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Sunday, December 10, 2023

Launch Partners

Taskforce on Nature-related Financial Disclosures issues final recommendations; expects prompt adoption

The Taskforce on Nature-related Financial Disclosures (TNFD) has published its final recommendations for nature-related risk management and disclosure. It is anticipating companies to start announcing their intention to voluntarily adopt the recommendations imminently.

The 14 recommendations aim to contribute to decision-making by companies and capital providers, and result in a shift in global financial flows toward nature-positive outcomes and the goals of the Kunming-Montreal Global Biodiversity Framework.

“Nature risk is sitting in company cash flows and capital portfolios today. The costs of inaction are mounting quickly. Businesses and financial institutions now have the tools they need to take action”, David Craig, the co-chair of the TNFD, remarked.

According to David, the recommendations are consistent with the recently issued International Sustainability Standards Board (ISSB) standards sustainability reporting baseline. As such, they will represent a step-change in the capacity for businesses to identify and disclose their exposure to nature-related issues.

According to Sue Lloyd, the vice-chair of the ISSB, the TNFD recommendations and the new ISSB standards have both incorporated the architecture of the Task Force on Climate-related Financial Disclosure (TCFD).

Notably, the International Financial Reporting Standards, of whom the ISSB is the sustainability standards arm, announced the transfer of the TCFD’s monitoring responsibilities to the ISSB in July this year following the issuance of its inaugural sustainability standards.

According to a recent report from Sustainable Fitch, Fitch Rating’s sustainability arm, the demand for nature-based solutions and biodiversity impact investment has been rising in recent years. About 85% of the world’s largest companies have a significant dependency on nature across their direct operations, the agency also found.

According to Richard Mattison, the vice-chair of S&P Global Sustainable1, the TNFD recommendations are a significant step toward providing clarity to businesses and investors hoping to mitigate their exposure to nature-related risks.

“These recommendations address a vital need as, quite simply, nature risk is financial risk,” Richard commented.

With the new recommendations in place — which span across the four pillars of governance; strategy; risk and impact management; and metrics and targets — the TNFD will now encourage the voluntary market adoption of the recommendations. It will also track the adoption on an annual basis.

The TNFD, which expects to see companies voluntarily announcing their intention to adopt the recommendations within the week, is set to announce the inaugural list of TNFD adopters in the coming weeks.

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