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Scoping the Assessment

The LEAP nature risk assessment approach Scoping the assessment: corporates

Scoping is a crucial phase of the LEAP approach that helps an organisation to identify initial areas of focus for further assessment. In this guidance, the TNFD proposes a set of scoping questions to support the process. These questions are not intended to be sequential but should be considered in parallel to develop a list of initial areas for further assessment. Not all questions will be relevant to every organisation.

The questions are grouped into three blocks:

  • C1: Type of organisation, mapping out the organisation and its value chain(s) at a high level.
  • C2: Entry points, correlating the organisation’s activities and assets across sectors and biomes with typical nature-related dependencies, impacts, risks and opportunities.
  • C3: Type of analysis, determining where the organisation wants to focus its assessment, considering the purpose of the analysis and the relevant constraints.

C1: Type of organisation

  • What is the nature of the organisation? What are the primary functional units, products, activities and assets?
  • Where are the direct operations?
  • What activities and assets are in the organisation’s value chain(s)? Where are these located, at a high level?
  • How much spending or revenue is associated with each of these sites?

An organisation needs to understand the key components of its direct operations and value chain(s) upstream and downstream – by organisational unit, product line, process or activity, for example. The organisation should map the locations of its direct operations and, at a high level, value chain(s) upstream and downstream, starting with areas likely to have the largest dependencies or impacts on nature. Recognising that the location-specificity of this assessment may not always be highly precise at this stage, the TNFD recommends that an organisation identifies the broad geographies of its value chain(s), going as far upstream and downstream as possible.

C2: Entry points

  • Which sectors do the direct operations and value chain(s) cover?
  • In which biomes are the activities and assets located?
  • Are there any particular concentrations? Do any biomes host large numbers of suppliers or customers? Are any biomes associated with large amounts of spending or revenue?
  • Do the answers to the questions point to any likely significant nature-related dependencies, impacts, risks or opportunities?

The organisation should map the in-scope organisational units, product lines, sites, assets or activities onto SASB sector classification and TNFD biomes. To identify likely nature-related issues, the organisation should connect this mapping to tools such as:

  • the TNFD sector and biome guidance,
  • ENCORE database;[1]
  • SBTN materiality matrix;[2]
  • CDP Water Impact Index;[3]
  • IBAT;[4]
  • The SBTN high impact commodity list, and
  • Internal information, national data and other sources to identify where significant nature-related dependencies, impacts, risks and opportunities might be occurring.

Where information gaps exist, the organisation should consult proxy and secondary data, as well as relevant stakeholders and experts. It should also consider information raised through early warning mechanisms and grievance mechanisms.

[1] ENCORE. https://encore.naturalcapital.finance/en.

[2] SBTN. 2022. Sector Materiality Tool. https://sciencebasedtargetsnetwork.org/take-action-now/take-action-as-a-company/join-the-sbtn-corporate-engagement-program/corporate-engagement-members-only/target-setting-tools-and-guidance/.

[3] CDP. Water Watch – CDP Water Impact Index. https://www.cdp.net/en/investor/water-watch-cdp-water-impact-index.

[4] IBAT Alliance. 2023. Integrated Biodiversity Assessment Tool. https://www.ibat-alliance.org/.

C3: Type of analysis

Where to focus?
  • What are the organisation’s priorities for understanding its nature-related issues?
  • What is the appropriate level for the analysis? Should it be by product, process, input, business unit or site?
  • What are the baselines and time periods for the analysis?
  • What are the organisation’s materiality processes? What information is needed to drive internal decisions? Who are the key stakeholders for the disclosures and what will they be interested in?

To further determine the priorities for further assessment, the organisation should consider the aims of the analysis. This might include, for example, investigating emerging risks or opportunities, or meeting demands from particular stakeholder groups for more information about the organisation’s activities in a certain geography.

In light of this, the organisation should consider the appropriate level to undertake the analysis, such as at the project, site, business unit or organisation level. In doing so, the organisation may want to consider how performance is or will be assessed. The TNFD will continue to develop use cases and guidance, learning from pilot testing, to help inform choices about the appropriateness of assessments at these different levels.

The organisation should consider the baseline and time period for the analysis, be that based on current dependencies, impacts, risks and opportunities, or also future nature-related issues in the short, medium and long term and past impacts. The TNFD disclosure recommendations include consideration of future risks and opportunities, based on scenario analysis.

Defining the organisation’s materiality processes at this stage will also help to ensure a common understanding of its priorities for the disclosure of nature-related issues and where it should focus during the initial scoping process. An organisation will need to consider what is meaningful for 1) the organisation’s internal decision making and 2) the intended audience for the disclosure, such as providers of capital and wider stakeholders. This will require consideration of those audiences’ likely interests and views on what they would consider material or of interest.

The organisation may wish to refer to external standards for materiality such as:

  • International Accounting Standards Board IAS 1 Presentation of Financial Statements, paragraph 7;
  • International Sustainability Standards Board IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, paragraphs 56-62; IFRS Practice Statement 2 – Making Materiality Judgements;
  • The European Financial Reporting Advisory Group’s Draft European Sustainability Reporting Standards General Requirements, section 3; and
  • Global Reporting Initiative 1: Foundation 2021, section 2.2.
Boundaries and constraints
  • What are the constraints on the assessment? For example, financial and human resources, data.
  • Where is it appropriate to place the boundaries around the analysis? What are the relevant business activities, sectors, geographies and biomes?
  • What level of assessment is feasible or appropriate given the complexity of the organisation’s business activities and value chain(s)?

The organisation needs to determine the boundaries for its assessment, across direct operations, value chain(s) and geographical areas. When doing so, the organisation should take into account the relevance to the organisation’s operations and financial position, the materiality process adopted, stakeholder priorities, information availability and the staff and financial resources available to undertake the analysis. The boundaries could be set across three variables:

  • Direct operations: Identifying which business units, sites, activities or product lines are included within the boundary for analysis or are most likely to have significant nature-related issues.
  • Value chain: Determining how far up and down the value chain(s) should be analysed. The TNFD recommends that organisations bear in mind where likely material dependencies and impacts on nature will be, recognising the challenges of tracing nature-related issues along complex global value chain(s).
  • Geography: Considering the geographies included within the boundary. The TNFD recommends considering the ecosystems surrounding sites where activities take place, in addition to the sites themselves. Dependencies and impacts are typically embedded in the wider system. For example, pollution discharged into a river may have impacts several kilometres beyond the organisation’s site boundary. Similarly, the habitat of the pollinators a farm relies upon may sit outside the farm property.

Additional filters could include the degree of influence the organisation is likely to have over the issue.

The organisation should review whether there are any significant issues that are excluded through its scoping process and evaluate if the reasons for exclusion are sufficiently robust.

Review

The scoping exercise should be reviewed once the organisation has completed the Locate, Evaluate and Assess phases of LEAP to confirm that the scope remains correct, based on new information. It should similarly be reviewed periodically as the availability of data and tools improves and the organisation’s activities, locations and value chains change.

Additional guidance: case studies and tools

To support financial institutions to get started with the LEAP approach, TNFD has collated a reference list of case studies for assessing nature-related risks and opportunities, tools to support the assessment, guides which consider the various use cases and limitations of these tools and examples of how these tools have been applied in practice.

Tools to support use of LEAP-FI

Below is a non-exhaustive list of tools that can be used by financial institutions to support the LEAP approach. We distinguish between ‘tools’ and ’applications and analysis’, where the second have often been built from the first and may be more practically useful for financial institutions, while the first are the original source. For a more comprehensive catalogue of complementary tools and their use cases please refer to: