Piloting the Framework

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Overview

You can also download this piloting guide as a PDF

Introduction

This section of the website provides a guide for organisations interested in – or already in the process of – pilot testing the beta versions of the Taskforce on Nature-related Financial Disclosures (TNFD) framework for risk and opportunity management and disclosure. The TNFD welcomes participation in piloting testing from a wide range of market participants across jurisdictions and sectors. The Taskforce encourages collaborative pilot testing projects.

This guide:

provides context and information on the aims of the TNFD and its piloting programme.
describes the different types of pilots that can be undertaken.
provides examples of current piloting approaches; and
presents important considerations for pilot design and implementation.

The guide has been developed in partnership with the TNFD’s piloting programme partners: FSD Africa, through the African Natural Capital Alliance (ANCA), Global Canopy, the International Council of Mining and Metals, the United Nations Environment Programme’s Finance Initiative (UNEP FI) and the World Business Council for Sustainable Development (WBCSD).

Overview of TNFD pilots

The TNFD is committed to global pilot testing. The Taskforce would like to see a broad and diverse mix of pilot tests being conducted by corporates and financial institutions across geographies (including nature-risk and biodiversity hotspots around the world), sectors and realms (e.g., land, freshwater, ocean and atmosphere).

Pilots from a mix of geographies, sectors, sub-sectors, and realms will create greater awareness among TNFD supporters about the TNFD’s objectives, what is currently possible and what the challenges are, before the framework is released to the market.

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 and AXA have also shared the findings from pilot tests publicly in external reports.

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.

Additional Content

Figure: TNFD Piloting Timeline

Why pilot test

Pilot testing the framework on a business, business unit, product line, specific operational site, supply chain or, for financial institutions, an investment or credit portfolio is a potentially valuable opportunity for market participants to explore the implications of the TNFD’s proposed approach. It will also provide the TNFD with valuable feedback to help shape the design and development of the framework.

Benefits to your organisation from pilot testing

Pilot testing can provide a range of learning benefits for pilot testers as well as insights for the Taskforce. Pilot testing the different components of the TNFD framework can enable organisations to:

Shape and organise their thinking around the management and disclosure of nature-related risks and opportunities.
Get ahead of the curve as nature-related issues rise in importance in the business agenda and prepare for the future market adoption of the TNFD framework in 2023.
Understand and respond to any gaps in capability and knowledge at your organisation to develop an integrated approach to sustainability-related risk management across climate, nature and social dimensions.
Improve governance and strategy in relation to nature dependencies, impacts, risks and opportunities.
Start embedding climate-nature nexus considerations early on in the organisation’s climate action and net zero planning and response; and
Help ensure the TNFD final framework and recommendations are practical for your organisation.

Other outcomes for piloting organisations are directly related to the implementation of the framework’s components, as described in the table below for different types of organisations.

Additional Content

Table: Benefits from pilot testing by organisation type

Type of organisation	Desired outcome(s)
Financial institutions (including institutional investors and development finance organizations)	Better informed and robust capital allocation decisions based on application of the TNFD framework. Enhanced alignment between risk management approaches/strategic direction and institutional purpose, fiduciary duty and commitments. Better understanding of the potential institutional risk assessment ‘blind spots’ related to climate and nature risks and the capabilities required, including supporting data infrastructure.
Financial market analysts and intermediaries	Improved understanding of structured approach to nature risk and opportunity assessment and implications for advisory products and services to clients.
Non-financial corporations	Improved understanding of how to incorporate nature-related information in mainstream financial reports, alongside climate disclosures (aligned with TCFD guidance), achieving a more holistic view of how environmental risks and opportunities affect performance and the actions that can be taken to address them. A better understanding of the alignment between current practices and the TNFD disclosure recommendations and framework.
Support organisations (e.g. consultancies, NGOs, academic and research institutions, data providers)	Learning and capability building to support the development of new data and insight products and services to assist market participants and other key stakeholders, such as policy makers and regulators in government.
Regulators, central banks and policy-makers	Deeper understanding of the relevance and implication of nature-related risks on macro-prudential stability and potential market regulation approaches and activities, including the design of specific standards and regulatory instruments. Upskilling of policy and regulatory staff around nature-related fundamentals, risks and opportunities.
Accounting firms	Staff capability building to support the development of new audit, assurance and advisory services to support future market reporting on nature-related performance.
Exchanges	Consideration of new voluntary and mandatory listing requirements linked to material nature-related risks and opportunities, alongside climate-related risks and opportunities. Commodity exchanges can benefit from pilot testing the draft TNFD risk management and disclosure framework to advance the integration of the disclosure recommendations among their client base.

