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Mar 16, 2022

Prototype of nature-related risk management framework launched by TNFD

Framework will be put to market consultation before recommendations released in Q3 2023

The Taskforce on Nature-related Financial Disclosures (TNFD) has released a beta version of its framework designed to measure and disclose nature-related risks at public companies.

‘Building an improved understanding of nature and nature-related risks and opportunities is a critical enabler of better corporate strategy, better capital allocation decisions, better governance and better risk-management and disclosure practices,’ says David Craig, co-chair of TNFD, in a statement. ‘With climate change and nature-related impacts and risks increasing, it is essential companies incorporate natural assets into their strategic planning and risk management if they are going to succeed.’

TNFD says half of the world’s GDP is ‘moderately or highly dependent on nature’ and that ‘institutions and businesses can no longer afford to overlook nature in strategy, risk management and capital allocation decision-making’.

It adds that the framework is not just about risks but also the opportunities that could contribute to nature-positive outcomes.

In what it says is an acknowledgement of the ‘interlinkages between climate change and nature loss’, TNFD’s prototype recommendations build on work done by the TCFD, adopting the same four pillars and aligning high-level disclosure recommendations as much as possible. TNFD notes that the market is looking for a consistent approach to sustainability reporting and hopes this alignment will speed up adoption.

The framework is also designed ‘for future alignment’ with the global standards being developed by the International Sustainability Standards Board.

The beta framework is made up of three components:

  • Foundational guidance, including key concepts and definitions
  • Disclosure recommendations aligned to the TCFD
  • ‘How to’ guidance for nature-related risk and opportunity analysis.

TNFD has published the beta version of the framework for consultation, saying it wants market participants to ‘support the development of the framework through an iterative process’ that will lead to the release of its full recommendations in Q3 2023.

The framework has been designed by the TNFD taskforce members, comprising 34 individuals from financial institutions, businesses and market service providers with assets under management of $18.3 tn and operations in more than 180 countries.

Last year, Norges Bank Investment Management – the world’s largest sovereign wealth fund that holds, on average, 1.3 percent of all of the world’s listed companies – published an expectation paper on biodiversity reporting for its investee companies.

Garnet Roach

An award-winning journalist, Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of...