Five things you should know about the TNFD framework


Gillian Mollod

Following several months of consultation, the Taskforce on Nature-related Financial Disclosures (TNFD) has published its inaugural risk management and disclosure framework which is designed to create a global standard for corporate reporting of biodiversity and nature-related risks.

The initiative was founded in 2020 with the goal of supporting a shift in global financial flows toward nature-positive outcomes and away from activities which may harm ecosystems. Currently, consistent data on nature and biodiversity is scarce, which affects models that depend on it.

The TNFD framework aims to guide companies and investors in assessing and publishing their nature-related impacts, dependencies, risks and opportunities. More broadly, the framework aims to standardize nature-related disclosure and raise awareness among investors and other capital-markets participants of the economic significance of nature and the risks that its degradation and loss holds for society.

Here are five things for companies and investors to know.

1. Voluntary… for now

Though the TNFD establishes a voluntary reporting framework, it could quickly become a market standard, much like the Taskforce on Climate-related Financial Disclosures (TCFD) became the global baseline for corporate climate disclosure. By design, the TNFD takes its approach from the TCFD. Both initiatives are designed to harness risk management and disclosure to help channel capital toward sustainable outcomes.

2. Four pillars and 14 core global indicators

The TNFD framework extends the TCFD’s four pillars — governance, strategy, risk management, and metrics and targets — to nature. The TNFD includes a core set of 14 indicators for reporting across sectors together with recommendations for sector-specific reporting. The framework also recommends a set of additional disclosure metrics which organizations can use where deemed relevant. Businesses and investors who want to be TNFD-aligned would, at minimum, report data for the core disclosure metrics.

3. Location, location, location

The TNFD has developed a structured process for reporting and management of nature-related impacts, dependencies, risks and opportunities called LEAP: Locate your interface with nature; Evaluate your dependence and impacts; Assess your risks and opportunities; and Prepare to respond to those risk and opportunities and to report. The “L” emphasizes the critical importance of location-specific data. In contrast to climate change, where carbon emissions have a global impact, impacts on nature and biodiversity generally vary depending on whether company operations are located, for example, in a city, a coastal zone or a tropical rainforest. MSCI supports investors, banks and other capital-markets participants with data and tools designed to help them integrating location-specific risks into their investment decisions.

4. Mind the gaps

Complexity, a lack of transparency in supply chains and limitations on data can make reporting impacts and risks on nature a challenge. For investors and financial institutions, collecting data on corporate supply chains or pinpointing specific impacts by location could continue to present significant hurdles. The TNFD framework aims to provide guidance how to reduce those gaps in the future.

5. Technology is helping

Despite the data challenges, technological advancements and the use of various tools such as satellite imagery, remote sensing, blockchain, bioacoustics or “eDNA” are helping investors and other capital-markets participants address nature and biodiversity loss.  MSCI is working with expert partners to make use of such new technologies to help investors with advanced tools and data.

Though challenges remain, the TNFD adds impetus to the standardization of nature-related financial reporting. The inaugural framework offers companies, investors and financial institutions a new global baseline for measuring and reporting biodiversity-related risks, dependencies and impacts.

By Arne Klug, Gillian Mollod, Sylvain Vanston – MSCI ESG & Climate Research

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