How your pilot test helps the TNFD

Advances the TNFD framework through the learnings and insights gathered.
Amplifies the TNFD’s engagement activities and market adoption.
Identifies further research and focus areas.
Increases the clarity and coherence of TNFD definitions and guidance on key concepts.
Improves the relevance, practicality and suitability of information within the TNFD framework to meet the decision-making needs of market participants;
Ensures alignment of the TNFD framework with current and future reporting practices and standards.
Addresses practical challenges for organisations in implementing the TNFD framework, including adherence to the TNFD disclosure recommendations.
Harvests specific insights on how the TNFD should approach metrics and targets linking nature-related risks and opportunities to financial performance and;
Refines the TNFD piloting process.

How the TNFD processes your feedback

The feedback received through pilot testing, reviews of the online platform and through focus group discussions is being assessed by the TNFD Secretariat and provided to the Taskforce. This will inform the iterative development of the framework leading up to the publication of the TNFD’s final recommendations in September 2023. A summary of the feedback received on the beta v0.1 release is available here.

The TNFD’s proposed phased approach to pilot testing

The TNFD recommends a phased approach to considering a pilot test:

Get familiar with the TNFD framework
- Start by familiarising yourself with the contents of the beta framework on the TNFD’s online platform.
Assess internal readiness
- Consider a rapid desktop pilot test to help gauge your internal readiness and capability to conduct further, more detailed pilot testing. Consider your current knowledge levels, capabilities and resource availability to decide the level of depth of your pilot testing exercise.
Scope your pilot test
- If you are ready to proceed, agree on the scope of a detailed pilot test. The scope of a pilot test, and the resources required by an organisation to conduct a pilot test of the framework, will be up to each organisation to determine, based on its current capabilities, data and resources. Scoping pilot testing activities will ensure they are practical to implement and likely to deliver learning benefits for the organisation and the TNFD.
- The TNFD recommends examining the following practical considerations when determining whether to go ahead with pilot testing and the appropriate scope:
  - Experience with nature-related risk and opportunity assessment (‘Do we have any prior experience with climate and nature-related risk analysis? What level of technical support are we likely to need to undertake a pilot test?’).
  - Internal capacity to undertake pilot testing (‘Do we have the appropriate senior sponsorship? Do we have the people and expertise available to undertake a pilot test? Or can we bring in external advisers to support us?’).
  - Time and cost considerations of committing resources to a pilot testing exercise (‘What resources are we willing and able to commit to a pilot testing exercise?’); and
  - Interest in specific areas of nature-related risk management and reporting (e.g., a better understanding of dependencies or improved risk management approaches upstream in the value chain)
- With these considerations in mind, the TNFD recommends you consider two types of pilot tests:
  - Desktop testing – A desktop review exercise of how the framework might apply to your business, based on comparison with current and past experience, or through engagement with relevant experts and/or consultants. This could take the form of an internal consultation process and/or review output (spreadsheet/word document) that works through the beta framework and assesses the business’ current understanding, and available data and analytics for addressing the components of the LEAP approach and the draft disclosure recommendations. This will help scope any further in-depth testing exercises.
  - In-depth testing – In anticipation of the market adopting the final TNFD framework, you might choose to deploy additional time and resources to run through the draft LEAP approach and draft disclosure recommendations in a stepwise manner to evaluate your organisation’s current capacity to assess, manage and report on nature-related risks and opportunities. This in-depth piloting could involve the use of organisation and third-party data sources and external consultants or advisers.
Mobilise resources
- Mobilise the internal, and if necessary, external supporting resources to undertake the pilot test.
Provide feedback
- Provide feedback on your pilot testing experience to the TNFD through our online survey.