One of the most well-known frameworks for companies and financial institutions to report on climate-related risks, from the Task Force on Climate-related Financial Disclosures (TCFD), is getting a sister framework. The Taskforce on Nature-related Financial Disclosures (TNFD) will build upon the work of the TCFD by 1) zeroing in on nature-related risks and opportunities, a metric that the TCFD only touches upon by considering climate implications; and 2) mimicking the TCFD’s structure and avoiding repetition to serve as a complementary framework, providing a comprehensive image of an organization’s environmental exposure. The TNFD will help companies and financial institutions to incorporate nature into decision-making and thus funnel funds toward protecting biodiversity.
The TNFD is especially important because of our dependence on nature and the threat of its disappearance. “$44 trillion of economic value generation – over half the world’s total GDP – is moderately or highly dependent on nature and its services,” according to the World Economic Forum, which simultaneously ranked biodiversity loss as one of the top five threats of the decade: humans having already caused the extinction of 83 percent of wild mammals and 50 percent of plants. In the words of Elizabeth Maruma Mrema, one of the co-chairs of the TNFD and Executive Secretary of the United Nations Convention on Biological Diversity (CBD), “we are losing biodiversity at an unprecedented rate in human history.”
On the flip side, engaging with nature in a positive manner presents enormous opportunity: in addition to preserving species, the World Economic Forum adds that “nature-positive transitions. . . could generate up to US $10.1 trillion in annual business value and create 395 million jobs by 2030.” But despite these risks and opportunities, organizations have lacked:
- Hard targets, like the Paris Agreement’s goal of keeping global temperature increase below 2 degrees Celsius
- Data to sufficiently measure biodiversity, where a large gap exists
According to the other TNFD co-chair and CEO of Refinitiv, David Craig, as he explained to Bloomberg, “we all proudly talk about our ESG data sets, but the honest truth is that there’s very little ‘E,’ there’s quite a bit on climate. There’s almost no ‘S,’ and there’s quite a lot of ‘G’. So it’s almost CG at the moment, and we need to definitely put the environment back into ESG.”
The solution, TNFD, was announced in July 2020, with the support of four founding partner organizations: Global Canopy, the United Nations Development Programme, the United Nations Environment Programme Finance Initiative, and the World Wide Fund for Nature. Beginning September 2020, an Informal Working Group (IWG) spent nine months fleshing out the scope and work plan which was then published in Nature in Scope in June as consolidated recommendations to the TNFD. This process was supported by an 18-member informal Technical Expert Group and an Observer Group of various stakeholders. The Working Group (with a collective $8.5 trillion in assets) consisted of:
- 49 financial institutions and private firms (like Citi and Pimco)
- 8 governments and regulators (like the governments of France and Peru)
- 17 think tanks and associations (like the World Economic Forum)
With the transition from the IWG complete, and the global launch of the TNFD on June 10, the co-chairs will form the Taskforce and together develop the framework, which will be adjusted throughout 2022 and launched in 2023. The Taskforce will have 30 members, including corporations, financial institutions, and service providers from developed and emerging markets.
Ultimately, the goal is not to develop a standalone standard, but to draw from and be incorporated into other standards and frameworks, like the Sustainability and Accounting Standard Board (SASB) standards and the Global Reporting Initiative (GRI) framework. It also aims to align with the CBD’s goals in their zero-draft Global Biodiversity Framework for “no net loss by 2030 and net gain by 2050.” As Craig reflected, “the TNFD is a coalition of the willing, a market-led initiative to bring brains and talent together”; “keeping the TNFD framework simple, practical and market-led is critical for success.”