Article description: The TFND's Final Recommendations were published two months ago, highlighting ESG's new area of focus. But who is the TNFD, and will it succeed in its ambitious aims for nature conservation?
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For companies wanting to benefit from ESG financing, a wide range of work needs to be done. Expensive consultants need to be consulted, indirect metrics need to be measured, and supply chains need to be traced. Current ESG frameworks, like the GRI, ISSB and TCFD set the criteria, and by extension define what responsible stakeholder capitalism should look like. Building on these existing ESG foundations, the TNFD recommendations step in as a new framework, ensuring that companies won’t neglect the critical area of nature.
Nature is a vital element of our planet’s structures, and we can neither enjoy biodiversity nor manage climate-change without protecting and nurturing our ecosystems. In September, the Taskforce published its ‘Final Recommendations’, culminating over two years of work. It focuses on tackling nature-related issues of corporate negligence. These recommendations have been designed to work alongside the ESG existing TCFD recommendations, using the same four pillars of governance, strategy, risk and impact management, and metrics and targets. Another ESG framework, the ISSB, has also committed itself to incorporating water, biodiversity, and ecosystems into the future adjustments of its framework, inspired by the TNFD (see here and here for more info).
Though the TNFD is largely funded by national governments and the UN, it is ultimately a private-sector, market-driven solution; the main Taskforce itself consists of 40 members, who are all from major financial institutions, large corporations and market service providers such as the big four consulting firms. In addition to this, 19 ‘knowledge partner’ institutions such as the WWF, the OECD and the GRI inform the Taskforce, and roughly one-thousand institutions (including some governments) make up the assisting TNFD Forum, as well as numerous ‘consultation groups’ representing various countries and regions.
The TNFD will include a range of nature-related metrics that will make self-assessment much more complicated than it had been with the TCFD. Whereas the TCFD could recommend a small number of centrally important metrics, such as greenhouse gas emissions, the TNFD has identified 14 core metrics, including the total spatial footprint of a company’s operations, the pollutants released into soil, and the amount of capital deployed towards nature-related opportunities. To aid companies through this demanding process, the TNFD published their ‘Guidance on the identification and assessment of nature related issues', in which they recommend a ‘LEAP’ approach (Locate, Evaluate, Assess, and Prepare).
One driver of adoption will be the threat of regulation: it is reasonable to assume that TNFD-style reporting will become mandatory through regulation, so it is worth getting ahead of the game. This is exactly what happened with TCFD, where climate-related financial disclosures were made mandatory for certain UK companies through a 2022 amendment to the Companies Act. Generally, the tide is heading towards more action and awareness surrounding biodiversity, as shown by the 2022 Global Diversity Framework being adopted by 200 countries. The UK government’s 2023 Green Finance Strategy gives financial institutions reason to suspect incoming nature-related regulations; not only does it explicitly state this on page 45: “the UK government will explore how best the final TNFD framework … should be incorporated into UK policy and legislative architecture, in line with Target 15 of the Global Biodiversity Framework.”, but the UK government has also been the first government to fund the creation of the TNFD (p.37), with the devolved Scottish government even sitting in the TNFD Forum (p.24).
As of now, the framework has been out for two months, but has been a topic of conversation for long before that. Major finance firms such as Bloomberg have assigned internal teams to tackling these new recommendations. As implied by the word ‘recommendation’, the adoption of this framework is completely optional, and so it is a waiting game to see how widely this will be adopted. However, the Taskforce itself already hosted a forum representing around 1000 major institutions across the world, including corporations, governments, and non-profits, and so in this sense, TNFD is already widely adopted.
The future of nature-related financial disclosures in ESG is therefore looking bright; 2023 has been coined ‘the year of biodiversity’, and this optimism is fuelled by the commitments of major companies; some firms have already begun reporting on their biodiversity impact before the final recommendations were published. Corporations which were on the Taskforce have started to make commitments to it; pharmaceutical company GSK committed to publish their first TNFD report in 2026, and Nestlé has identified commonalities between them and the potential forthcoming regulations .
As such, gaining a good understanding of the TNFD is critical for anybody looking to enter the ESG industry, and the best way to familiarise oneself with its four pillars of recommendation, the LEAP method, and its metrics, is though the concisely written reports published by the TNFD on their website.
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