ASSESS Material Risks and Opportunities

Introduction

The TNFD recommends that organisations use the four components of the Assess phase of LEAP outlined below to assess the nature-related risks and opportunities to their organisation. The LEAP components adapt and build on the TCFD steps for assessing climate-related risks.[1] As with TCFD guidance, the Assess components also relate to integrating nature-related risks into existing enterprise and portfolio risk management processes.

Based on feedback from pilot testers, the Taskforce has decided to streamline the Assess phase by combining previous components A1 (risk identification) and A5 (opportunity identification) into one component, A1 (risk and opportunity identification), and incorporating ‘opportunities’ into components A2, A3 and A4 as well.

Before starting the Assess phase of LEAP, organisations should apply the Locate and Evaluate phases, referring to the TNFD framework online platform and the TNFD additional guidance on impact and dependency analysis and measurement.

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Guiding Questions

Internal and External Tools to Support your analysis

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Suggested outputs from the ASSESS Phase

  1. A ‘long list’ of relevant nature-related risks and opportunities the organisation should act on.
  2. A matrix of material risks consistent with the enterprise management framework of the organisation (e.g. significance by sector, business line, location, value chain, etc).
  3. Executive Committee and Board level guidance outlining the organisation’s proposed nature-related risk management strategy.
  4. Executive Committee and Board level advice on ways to avoid, minimise and mitigate nature-related risks and identify nature-related opportunities for the organisation.

Metrics for the Assess phase of LEAP

In this v0.3 release, the Taskforce has given additional consideration to the approach to measurement required for the Assess phase of LEAP (see Annex 3.1). This approach introduces two types of assessment metrics:

  • Exposure metrics, based on nature-related dependencies and impacts identified in the Evaluate phase of LEAP (Evaluate priority dependencies and impacts);
  • Magnitude metrics, which can be used to assess the financial implications to the organisation of nature-related risks and opportunities. Magnitude metrics should be used as part of the criteria to prioritise nature-related risks and opportunities (as well as the other criteria outlined in Annex 3.1). As far as possible, magnitude metrics should quantify the financial value of nature-related risks and opportunities for the organisation.

Determining the financial implications of nature-related risks and opportunities generally involves an organisation assessing its:

  • potential for damages or benefits against identified risks and opportunities;
  • planned responses; and,
  • response effectiveness.

The table below provides an illustration of exposure and magnitude metrics using the example of acute physical risks. Annexes 3.1 and 3.2 contains illustrative examples of metrics for all categories of nature-related risks and opportunities.

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Type Risk Example Exposure metrics Magnitude metrics
Physical risk
Acute risk Changes in the state (condition and/or extent) of ecosystems on which the organisation is dependent or has an impact, resulting in changes to the flow of ecosystem services Degradation of freshwater habitat due to pollutants released by the organisation and other stakeholders
Quantity and concentration of pollutants emitted (impact driver)Change in mean species abundance in freshwater ecosystems (ecosystem condition) Concentration of pollutants in water (ecosystem condition)
Costs associated with the relocation of operations and suppliers

Reduction in revenue due to interruption of operations/supply chain

Increased costs due to interruption of operations/supply chain

Restoration costs

Value of assets/revenue dependent on area

Number of locations/business lines/facilities exposed