This week, the Taskforce on Nature-related Financial Disclosures (TNFD) released the final prototype of its beta framework.
Driven by a need to make nature visible in decision-making, the TNFD has emerged as a framework for businesses to act on nature-related risks and opportunities.
The TNFD is a voluntary, market-led approach that will see companies quantifying the dependencies and impacts of their activities on nature.
The framework is currently being developed by a global network of 40 representatives, with a consultative group of over 900 institutional supporters, from financial institutions, corporations and market service providers.
Due for finalisation in late 2023, the goal is to achieve a greater flow of global finance away from harmful impacts on nature, and towards nature-positive actions.
Like the Taskforce on Climate-related Financial Disclosure (TCFD), the core elements and areas of disclosure are governance, strategy, risk management and metrics, and targets.
The latest version of the TNFD beta framework has a number of significant updates and enhancements, including an outline of the approach to disclosure metrics and additional guidance for different sectors and biomes such as deserts, grasslands, tropical rainforests and aquatic environments.
Why is the TNFD significant?
Incremental reductions by business will fail to unlock the systems change that we need to avoid dangerous climate change and halt and reverse nature loss.
Addressing this challenge will require tackling the indirect forces that underlie the drivers of nature loss – such as global trade, production and consumption patterns, governance mechanisms and the values and behaviours of society.
Success needs policy and regulation from governments, as well as shifts in habits and social norms from citizens. However, corporate action driven by the TNFD is a crucial element.
Whilst policymakers set regulations and the framework for a sustainable transformation for the economy, a critical mass of businesses adopting ambitious corporate policies and frameworks such as the TNFD moves the goalpost of what is possible and desirable, and changes the decision-making impetus for regulatory choices.
And there are already signs that it will be adopted by leading market actors and eventually become part of the regulatory framework in some jurisdictions, as has happened with TCFD.
The combination of mass action taken by corporations and regulation from governments hold significant potential to tilt the system. There is no path to net zero without nature. Which is why Climateworks’ Natural Capital Measurement Catalogue pilot aligns with this global framework.
Measurement: the essential and challenging element in the TNFD framework, as we’re showing in our pilot
To support organisations in preparing to disclose under the framework, the TNFD has developed a voluntary four-step assessment process called LEAP, which stands for:
- Locate your interface with nature
- Evaluate your dependencies and impacts
- Assess your risks and opportunities
- Prepare to respond to nature-related risks and opportunities and report.
Evaluating a company’s impact and dependency on an ecosystem is essential to understand the ability of that ecosystem to continue providing services – such as pollination, water purification, flood control, carbon storage and climate regulation. This, in turn, is needed to assess the associated risks and opportunities for business.
However, measuring impacts and dependencies on nature is challenging. Nature’s multi-faceted features make it complex to measure using a single metric or methodology.
Climateworks developed a proof of concept Natural Capital Measurement Catalogue as a comprehensive, open-source set of measures for natural capital at the property level in Australia.
The catalogue has been designed to help facilitate the integration of natural capital considerations into business, financial and government decision-making.
Closely aligned with what is being outlined in the TNFD, it provides an entry point for companies and organisations in Australia that are trying to understand and navigate the framework.
At Climateworks we are working with partners across finance, retail and government to pilot different incentives for farmers to actively measure and manage their natural capital.
The pilots will draw on measures identified in the catalogue, and provide a test case for the catalogue to demonstrate how one might use it moving forward to support better measurement on the ground.
Why now, and how you can get involved
Our economies are entirely dependent upon the environment and the natural world. They are enmeshed within nature, and cannot exist without it. However markets remain largely blind to these benefits.
Addressing nature’s economic invisibility and making its value more visible in business decision-making is essential.
Every business relies on nature for resources and ecosystem services such as water, food, fibre, minerals, pollination of crops, water filtration and climate regulation.
In spite of this dependence, the services that nature provides are not routinely accounted for in investment decisions, asset management or accounting by businesses.
As more companies prepare to respond to nature-related risks and opportunities, we’d welcome the opportunity to discuss how our work on measurement will help build the critical mass of businesses that is needed to unlock change in the system.