Introducing v0.3 of the TNFD framework

Introduction

The Taskforce on Nature-related Financial Disclosures (TNFD) was established in 2021 in response to the growing need to factor nature into financial and business decisions. The TNFD is a global, market-led initiative with the mission to develop and deliver a risk management and disclosure framework for organisations to report and act on evolving nature-related risks and opportunities, with the ultimate aim of supporting a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.

To achieve these outcomes, the Taskforce resolved at its first meeting in October 2021 that the TNFD risk management and disclosure framework should be applicable to, and used by, business and financial institutions of different sizes, across sectors and jurisdictions, irrespective of their preferred or required approach to materiality. Halting and reversing nature loss, achieving nature-positive outcomes and mitigating and managing nature-related risks will only be possible if large and small businesses across supply chains and financial institutions of all types are collectively identifying, assessing, managing and disclosing nature-related dependencies, impacts, risks and opportunities.

The Taskforce is now half-way through its two-year phase of design of the TNFD framework. The TNFD’s complete recommendations (v1.0) will be published in September 2023 for market adoption. As it continues to develop the framework with the support and input of a wide range of knowledge partners and stakeholders, the Taskforce aims to:

  • Help drive alignment with the emerging global reporting baseline under development by the ISSB and best practice standards and tools already in use by market participants today;
  • Provide adaptability and flexibility regarding the approach to materiality to accommodate the preferences and regulatory requirements of report preparers and report users from organisations of all sizes and across all jurisdictions;
  • Encourage early action by companies and financial institutions to begin reporting nature-related dependencies, impacts, risks and opportunities, given the urgent need to address both nature loss and climate change in an integrated approach; and
  • Provide a structured path to increase disclosure ambition over time, recognising that this area is new to many organisations, but a rapidly growing strategic imperative for sound governance, strategy, risk management and capital allocation.

The TNFD aims to build a risk management and disclosure framework that can be used by organisations of all sizes in all jurisdictions to identify, assess, manage and disclose nature-related dependencies, impacts, risks and opportunities.

The Taskforce is made up of 34 senior executives drawn from corporates, financial institutions and market intermediaries around the world and led by the TNFD Co-Chairs, Elizabeth Mrema and David Craig. Collectively, the Taskforce Members represent institutions with over US$19.4 trillion in assets under management and a footprint in over 180 countries. The Taskforce is supported by a larger institutional support base, the TNFD Forum, consisting of over 700 organisations globally, and a network of 16 core knowledge partners, including leading global scientific, conservation and standards development bodies, which are actively contributing to the development of specific aspects of the framework.

Developing the TNFD framework

To develop the framework, the TNFD has adopted an open innovation approach. This involves the release of a series of prototypes, called ’beta versions’ of the TNFD framework, for feedback and pilot testing with market participants and other stakeholders. The TNFD beta framework has been viewed over 60,000 times by stakeholders in over 140 countries since the release of v0.1 in March 2022.

Following this release of v0.3 of the TNFD beta framework, the Taskforce will release v0.4 in March 2023, before the launch of the complete recommendations (v1.0) of the TNFD framework in September 2023 (see Figure below).

The TNFD’s open innovation approach has attracted the engagement and feedback of market participants and other stakeholders through a range of channels (see section below on ‘TNFD Consultation and Engagement efforts):

  • The online TNFD framework platform, including feedback forms and interactive rating functionalities;
  • Over 130 pilot tests of the beta framework now underway;
  • Dedicated engagement with different stakeholder groups, including with Indigenous Peoples and Local Communities (IPLCs) and ongoing dialogue with a range of civil society organisations;
  • TNFD Consultation Groups established in nine countries and regions;
  • The Nature-related Data Catalyst, which now includes over 100 nature-related data providers; and
  • Group meetings, presentations and webinars globally with a wide range of stakeholders, including policy makers, regulators, business and finance industry associations, other sustainable finance initiatives, and conservation groups.

The TNFD is grateful to all those who have provided feedback on the beta framework to date and invites market participants and other stakeholders to continue to provide feedback on this and the forthcoming v0.4 beta version of the TNFD beta framework through the TNFD framework online platform.

The TNFD will accept feedback on a rolling basis until 1 June 2023. However, for feedback on v0.3 of the beta framework to be evaluated ahead of the final v0.4 beta release in March 2023, feedback must be received by 14 February 2023. All feedback on all beta versions of the framework, irrespective of when it is provided, will be reviewed and evaluated before the Taskforce launches v1.0 of the TNFD framework in September 2023.

In March 2023, the TNFD will conclude its open innovation process with a 60-day formal consultation where organisations can submit responses to a full draft of the beta framework (v0.4). The Taskforce will consider all feedback received to inform its complete framework for publication in September 2023. Comment letters received in this formal consultation will be published on the TNFD website, following the approach of international standards organisations.

