Taking the next step for nature - TNFD | Deloitte UK has been saved
Our society and economy need nature to prosper but nature is declining at an unprecedented rate. If we transform the way we do business, we can put vital ecosystems back on a path to recovery and enhance economic resilience and our future prosperity.
The Taskforce on Nature-related Financial Disclosures (TNFD) aims to support the shift in global financial flows towards nature-positive outcomes. It provides a risk management framework that brings together leading tools and insights to help organisations report and act on risks and opportunities linked to its impacts and dependencies on nature. The first version of the TNFD beta framework (v0.1) was released in March 2022. For more information on v0.1, refer to our blog, A big LEAP towards a nature-positive future.
The TNFD released a second beta version (v0.2) of its framework in June 2022 building on market feedback on v0.1.
Timeline of the TNFD framework releases
New components include:
We explain these latest developments below.
The TNFD has also released a piloting guide to support organisations that are interested to pilot the TNFD framework.
Organisations need a clear, science-based and easy to operationalise approach to metrics and targets to put the TNFD framework into practice.
This second beta release includes an initial overarching approach to metrics and targets and outlines two types of metrics:
Assessment metrics are used within an integrated internal assessment process to understand nature-related risks and opportunities. This release sets out proposed assessment metrics for dependencies and impacts that indicate how a business interacts with nature at specific locations. For example, the amount of natural resources used as input to production, and how much land is owned, leased and/or operated within or close to protected areas.
Subsequent releases will set out proposed assessment metrics for risks and opportunities, as well as disclosure metrics and further guidance on targets.
The TNFD will create specific guidance and recommendations to respond to different organisations’ needs.
This second beta release outlines how your organisation will be able to look at the guidance through three lenses:
This approach builds on the guidance of leading classification systems, such as SASB (Sustainability Accounting Standards Board), GICS (Global Industry Classification Standard), and NACE from the EU Taxonomy. By adopting the TNFD framework, your organisation will simultaneously comply with other disclosure standards and taxonomies.
The TNFD’s recommended LEAP approach (published in beta version 0.1) has a particular focus on entities’ own operations and supply chains and is intended for use by all organisations, including financial institutions.
The TNFD also published a LEAP prototype tailored for financial institutions in v0.1 (the LEAP-FI) given the unique role of the financial sector as a financial capital provider.
The LEAP-FI proposes different entry points and has varying emphasis on different LEAP components. This enables financial institutions to consider variations in their business, asset classes and financial products, and level of aggregation.
The second beta release contains an updated version of the LEAP-FI. It now starts with a three-step framework for financial institutions to scope the assessment of nature-related risks and opportunities across their portfolios using scoping questions.
Step 1: Type of business
Step 2: Entry points
Financial institutions can consider one or all of three entry points:
Step 3: Type of analysis
Financial institutions should determine the most feasible and appropriate level of assessment for their products and asset classes, given the level of aggregation.
We expect the TNFD to become a market-leading framework on nature-related disclosures given the rising expectations of organisations, institutional investors, and regulators. With growing convergence around global reporting standards, increasing focus on net zero, and the transition to nature-positivity, regulation is likely to follow.
While the TNFD framework and disclosure recommendations are still in draft format, we recommend organisations start to apply them now so they can get ahead in this fast-moving area.
The TNFD framework is designed to complement and, ultimately, be applied together with existing climate-related risk disclosures as part of an integrated approach to climate and nature-related risks. This means there is a significant opportunity to use work you've already done on climate and other risk domains. You can use data you have already collected and investments you’ve made in integrating climate and sustainability in your risk management and investment-planning processes.
You can explore the second beta version of the framework on the TNFD online platform and find more information on how you can get involved in the piloting guide.
We can help you prepare for the TNFD and start to assess, disclose and manage your nature-related risks and opportunities. This includes supporting you to understand your organisation’s nature-related risks and opportunities; piloting the draft TNFD framework; and implementing nature positive aligned targets, strategies, and investments to mitigate risk and ensure you thrive during the transition. We have strategy expertise and deep technical capability in nature and sustainability. Our experience of supporting the development of the TNFD and working with a wide range of organisations to prepare for the TNFD, makes us well placed to support you.
Get in touch with Guy Williams and Toby Roxburgh - leaders of our nature team and our representatives on the TNFD - to discuss more.
Guy Williams - Global Nature Lead
Toby Roxburgh - UK Nature Lead
Simon Brennan - European Centre for Regulatory Strategy