Posted: 15 Mar. 2022 5 min. read

A big LEAP towards a nature positive future

TNFD framework beta release

The natural world provides the foundation for business activities across virtually all sectors of the economy, underpinning an estimated $44 trillion of global output, according to the World Economic Forum. Nature also gives us food and other raw materials, protects communities from storms and other hazards, and plays a central role in the regulation of the climate. Yet on current trajectories, we risk undermining its capacity to support human societies and economic activity. In response, momentum is building behind the drive to reverse the loss of nature, and to set us on course to achieve the twin aims of a net zero and nature positive future. 

The Taskforce on Nature-Related Financial Disclosures (TNFD)

The TNFD is a global market-led initiative that will help organisations better understand their relationships with nature. It has been created to help financial institutions, corporates and service providers equip themselves with the information they need to support a shift in global financial flows towards nature positive outcomes.

Embracing nature brings challenges. It is:

  •  complex and multifaceted
  • hard to come by good data, and
  •  difficult to translate scientific terminology into business decisions.

But there is growing recognition that nature-related risks can affect long-term enterprise value, and that managing those risks is essential to build resilient businesses and societies. Nature and biodiversity loss are also inextricably linked to climate change: without addressing both, we will be unable to resolve either.

The TNFD aims to provide solutions to these challenges. Engaging with the TNFD will help organisations in all sectors to understand the issues, make scientifically informed decisions, build resilience, and make the most of the opportunities created by the drive for a nature positive future. It wants to help organisations “make nature count in all decisions”.

The TNFD is supported by some of the world’s largest organisations – Deloitte included – as well as the United Nations, national governments and standard setting bodies. The framework is modelled on the Task Force on Climate-related Financial Disclosures (TCFD), and as we move towards global sustainability standards under the new International Sustainability Standards Board (ISSB) the TNFD will accelerate progress across nature and biodiversity. We outline some of its key features below.

TNFD framework - Beta version 

The TNFD has released a beta version of its framework for consultation, with draft proposals on nature-related risk management and disclosure. The TNFD is inviting organisations to test and provide feedback on the proposals as they develop in an iterative ‘Open Innovation’ process that will run until the middle of 2023.

This beta version has three core components: a clear language system, a first draft of disclosure recommendations, and a ‘How To’ on nature-related risk management process (‘LEAP’):

1. Language system

The TNFD framework defines the concepts and vocabulary organisations will need to understand nature as a business issue. This guidance on language will help organisations understand how their impacts and dependencies on nature create both risks and opportunities. The TNFD categorises nature-related risks in a similar way to the TCFD, highlighting physical, transition and systemic risks. These are linked to financial risks through various macro-economic and micro-economic transmission channels, such as changes in demand, or disruptions in supply chains.

2. Disclosure recommendations

The recommendations are aligned with global reporting standards and build on the pillars and disclosure elements of the TCFD, meaning interoperability with other organisations in this area. Consistent with these approaches, TNFD recommends disclosure about:

  • Governance, including the role of the board and management
  • Strategy, including for financial planning over the short, medium and long term
  • Risk management, including how nature risks are integrated into wider risk management frameworks
  • Metrics and targets, including how performance is measured.

3. How to (LEAP) guidance

The TNFD also includes voluntary guidance on how to approach nature-related risk management. It is structured around a novel ‘LEAP’ process of Locate, Evaluate, Assess and Prepare, which is further broken into sub-steps that help organisations think through critical questions and tasks to assess nature-related risks and opportunities.  The LEAP process guides organisations to assess the interactions of their assets and operations with nature, develop a sense of materiality, and prepare their strategic response. 

What can you do now?

The release of the beta version invites organisations to pilot the framework, assess their own capabilities, and support the TNFD’s ongoing development. The iterative development approach means that organisations can experiment and learn, as well as provide valuable feedback that can be used to further develop the framework. 

We expect there will be as many as four phases of beta testing between now and September 2023 when the final framework is scheduled for release. There will be opportunities to engage in its development throughout the year, including through a dedicated learning community, the TNFD forum, a series of roadshow events, and working groups that will be launched next month. These events aim to spark a broader dialogue amongst experts and market actors.

Here are four principles to keep in mind as you consider your TNFD response and engagement strategy:

1. Build on the TCFD

Nature brings different, albeit related challenges to climate, but the TCFD and TNFD follow the same fundamental logic. Lessons learnt from TCFD implementation will be relevant to TNFD. Keep an eye out for further work from the TNFD in the coming months to address the links between the two, or what it calls the ‘climate-nature nexus’.

2. Location matters

Many nature-related risks are highly local. Understanding the specifics of location is central to the TNFD and its LEAP process. What is important for fresh water supplies, or soil health, or flood defences, in one part of the world may be very different from another. This has major implications for the granularity of data needed. 

3. Prioritise

Prioritisation will be key to making the most of the learning opportunity over the next 18 months. To enable rapid engagement, organisations could start with more readily available data, or where they have existing capabilities that they can enhance in a short space of time. 

4. Opportunities, not just risks

The TNFD emphasises that its framework is about the opportunities that businesses have to contribute to solutions not just the risks. As a result, finance and business development teams, as well as risk managers, should engage with the TNFD to consider how they can facilitate the flow of financing or other resources to nature positive projects, and how they can engage in rapidly expanding sustainability-linked markets. 

Looking ahead

The framework is intended to be voluntary but we think it will quickly drive changes in expectations and market practices.

We also expect the TNFD to accelerate thinking and practice that will be useful for the work of the ISSB, and could ultimately lead to further consolidation as the ISSB develops its thinking on this topic. Further standardisation would then create the potential for further mandatory reporting as global sustainability standards become adopted around the world.

The remainder of 2022 will be busy with sustainability-related developments, from the TNFD, through COP15 on the Convention on Biological Diversity, and ongoing work on ESG issues around the world. The TNFD provides an opportunity for organisations from all industries to engage, learn, and position themselves to make a difference.

Explore the TNFD’s online platform with the beta version of its framework and information about how to engage.

Download our overview of the framework

Deloitte’s global representative on the TFND, Guy Williams has actively supported the development of the beta framework, bringing his 20 years of expertise in business and ecology. If you’d like to discuss how your organisation can start to understand its nature risks, prepare for the TNFD and ensure nature positive is incorporated into your strategic agenda and disclosures, get in touch with one of our authors.

Key contacts

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Guy Williams - Director, Risk Advisory
guwilliams@deloitte.com.au

 

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Anne-Claire van den Wall Bake-Dijkstra - Partner, Risk Advisory
acvandenwallbake@deloitte.nl

 

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Simon Brennan - Director, Risk Advisory
simbrennan@deloitte.co.uk