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New guidance on target setting

Download – Annex 4.8
TNFD v0.4 Annex 4.8

New guidance on target setting

This release includes new draft guidance on target setting for organisations using the TNFD framework. This guidance aims to support organisations in undertaking component P2 of the LEAP approach, and recommended disclosure Metrics and Targets C.

This draft guidance document provides:

  • A discussion of the considerations an organisation should take into account when setting targets for nature; and
  • Target design features that can help ensure that targets best support an organisation’s wider impact and risk management objectives.

The Taskforce recommends that when corporates applying the TNFD framework set targets for nature in relevant areas and measure performance against those targets, they set science-based targets for nature using the Science Based Targets Network (SBTN) framework. In setting targets, the Taskforce also encourages organisations to align with the TNFD disclosure metrics, the Global Biodiversity Framework’s monitoring framework and other international treaties and global policy goals. The guidance provides illustrative examples of targets an organisation might set that would align with TNFD metrics and the Kunming-Montreal Global Biodiversity Framework (GBF).

The Taskforce and its knowledge partner the Science Based Targets Network (SBTN) published joint guidance for corporates setting science-based targets for nature in the beta v0.3. This will be updated later in 2023 based on the SBTN v1 publication, due in spring 2023.

Outline of the TNFD’s approach to metrics

Metrics are defined as a system or standard of measurement (Biodiversity Indicators Partnership. 2011. Guidance for national biodiversity indicator development and use.)

An indicator is defined as a quantitative or qualitative factor or variable that provides a simple and reliable means to measure performance (OECD/DAC. 2002. Glossary of Key Terms in Evaluation and Results Based Management Development Assistance Committee. Available from: http://www.oecd.org/dac/evaluation/2754804.pdf)

Key elements of the proposed metrics and targets architecture

The TNFD’s approach to metrics and targets has been built around six design features:

  1. Distinguishes between ‘Assessment Metrics’ used internally by report preparers for assessment purposes to inform management decisions (including what to disclose) and ‘Disclosure Metrics’ to be used in external disclosures for report users.
  2. Aligns with the Task Force on Climate-related Financial Disclosures (TCFD) approach of focusing first on cross-sector metrics and builds on the work of standard-setting bodies, in recognition that considerable research, scientific expertise and feedback from market participants is embodied in these various measurement, standards and disclosure frameworks developed by organisations such as the UN Statistics Division, CDP, GRI, SASB and IIRC (now the VRF) and CDSB (the last three now incorporated into the new International Sustainability Standards Board).
  3. Configures to support end-to-end nature-related risk management and disclosure, following the LEAP approach introduced in the v0.1 release of the TNFD framework.
  4. Provides a common global set of core disclosure metrics (specifics to be provided in future releases) to provide a baseline for comparability within and across sectors, while also recognising the need to accommodate additional disclosures based on the specific needs of each sector and different regulatory requirements across jurisdictions.
  5. Enables periodic reviews of the measurement architecture to ensure it continues to be fit for purpose, based on further development of scientific knowledge, data and measurement innovation and reporting requirements; and
  6. Aligns with emerging global and national policy target-setting frameworks, such as the Global Biodiversity Framework (GBF), and corporate target-setting approaches such as those being developed by the Science Based Targets Network (SBTN).

1. Two types of metrics: Assessment and Disclosure

The TNFD’s approach to measurement includes two types of metrics:

  • Assessment Metricsmetrics used within an integrated internal assessment process for nature-related risk and opportunity management . These Assessment Metrics help to inform internal decision making and would not be required to be disclosed (i.e. not part of TNFD-aligned disclosure against Metrics & Targets disclosure recommendation A) unless specified in the Disclosure Metrics.Assessment Metrics are relevant to the Locate, Evaluate and Assess phases of LEAP as well as the ‘Strategy and resource allocation’ components of the P phase (P1 and P2). Assessment Metrics for only the impact and dependency metrics categories have been identified in this v0.2 to v0.3 update release. Assessment Metrics for risk and opportunity analysis and strategy and resource allocation considerations will be included in the v0.3 release in November 2023.
  • Disclosure Metricsmetrics required to be disclosed to market participants in line with the TNFD’s disclosure recommendations (i.e. Metrics & Targets disclosure recommendation A[2]). Some, but not all, Assessment Metrics may also be Disclosure Metrics. Disclosure Metrics are not detailed in this v0.2 to v0.3 release and will be released for discussion and market feedback in a future release.

