Structure and design considerations for the development of specific guidance
Many market participants have been clear that nature-related risk and opportunity assessment is new and unfamiliar. The TNFD has received feedback from market participants that they want additional guidance, including sector-specific guidance, but also by realm, biome and nature-related issues.
The TNFD will therefore approach the development of specific recommendations and guidance using the following structure (see figure below):
- Sector specific: Recommendations/guidance tailored to the economic sector in which organisations conduct business.
- Nature-related issue specific: Recommendations/guidance tailored to specific nature-related issues – dependencies, impacts, risks, and opportunities – that are relevant for a particular organisation and across sectors.
- Realm specific: Specific guidance/recommendations linked to the nature realms defined by the TNFD (ocean, freshwater, land, and atmosphere).
Nature-related issues are relevant across various sectors. For example, the impact driver freshwater use is relevant to a variety of sectors, including agriculture, apparel and textiles, mining, and oil and gas. A multi-dimensional approach to guidance will allow organisations from different sectors to access guidance on these nature-related issues that are relevant across industries.
The guidance will build on the following further design considerations:
- Provide further detail on sector-specific metrics and targets, building on the approach to metrics and targets in v0.2, which covers cross-industry metrics only;
- Leverage the work advanced by knowledge partners and industry associations and align with relevant normative requirements (e.g. taxonomies, sector specificity in mandatory disclosure standards across jurisdictions); and
- Provide valuable specific guidance for organisations at varying levels of maturity, as it relates to the management and disclosure of nature-related risks and opportunities.
Towards sector-specific guidance: TNFD sector classification & sector prioritisation
The draft disclosure recommendations in the beta v0.1 of the TNFD framework are sector agnostic and apply both to financial institutions and corporates. The TNFD’s first attempt at providing specific guidance based on the distinct characteristics of an organisation has been the development of two versions of LEAP: the LEAP approach for corporates (including financial institutions as corporates) and LEAP-FI, a version of LEAP specifically tailored towards financial institutions as providers or managers of capital, which has been updated in the v0.2 release.
Since the launch of the Taskforce, the TNFD has received significant interest from market participants in the development of additional guidance, including by sector. The TNFD therefore aims to enhance the specificity of its recommendations moving forward and develop guidance that is relevant, customised and aligned to the needs of different market participants.
TNFD’s Proposed Approach to Sector Classification
The TNFD’s non-financial sector classification is based on the Sustainable Industry Classification System® (SICS®), developed by SASB to group companies based on shared sustainability risks and opportunities. This has been adopted by the ISSB for the global baseline they are developing for sustainability disclosure. The TNFD has adopted SICS® to align as closely as possible to this emerging global baseline under development by the ISSB.
The TNFD will organise financial sector guidance into the four major financial services industries identified and defined by the TCFD: banks, insurance companies, asset managers and asset owners. Development Finance Institutions have been added, given their important role in nature-related financing in emerging markets, including in many nature hotspots.
The specific guidance developed by the TNFD will be designed to be interoperable with different sector and industry classification schemes and a mapping to different classification schemes will be provided in future releases.
TNFD’s proposed priority sectors
Non-financial TNFD priority sectors
While the TNFD recognises that every non-financial sector has an impact on nature and is affected by nature-related risks and opportunities, the TNFD has developed an initial list of its priority sectors, identifying the sectors and industries that are more likely to be financially impacted than others due to their exposure to dependencies and impacts on nature. It also considers the sector’s potential opportunities – activities that create positive outcomes for organisations and nature by avoiding or reducing negative impact on nature or contributing to its restoration. This first list of priorities has been identified to ensure a manageable scope of work for the Taskforce in developing its first set of specific guidance. Further sectors, sub-sectors and industries may be added in subsequent releases.
To inform its prioritisation of sectors for developing sector specific guidance, the TNFD has conducted a review and consolidation of existing sector-specific research and assessments focused on nature-related dependencies, impacts, risks, and opportunities. Based on this review and evaluation, and aligned with the SICS classification scheme, eight thematic sectors, 13 sub-sectors and 19 industries have been prioritised for the TNFD’s initial development of sector-specific guidance/recommendations moving forward:Additional Content
Financial industries prioritised by TNFD
The TNFD will organise financial sector guidance into the four major financial services industries identified and defined by the TCFD, with the addition of Development Finance Institutions, given their important role in nature-related financing in emerging markets, including in many nature hotspots.Additional Content
The TNFD’s sector equivalency tool will allow these industries to be mapped to equivalent national/regional classification systems (e.g. NACE, Taxonomies) or other commonly used classification systems (e.g., GICS as used in ENCORE, ICS).
Next steps: Content to be developed for specific guidance
Sector specific guidance
In forthcoming v0.3 and v0.4 releases, the TNFD will develop additional guidance for market participants relevant to specific sectors, including the following content:
- