Latest pilot framework launched for nature-related financial disclosure

In March 2022, the TNFD unveiled the first iteration of its beta framework to help corporates outline and disclose nature-related risks and impacts in alignment with corporate reporting.

This version consisted of three main components. It outlines key science-based concepts and definitions to help corporates and stakeholders define nature-based risks and opportunities. It also outlines disclosure recommendations that are in alignment with the TCFD reporting framework and offers practice guidance on how nature can be incorporated into enterprise risk and portfolio management processes.

Additionally, the framework is being designed to align with the International Sustainability Standards Board (ISSB), which was officially unveiled at COP26. The aim of the new Board is to unify disclosures from corporates, helping investors and other stakeholders to properly compare their sustainability performance and related risks. At present, the Foundation has stated, a patchwork of various voluntary disclosure guidelines has made meaningful comparisons of corporate environmental credentials complicated.

The TNFD has noted that the first version received “overwhelmingly positive” feedback across more than 130 market participants and stakeholders across 37 countries and all five continents.

The latest version features minor changes to metrics and targets to help support pilot testers of the framework, as well as further guidance to undertake impact evaluations – called LEAP (Locate Evaluate Assess Prepare) assessments.

There has also been further overview to help with sector classification aligned with the approach taken by the ISSB, the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD).

TNFD Co-Chairs, Elizabeth Mrema and David Craig, said: “The Taskforce has continued to work at great pace, listening to feedback and building upon the first iteration of the beta framework released in March.

“We are delighted with the level of market interest and feedback in the process and will continue to develop a science-based, practical approach aligned as much as possible with other standards-setting, regulatory and policy developments globally as they evolve.”

The TNFD officially launched in June 2021 with an overarching aim to align corporate reporting and financial spending to alleviate nature-related risks.

The initiative was first announced in July 2020, with an informal working group set up two months later comprising of 74 financial institutions, corporates, governments, regulators, multilaterals, NGOs and consortiums, spearheaded by Banorte, BNP Paribas and the Green Finance Institute.

The aim of the TNFD was to compliment the growth of the TCFD, which is gaining popularity amongst corporates and financial markets in outlining the economic risks associated with the climate crisis. The TNFD follows a similar pattern; it aims to give companies and financial institutions a complete picture of their environmental risks.

The framework has been designed by the TNFD Taskforce, which consists of 34 individuals from financial institutions, businesses, and market service providers with assets under management of $18.3trn.

Future iterations of the framework are expected to be released in October and February. The finalised framework is earmarked for release in late 2023.