2. Configuring the LEAP approach for risk and opportunity assessment

In the v0.1 beta framework release in March 2022, the TNFD introduced an integrated assessment process for nature-related risk and opportunity management called LEAP.

The phased approach of LEAP makes clear the different types of assessment metrics required as report preparers assess nature-related risks and opportunities and identify a set of disclosures aligned with the TNFD’s draft disclosure recommendations (see table below).

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This v0.2 beta release focuses on the Assessment Metrics for dependencies and impacts on nature under the ‘E’ phase of the LEAP process. Further work will be undertaken by the Taskforce on the Assessment Metrics for the ‘L’, ‘A’ and ‘P’ phases of LEAP.

3. Cross-industry metrics categories

Aligned with the approach taken by the Task Force on Climate-Related Financial Disclosures (TCFD) and based on existing frameworks and standards in the marketplace, the proposed TNFD approach to metrics and targets starts by identifying categories of nature-related cross-industry metrics.

The proposed TNFD cross-industry metrics categories are provided in Table 6 and are supplemented with guidance in Annex 2.1 and an illustrative set of metrics in Annex 2.2.

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Metrics for each category should correspond to related indicators, selected using the illustrative assessment criteria set out below, in order to create a suite of related indicators across all metrics categories.

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A number of different levels of measurement will be relevant for Assessment and Disclosure Metrics. Indicators and metrics may be at the level of:

  • Direct operations (site, project or corporate level).
  • Upstream; and
  • Downstream (including portfolio level).[3]

Metrics levels should be hierarchical (i.e., corporate level metrics would be the aggregation of site or project-level metrics). Ecosystems and biomes intersect with the different levels of metrics.

The illustrative metrics in Annex 2.2 focus on direct operations as a starting point.

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4. Providing comparability yet flexibility for different disclosure regimes – Core and Additional Disclosure Metrics

As outlined above, one of the biggest challenges the TNFD faces in designing a nature-related risk management and disclosure framework is striking the right balance between simplicity and comprehensiveness. Ultimately, investors, creditors and regulators across markets and jurisdictions will make this judgement in different ways. As such, the TNFD will provide some flexibility in approach, while also recommending a common global set of ‘core’ metrics that allows comparability within and across sectors. This will help to ensure that the approach taken in the TNFD framework fits into a broader global baseline for integrated sustainability reporting and is manageable and cost effective for report preparers.

To ensure the analytic and reporting process is achievable, Disclosure Metrics recommended by the TNFD as part of the final framework in September 2023 would be delineated into ‘core’ and ‘additional’ metrics:

  • Core Disclosure Metrics are metrics that all organisations should disclose in line with the TNFD’s disclosure recommendations (Metrics & Targets disclosure recommendation A). These metrics would provide the market with consistent, decision-useful information, including for financial institutions. The TNFD recommends that organisations should consider Core Disclosure Metrics within the context of the regulatory disclosure requirements for the applicable jurisdiction they are operating in.
  • Additional Disclosure Metrics are metrics that a company or financial institution may choose to include in their disclosures, based on their specific industry, location and/or regulatory requirements, depending on their jurisdiction. As the name suggests, these would be additional to, not a substitute for, reporting on the core TNFD Disclosure Metrics, irrespective of whether all the core TNFD Disclosure Metrics are required by the relevant jurisdiction.

5. Ensuring flexibility and fitness for purpose – A periodic review process

The TNFD proposes that the specific metrics it recommends in the v1.0 framework in September 2023 be subject to periodic review initially every three to five years. This would help to ensure that advances in science, data, policy, and investor expectations can be reflected and incorporated, while providing medium-term consistency and certainty of approach for report preparers and users. Examples of advances to consider in the periodic updates include:

  • Reviews of the monitoring framework for the post-2020 Global Biodiversity Framework (GBF).
  • Major assessment reports undertaken by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES); and
  • Changes in regulatory arrangements and/or the information needs of financial institutions, including in the global baseline of reporting standards by the ISSB and/or elsewhere.

