitation of natural resources is limited due to the recognised ecological value. One of the main outcomes of this COP was an increase in disclosure related to nature, with a target requiring governments to ensure certain companies disclose their nature-related impacts. This target goes hand in hand with the Taskforce for Nature-related Financial Disclosures (TNFD); launched in June 2021 in response to the increasing demand for nature-related risks to factor into financial and business decisions. The TNFD aimed to replicate the success of the Taskforce on Climate-related Financial Disclosures (TCFD) and received global endorsements from the G7, G20, financial institutions, corporates, governments, regulators, think-tanks, and non-governmental organisations.

The Taskforce finalised and published the recommended disclosures in September 2023. Despite concerns over the complexity of nature-related disclosures, the disclosures were welcomed due to the similarities between TNFD and TCFD. These recommendations form the foundation for how businesses should manage and disclose their actions regarding nature-related risks. The TNFD framework provides fundamental concepts, definitions, and guidance to help organisations understand, assess and integrate nature-related considerations into financial disclosures. The Taskforce developed these disclosure recommendations to support a shift in investment away from nature-negative outcomes by forcing companies to integrate nature into decision-making.

Navigating new environmental frameworks can be daunting, but BDO’s Sustainability & ESG Hub can help. Here are five key tips for getting to grips with the TNFD recommended disclosures:

1. Define ambitions

Discuss your ambition level with key stakeholders and understand your level of maturity against disclosing your nature-related risks. TNFD is made up of core disclosures, as well as additional metrics for organisations who are more mature. Clearly articulate your goals and prepare a roadmap, which can help communicate your approach and manage expectations.

2. Take the first step now

Although TNFD reporting is not yet mandatory, investors are considering their exposure and impact to nature, therefore, demand to see corporate disclosures. This commitment is through the Finance for Biodiversity pledge, which has gained signatures from over 160 investors with collective assets totalling €21.7 trillion assets under management, representing two percent of global impact investing (GIIN, 2022). Prepare and disclose your nature-related risks as soon as possible, not only to gain first-mover advantages and satisfy investors but also to protect your company from nature-related risks that could disrupt operations. There is always room to refine your processes later. As you adopt nature-related disclosures into your mainstream reporting, practices and techniques develop and improve, increasing the quality and scope of your disclosures.

3. Build on what you have

You don’t need to start from scratch. The TNFD disclosures are modelled on the TCFD and International Sustainability Standards Board (ISSB), building on the same architecture. TNFD follows the same four pillars – governance, strategy, risk management, and metrics & targets – and 11 out of the 14 disclosures have been carried over from TCFD. This helps you build on existing practice and encourages the move to integrated reporting between climate and nature.

Nature loss and climate change are inextricably linked, and businesses need to tackle these issues simultaneously. Look for quick wins, identify actions that your organisation takes, that also meet requirements for various frameworks, such as TCFD, TNFD, and ISSB. Further, much nature-related data can be utilised from data you already collect, eg, water consumption or raw material input volumes. Look at the data you already collect and how this maps to data needed for the TNFD disclosure requirements.

4. Sector-specific guidance is your friend

TNFD provides a set of additional guidance documents to help organisations get started with their nature-related disclosures. This includes the provision of tailored advice and tools for different sectors and for organisations producing, operating or sourcing in certain biomes. They have been developed by industry leads in collaboration with the Taskforce to overcome the significant differences that organisations may face depending on their sector. The documents cover guidance on how different sectors should approach the TNFD disclosures, as well as listing sector-specific disclosure metrics and dependencies.

5. TNFD will become mandatory

Published in 2017, the TCFD recommendations became mandatory for in-scope companies by the FCA’s Listing Rules in 2022. We can expect a similar and perhaps faster trajectory for the TNFD recommendations, with the first mandated reporting anticipated for FY25. Although we don’t expect all companies to be in scope, it would put your company in a better position if you are prepared. We want to set you up for success.

Conclusion

There is a strong connection between the focus on climate change and nature-based impacts. It is important for companies who wish to tackle nature-based risks and opportunities to leverage their work around climate change. As we have outlined above, companies can pivot data from their climate change disclosures to inform and recognise gaps in nature-based corporate strategy.

How can we help?

Preparing for TNFD involves assessing, managing, and acting on nature-related risks and opportunities. We offer support to evaluate your readiness, pilot the TNFD framework in your organisation, and implement strategies to mitigate risks and capitalise on opportunities. We have sophisticated experience in materiality assessments, scenario testing, and providing assurance on metrics and targets. With expertise in nature and sustainability, deep experience with TCFD, and a history of guiding diverse organisations, we are well-equipped to support your journey.