LEAP – the risk and opportunity assessment approach: P2: Target setting & performance management
LLocate The interface with nature
EEvaluate Priority dependencies and impacts
AAssess Material risks and opportunities
PPrepare To respond and report
P2: Target setting & performance management
Guiding Question: How will we set targets and define and measure progress?
Reporting metrics and targets associated with nature-related risks and opportunities
The Metrics and Targets pillar of the TNFD draft recommended disclosures, like those recommended for climate-related risks and opportunities by the TCFD, requires organisations to:
A: Disclose the metrics used by the organisation to assess and manage material nature-related risks and opportunities in line with its strategy and risk management process
B: Disclose the metrics used by the organisation to assess and manage dependencies and impacts on nature; and
C: “Describe the targets and goals used by the organisation to manage nature-related dependencies, impacts, risks and opportunities and its performance against these”.
Target setting approaches
The TNFD has produced using the TNFD framework.
This draft guidance document provides: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.
An organisation’s performance and progress against targets should be monitored over time. The indicators used to monitor performance will likely relate to Exposure (dependencies and impacts, from the Evaluate phase of LEAP) and Magnitude (risks and opportunities, from the Assess phase of LEAP), compared to a baseline and/or reference state.
Depending on the targets set, dependencies and impacts on nature will require performance indicators to monitor:
- Changes to business impact drivers (positive or negative);
- Changes to the state of nature (ecosystems and/or species);
- Changes to the provision of ecosystem services.
Performance indicators can also relate to the response identified, for example, if the organisation has committed to having a certain number of certifications in place or a certain amount of training in nature undertaken by staff. Performance metrics can be used to monitor progress over time towards these response targets.
Performance metrics will relate to the commitments and targets set by the organisation. Examples include:
- Additional water availability and/or increased water catchment in m³/year (International Capital Markets Association)
- Reduction in changes in the nutrient and/or pH level for agricultural soils (International Capital Markets Association)
- Total volume of water withdrawn from areas with water stress, compared to previous year (CDP)
- Change in withdrawal volume as a result of water produced (CDSB Water)
- Proportion and/or value of production, consumption and sourcing of raw materials from ecosystems that have managed to maintain or enhance conditions for nature (CDP)
- Circular material use-rate (CDP)
- Proportion of value-chain assessed in nature-related assessment (CDP)
- Percentage of total portfolio value that is allocated to products/services that support nature (CDP)
- Proportion and/or value of production, consumption and sourcing of raw materials that is traceable (CDP).
Data & metrics for analysis and performance reporting
To support market participants in their pilot testing of the TNFD Framework, including the LEAP approach and reporting against the TNFD’s draft disclosure recommendations, we intend to signpost to reputable online sources of data, metrics and targets across a range of natural capital dimensions (environmental assets, ecosystem services, impact drivers and industry sectors). This will be supplemented with additional guidance by sector, and potentially by biome, to support market participants in their efforts to find and use high-quality data and contextualise it, with the aim of moving towards reporting that is comparable at an industry level.
Links to data sources will be updated throughout 2022 and 2023 through subsequent updates to the TNFD Framework (currently expected in June 2022, November 2022 and February 2023).
The TNFD is particularly interested to learn from current market practice in finding, using and reporting against nature-related metrics and targets.