Banking giants team up for Task Force for Nature-related Financial disclosures
AXA and BNP Paribas are among a group of 10 major banks backing a new initiative intended to help corporates measure, disclose and minimise their nature-related financial risks.
Spearheaded by the UK and Swiss Governments and by NGOs WWF and Global Canopy, the Task Force for Nature-related Financial Disclosures (TNFD) is aiming to publish a reporting framework in 2021.
The framework will provide corporates in all sectors with best-practice advice for measuring the financial risks they are facing as a result of the over-exploitation of natural resources (i.e. deforestation, overfishing, poor soil management) and as a result of extreme weather events. It is hoped that the UK Treasury’s ongoing review into the economic value of biodiversity, the results of which will be published in October, will provide the formal underpinning of the framework.
According to the World Economic Forum (WEF), $44trn – more than half of global GDP – is exposed to risks from nature loss. Similar research from WWF found that nature loss will cost the global economy at least £8trn by 2050 without transformational action from the public and private sectors, alongside governments.
The TNFD will be similar in format to the Task Force on Climate-related Financial Disclosures (TCFD), launched by Mark Carney and Mike Bloomberg in December 2015 and expanded with a specific framework in 2017. At present, more than 1,000 organisations are supporting TCFD recommendations, including corporates with a combined market cap of $12trn and investors with $138.8trn of assets under management collectively. Nonetheless, challenges remain in aligning disclosure levels with investor demands.
So far, 10 major financial institutions have signed up to support the TNFD: AXA; BNP Paribas; DBS Bank Ltd; Coöperatieve Rabobank U.A.; FirstRand Group Ltd; International Finance Corporation, Standard Chartered; Storebrand Asset Management; Yes Bank and the World Bank. Each of these organisations will contribute to the development of the framework, and be among the first adopters.
Also supporting the TNFD are the United Nations Development Programme (UNDP) and the United Nations Environment Programme Finance Initiative (UNEP FI).
In order to avoid clashes with other similar initiatives, TNFD’s partners are engaging with the OECD’s multi-stakeholder group on business, finance and biodiversity; the Natural Capital Coalition; Business for Nature; the Banks and Supervisors Network for Greening the Financial System and others.
“The rapid loss of nature to our economy poses large, unprecedented risks for the finance sector,” the UK’s Environment Minister for Pacific, International, Climate and Forests Lord Goldsmith said.
“The new Task Force will complement the reporting recommendations that already exist for climate-related risks, to give investors, lenders and insurers a complete picture of their environmental risks.”
A pivotal moment
2020 is widely regarded as a crucial moment in the fight to avert the nature crisis. The UN’s 15th COP on biodiversity will be taking place in China next spring, having been moved from its original November 2020 date due to Covid-19. At the conference, attendees will negotiate a “Paris-Agreement-style” accord aimed at preventing Earth’s sixth mass extinction.
In preparation for the conference, the UN is urging corporates in the financial sector to set time-bound numerical targets for reducing the biodiversity impact of their operations and investments. Such businesses should aim to have a net-positive impact on nature, the UN argues.
The EU is in the process of developing its Biodiversity Strategy through to 2030 as part of its €750bn Covid-19 recovery package – a further move which will place new requirements on businesses in the finance sector and beyond.
The UK, meanwhile, this week announced a new £5m Natural Capital and Ecosystem Assessment as part of a new package of Environment Bill measures. A £16m sustainable farming package designed to tackle agriculture-driven deforestation in the Amazon rainforest was also unveiled.
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