The TNFD welcomes feedback from market participants whether they would prefer a 3-year or 5-year review cycle, balancing consideration for medium-term reporting consistency on the one hand, with the need to incorporate technology and reporting advances on the other.

6. Aligning with emerging target-setting frameworks and approaches

The TNFD approach to measurement and target-setting will align with the emerging global and national policy target-setting frameworks, such as the GBF, and corporate target-setting approaches such as those being developed by the SBTN. As the GBF and SBTN approaches are still in development, the TNFD will work closely with the CBD, SBTN, ISSB and others to maximise alignment and work towards a joined-up approach to guidance for market participants.

Targets: Guidance for corporates on science-based targets for nature

Nature-related targets are an important component of the TNFD beta framework. They are the manifestation of corporate decisions and commitments made as a result of the identification and assessment of nature-related dependencies, impacts, risks and opportunities.

Target-setting is reflected in both the LEAP approach and the disclosure recommendations as follows:

TNFD beta framework component
TNFD draft disclosure recommendation ‘Metrics and targets C’ Describe the targets used by organisations to manage nature-related dependencies, impacts, risks and opportunities and performance against targets.
TNFD LEAP approach for nature-related risk and opportunity assessment, component P2: ‘Target setting & performance management’ Describe how organisations set targets and define and measure progress.

In v0.3 of the beta framework, the TNFD builds on its previous guidance from v0.2, which introduced a range of considerations for target-setting for nature. Consistent with the Taskforce’s commitment to build on and incorporate best practice methods and frameworks already widely used or under development, v0.3 includes guidance on methods under development by the Science-Based Targets Network (SBTN). The ‘Additional draft guidance for corporates on science-based targets for nature’ published as part of this v0.3 release, incorporates the five-step approach to setting science-based targets for nature developed by the SBTN. The TNFD beta framework provides an overview of relevant SBTN guidance and signposts to SBTN documentation for further details. The TNFD’s guidance on target-setting will be updated as SBTN releases further updates to their methods and guidance.

When corporates applying the TNFD framework set targets for nature and measure performance against those targets, the TNFD recommends that they set science-based targets for nature following SBTN guidance.

The Taskforce recognises that some organisations may choose another process for setting targets on nature, particularly while the SBTN methods are still in development. If organisations choose to follow another approach to target setting, the TNFD strongly recommends that target-setting follow the basic principles of science-based targets used by SBTN. This means that the targets set should be measurable, actionable and time-bound and based on the best-available science on nature and societal needs.

SBTN is a core knowledge partner of the TNFD and has worked with the TNFD to develop the ‘Additional draft guidance for corporates on science-based targets for nature.’ The TNFD and SBTN are working to align further to make it easier and more efficient for corporates to apply both frameworks.

SBTN target-setting methods generate data and analytical outputs that help corporates apply parts of the TNFD’s LEAP approach for nature-related risk and opportunity assessment. Conversely, applying the LEAP approach can help corporates generate data needed to set science-based targets (SBTs) for nature.

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Both the TNFD framework and science-based targets for nature are in development. The TNFD and SBTN are working to align these further to make it easier and more efficient to use both frameworks.

The scope of the TNFD beta framework’s recommendations on targets go beyond SBTN’s current methods. Targets in the TNFD framework context include targets for:

  • Use by financial institutions;
  • Downstream value chains
  • Impacts on nature in the atmosphere realm, including air quality; and
  • Dependencies on nature; and
  • Nature-related risks and opportunities.

Further target guidance covering these areas, as well as transition plans will be a focus of the v0.4 beta release.

The TNFD will also look to the Convention on Biological Diversity’s forthcoming Global Biodiversity Framework, including specific global targets agreed as a result of the CBD COP-15 process, to inform development of targets and transition plans. These targets are also informing the development and ambition levels of SBTN guidance on science-based targets.  The Taskforce will also look towards the development of goals and objectives for nature and biodiversity within national and local policies, which – along with global targets – will set the level of ambition and context for enterprise-level targets set by corporates and financial institutions.