TNFD sets 2023 deadline for new reporting framework on nature-related risks
The Taskforce on Nature-related Financial Disclosures (TNFD) has set a deadline of 2023 for the creation of a new reporting framework to address risks connected to the natural world.
The organization, which officially launched this week, has also announced the appointment of two co-chairs: David Craig, CEO of Refinitiv, and Elizabeth Maruma Mrema, executive secretary of the UN Convention on Biological Diversity.
In recent years, investors and regulators have upped their focus on biodiversity, calling for more disclosure from companies about how their activities impact nature, such as plant and animal life, and what steps they are taking to prevent further damage.
‘The framework will address both how nature may impact the organization [and] how the organization impacts nature,’ notes a report released by the TNFD.
‘It is our hope that this will create opportunities for the protection and restoration of the natural capital assets upon which our world economy depends... and help to ensure respect for internationally recognized human rights – including the rights of indigenous peoples and local communities that play a key role in safeguarding nature.’
Research conducted by the World Economic Forum estimates that $44 tn in economic value is either moderately or heavily dependent on nature. Construction, agriculture and food and beverages are the sectors most exposed to biodiversity loss, says the body.
The TNFD aims to replicate the success of the TCFD recommendations, which have pushed climate risk to the forefront of corporate and investor concerns. The addition of a new framework covering nature will help companies and financial firms better understand the full range of their environmental risks, it says.
Companies, still grappling with the difficulties of reporting on climate change, will face new and potentially more complex demands for environmental data under the TNFD framework. In a letter published by the body, the two co-chairs say there are ‘critical differences’ between climate and nature in the way information is collected and assessed.
‘A key challenge is that, unlike for climate, it is not just what your activities are, but where they are, that matters, which means having more location-specific data from corporates will be part of the solution,’ they write.
A report released by Moody’s last week underlined the importance of location when assessing biodiversity issues. The study looked at the proportion of corporate facilities positioned close to areas suffering habitat loss, identifying more than 2,000 companies with at least one facility in such an area.
While most large companies disclose information on biodiversity, few address issues relating directly to their business, according to a study by Leaders Arena, an ESG consultancy.
The firm reviewed disclosures by the 100 largest companies in the US and Europe. It finds that 69 percent mention biodiversity in their reports and 52 percent write about ‘nature-positive’ projects, but only 32 percent talk about direct links between biodiversity and business operations, such as whether they operate in areas rich in animal and plant life.
In October the UN will host a global summit on biodiversity where it is hoped nations will agree a new treaty and long-term goals focused on protecting nature. The summit was originally planned for October 2020 but has been delayed twice by the Covid-19 outbreak.