The TNFD beta framework is open for feedback until 1 June 2023, ahead of the Taskforce publishing its complete recommendations (v1.0) of the TNFD framework in September 2023. The deadline for providing feedback to inform the v0.4 release is 14 February 2023, and should be submitted via the feedback survey on the online platform.

In March 2023, TNFD will establish a 60-day formal consultation where organisations can submit responses to a full draft of the beta framework (v0.4).

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TNFD’s consultation and engagement efforts

The TNFD continues to build its consultation and engagement efforts to collect feedback from market participants across a range of countries and sectors, and a variety of stakeholders and rights-holders.

Pilot testing

Approximately 130 organisations are currently designing, implementing or have completed a pilot test of the TNFD beta framework to explore its application in their organisational context. This includes 54 corporates, 72 financial institutions and 13 other organisations (including public sector and civil society organisations, and market service providers). In addition, a further 60 organisations have expressed interest in running a pilot. So far, 46 pilots have already provided the TNFD with feedback based on their experience. Organisations such as Kirin[1] and AXA[2] have also shared the findings from pilot tests publicly in external reports.

Overall, the pilots vary widely in terms of their type, scope and applied resources. In addition to independent pilot tests, organisations are pilot testing through the TNFD’s pilot programme partners: Agence Française de Développment (AFD), Global Canopy, FSD Africa, via the African Natural Capital Finance Alliance (ANCA), the International Council on Mining and Metals (ICMM) the United Nations Environment Programme Finance Initiative (UNEP-FI) and the World Business Council on Sustainable Development (WBCSD).

Further information on the break-down of pilots by region, sector, realm, biome and organisation type is available on the framework online platform.

The TNFD is working actively to fill existing gaps in coverage of pilots: for financial institutions in North America, Island States and Central and Western Asia; for corporates in Central America and Africa; in priority sectors of fisheries and aquaculture, textiles and apparel, pharmaceuticals, industrials, marine transportation and chemicals; and in the ocean realm and blue economy.

Organisations interested in pilot testing the framework are invited to contact the TNFD Secretariat at [email protected]. For TNFD Forum member institutions, monthly TNFD pilot testing clinics provide additional guidance and enable piloting organisations to share insights and lessons from their piloting experience. Over 900 individuals have engaged in the first two pilot testing clinics held in September and October 2022.

The TNFD Piloting Guide sets out more information on why and how to pilot test.

The Taskforce invites all piloting organisations to complete the TNFD pilot classification form to ensure the TNFD has a full view of the diversity of pilot tests and where piloting gaps still exist.

Engagement with Civil Society, Indigenous Peoples and Local Communities

To ensure the voices and perspectives of civil society organisations and Indigenous Peoples and Local Communities (IPLCs) are incorporated into the design and development of the TNFD framework, the TNFD is partnering with the International Union for Conservation of Nature (IUCN) to engage with a wide range of Indigenous Peoples and Local Communities through IUCN’s global networks and relationships. The TNFD is meeting bi-monthly with IPLC leaders and organisations across five continents, as well as with a range of civil society organisations to gather feedback on the beta framework. These meetings have included, for example, a briefing to the caucus of the International Indigenous Forum on Biodiversity (IIFB) and bilateral sessions with organisations working on social dimensions of nature-related issues. The TNFD is also exploring additional initiatives to encourage pilot testing in biodiversity hotspots and emerging markets, and pilot tests with Indigenous community enterprises.

As part of this v0.3 beta release, the TNFD has published a discussion paper on ‘Social dimensions of nature-related risk management and disclosure – Considerations for the TNFD framework’. This reflects the feedback received by the Taskforce to date and seeks additional feedback from stakeholders, including rights-holders, as the Taskforce continues to evaluate the social dimensions of the framework under development.

Regional and national Consultation Groups

To increase outreach and engagement in markets where there has been particularly strong interest, TNFD Consultation Groups have been established at a national or regional level. Participation in Consultation Groups is open to all institutional members of the TNFD Forum from that jurisdiction. An initial six Consultation Groups were established in May 2022 for Australia and New Zealand, India, Japan, the Netherlands, Switzerland and the United Kingdom. Three additional Consultation Groups have subsequently been established in Brazil, Colombia and France. The Consultation Groups are designed to help amplify awareness of the TNFD framework in development and provide a platform for national and regional dialogue on its future adoption across business and finance.

Nature-related Data Catalyst

Building on the TNFD’s Nature-related Data and Analytics Discussion Paper released in March 2022, the TNFD established the Nature-related Data Catalyst in July 2022. The Data Catalyst convenes a range of market participants across the nature-related data landscape, including nature-related data providers. The goal of the Data Catalyst is to address shortcomings in the current landscape of nature-related data, while also identifying and encouraging the development of – and access to – nature-related data, analytics and tools. The ultimate goal is to improve the ease, speed and scale of adoption of the TNFD framework, once the Taskforce launches its complete recommendations and framework in September 2023. The Nature-related Data Catalyst now has over 100 members.

