NORTHAMPTON, MA / ACCESSWIRE / March 20, 2024 / As the world grapples with existential threats like climate change and biodiversity loss, the spotlight is increasingly turning toward the role of corporations in shaping our sustainable future.
In this context, last year's New York Climate Week was a monumental occasion. One of its standout events was the public webinar hosted by the Taskforce on Nature-related Financial Disclosures (TNFD). It marked the culmination of two years of development, four beta releases, and more than 3000 pieces of feedback. This event unveiled TNFD's finalized disclosure recommendations and metrics, making it a must-watch for any corporation seeking to mitigate its biodiversity impact.
In this article, we'll delve into why the TNFD framework is indispensable for corporate sustainability.
What is the TNFD?
Founded to mitigate nature-related risks and drive meaningful action, the Taskforce on Nature-related Financial Disclosures (TNFD) has been a remarkable initiative. Its goal is to provide organizations with a comprehensive framework to report, locate, estimate and assess their nature-related risks. These risks include severe droughts, the disappearance of pollinators, or disruption of supply chains, due to overexploitation of biodiversity and ecosystem services.
Over a two-year developmental phase that included multiple beta releases and extensive community input, the TNFD has emerged as a robust, transparent, and adaptable framework. Not merely a policy document or a list of best practices, the TNFD is an integrated roadmap that is designed to make biodiversity concerns an integral part of corporate decision-making. With this roadmap businesses can chart the course towards reducing their impact on nature, minimise risks of biodiversity loss and ensure they are resilient to climate and environmental shocks.
Why the TNFD is ImportantStandardising Disclosure
One of the greatest barriers to biodiversity action within the corporate sphere has been the lack of standardised disclosure norms. Many different methods and metrics have made it challenging for investors and stakeholders to gauge the real impact of companies on biodiversity.
Enter the TNFD. Its framework offers a standardised methodology that enables a uniform, accurate portrayal of a company's environmental impact. This, in turn, allows stakeholders to make more informed decisions and levels the playing field for companies themselves, as they can better understand how they compare to peers in the industry.
Guiding Investments
Beyond disclosures, the TNFD framework is a strategic guide for corporations and financial institutions to funnel their investments.The TNFD offers guidelines for companies to understand its impacts and dependencies and translate them into risks and opportunities to allocate investments that are aligned with broader global sustainability goals, such as the Global Biodiversity Framework, or the UN's Sustainable Development Goals. It creates a ripple effect-disclosure prompts awareness, awareness prompts action, and action brings change.
Enhancing Corporate Accountability and materiality approach aligned with main relevant standards
Corporate accountability is another domain where the TNFD framework is poised to make impacts. Making companies more accountable for their actions on biodiversity loss puts a mechanism in place that raises internal corporate awareness of where major impacts can occur on the companies' direct operations and value chain.
This accountability not only nudges companies towards positive action but also reassures investors and stakeholders that their involvement leads to tangible environmental benefits. In this sense, TNFD is based on the principle of double materiality, or the financial value of a company as well as its impact on the world, including biodiversity.
TNFD recommendations accommodate the different approaches to materiality under the ISSB's IFRS Standards and TCFD recommendations, meeting the material information needed by capital providers, but also meeting the material information needed by stakeholders focused on impacts, aligned with a broader materiality approach, consistent with the GRI standards.
How It's Going So Far
TNFD proposes a "leading indicators" approach to measurement. This approach leverages the best available science and cross-referencing metrics already in use by market participants through organisations such as Sustainability Accounting Standards Board ( now part of the International Financial Reporting Standards Foundation),Global Reporting Initiative and European Financial Reporting Advisory Group. They incorporate cross-sector and sector-specific metrics to provide a flexible approach for report preparers and a basis for comparative analysis by report users.
TNFD encourages the implementation of the LEAP (Locate, Estimate, Assess, Prepare) approach to better implement nature-related risks into the company's decision-making process. The LEAP Approach, in particular, offers companies a structured way to understand the complexity of their impacts and dependencies, identify risks and opportunities material to the company, engage with stakeholders, and set measurable goals. The latest version of the methodology prioritises Indigenous People and Local Communities. These include recommendations to disclose the level and scope of engagement that the companies maintain with Indigenous People and Local Communities. In the case of target setting, the TNFD recommends the use of the Science Based Targets Network (SBTN) guidance.
TNFD and SBTN. How do they fit together?
The SBTN and TNFD operate in related yet distinct capacities and have a mutually reinforcing relationship. SBTN provides the scientific grounding, and TNFD offers the financial framework for transparent disclosure and accountability, making both indispensable in the corporate quest for sustainability. The SBTN and TNFD work together by:
- Aligning targets with financial risks: the science-based targets endorsed by SBTN can be used as benchmarks against which financial risks and opportunities are assessed in the TNFD framework. A company adhering to SBTN targets is likely to perform better in TNFD disclosures, showing less nature-related risk.
- Data and metrics: both initiatives are likely to benefit from shared data, insights, and methodologies that improve the accuracy and relevance of nature-related metrics. TNFD can employ science-based metrics established by SBTN in its disclosure guidelines.
- Leveraging stakeholder engagement: SBTN and TNFD can collaborate in stakeholder engagement activities, given their overlapping target audiences, which include corporates, financial institutions, and policy-makers.
- Integrating reporting: organisations could feasibly integrate their science-based targets into their TNFD disclosures, making for a more comprehensive and credible sustainability report.
- Policy synergy: given that both initiatives are multi-stakeholder and multi-disciplinary, they can mutually benefit from policy advocacy, urging governments and regulators to adopt frameworks that protect nature and ensure sustainable development.
As the SBTN target methods continue their development, they will generate data that will help companies to apply parts of the TNFD LEAP approach for the assessment of nature-related issues and to disclose in line with the TNFD recommendations.
What Are the Next Steps?
Any company, from any sector is encouraged to kick off its journey in biodiversity corporate action by implementing the TNFD. Yet, if the company does not possess the right quantity and quality of data to conduct an appropriate assessment, the important goal is to make a start since the refinement will come later, as companies become more aware of their impacts and dependencies and they set adequate data management systems to better support future iterations in the implementation of the TNFD framework. The first step is to internalise the framework by training and increasing knowledge across all key departments. Then comes the actual task of implementation-setting targets based on TNFD metrics, monitoring performance, and making adjustments as needed.
The TNFD will also continue to gather data, feedback, and adapt. Future iterations will likely integrate even more community feedback and real-world case studies, thereby refining the framework into an even more effective tool for corporate sustainability.
As we approach COP16 in Cali, Colombia, the Task Force on Nature-related Financial Disclosures (TNFD) stands as a beacon of hope and opportunity in the nexus between climate change and biodiversity loss. The TNFD is not just a set of recommendations; it's a living, breathing framework that will continue to evolve. It's designed to permeate the very DNA of a corporation's strategy, operations, risk management and financial planning. The release of the final recommendations in September 2023 was a pivotal moment for companies to fully grasp these final recommendations and either kick-start or significantly enhance their own biodiversity journey. With the tools and the responsibility now clearly laid out, companies have a pathway to start their journey in corporate biodiversity action. Let's seize this opportunity for transformative action and lasting impact
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SOURCE: South Pole
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