The TNFD framework - an overview

Updates in v0.3 of the beta framework

The TNFD framework seeks to provide recommendations and guidance of relevance to a wide range of market participants, including investors and credit providers, analysts, corporate executives and boards, regulators, stock exchanges and accounting firms. It has been developed following the TNFD principles of being market usable, science-based, purpose driven, integrated and adaptive, and globally inclusive, while embracing a broad approach to nature-related risks and employing an integrated approach to sustainability risk management and reporting.

This version 0.3 update to the beta framework incorporates a number of important modifications and additions aligned with these aims.

The core components of the TNFD framework are showing in the figure below. This structure remains unchanged and consistent with that of v0.1 and v0.2 of the beta framework and the Taskforce expects it to remain unchanged in future update releases.

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Who the TNFD framework is designed for

With demand for an integrated nature-related risk management and disclosure framework growing, the TNFD seeks to provide recommendations and guidance of relevance to a wide range of market participants:

  1. Investors and financial institutions: Support more informed and robust capital allocation decisions and active ownership strategies based on clarity, confidence and trust in data relating to nature-related risks.
  2. Analysts: Enable high-quality and timely analysis that incorporates nature-related risks to support the determination of potential and likely impacts on future cash flow and company valuations.
  3. Corporates: Inform better corporate strategy, governance and risk management decision making, and the incorporation of nature-related risk assessments alongside, and ideally integrated with, climate-related risk reporting in statutory reporting to markets and regulators.
  4. Regulators: Ensure recommendations and guidance align with existing disclosure mechanisms, standards and other jurisdiction-specific regulatory requirements.
  5. Stock exchanges: Support and encourage consideration of new voluntary and mandatory listing requirements linked to nature-related risks, as well as opportunities for new listed equity offerings that encourage nature-positive outcomes.
  6. Accounting firms: Enable comprehensive company assurance that incorporates nature risk and opportunity considerations, and support internal risk functions.
  7. Environmental, Social and Governance (ESG) data providers, credit rating agencies and financial service providers: Enable support to investors and financial decisionmakers with consistent and robust data and insights on how corporates manage their nature-related risks.

As we have seen in the growth of climate-related reporting, demand for disclosure from investors and others is now strong and widespread. For many investors, company disclosures on climate are considered essential to their full disclosure of material risks.

Large asset owners and asset managers also play a catalytic role, as they influence the organisations they invest in to provide nature-related financial disclosures and strengthen their management of nature-related risks and opportunities. This also applies to lenders, including development financiers. Corporates have been found to be 2.3 times more likely to disclose across climate, forests and water themes when financial institutions request them to do so.[3]

In addition, governments and regulators are considering nature-related risk management and disclosure, expanding the work they have already undertaken on climate-related risks. Eight jurisdictions, including the United Kingdom, Japan, Singapore and the European Union, have now mandated the incorporation of TCFD recommendations into their national reporting regimes.[4] The more than 100-strong network of global central banks and supervisors, the Network for Greening the Financial System (NGFS), is now exploring the impacts of nature and biodiversity loss on systemic risks to financial system stability. Many national governments, central banks, regulators and public sector organisations formally support the TNFD as members of the TNFD Forum, a global and multi-disciplinary consultative network of over 700 institutional supporters who share the vision and mission of the TNFD.[5]

‘We look forward to the establishment of the Taskforce on Nature-related Financial Disclosures and its recommendations.’ G7 Finance Ministers

‘The TNFD will play a shaping role in providing a reporting framework that will allow for consistent and comparable reporting.’ Network for Greening the Financial System, Study Group on Biodiversity and Financial Stability

‘A move to ultimately mandatory standards [for nature-related risks] is appropriate. The Taskforce on Nature-related Financial Disclosures, which is a voluntary process, could ideally provide some basis for this.’ Mark Carney, UN Special Envoy for Climate Action and Finance

Framework development principles

The TNFD framework is being developed following the TNFD principles:[6]

  • Market usability: Directly usable and valuable to market participants, notably corporates and financial institutions, as well as policy and other actors.
  • Science-based: Follow a scientifically anchored approach, incorporate well established and emerging scientific evidence, and converge towards other existing science-based initiatives.
  • Embrace nature-related risks: Embrace nature-related risks that include immediate and material financial risks, as well as nature dependencies and impacts and their related organisational and societal risks.
  • Purpose driven: Actively reducing risks and increasing nature-positive action by using the minimum required level of granularity to ensure achievement of the TNFD goal.
  • Integrated and adaptive: Can be integrated into and enhance existing disclosures and other standards. Account for and be adaptive to changes in national and international policy commitments, standards and market conditions.
  • Climate-nature nexus: Employ an integrated approach to climate- and nature-related risks, scaling up finance for nature-based solutions.
  • Globally inclusive: Ensure the framework and approach is relevant and accessible worldwide, across emerging and developed markets.
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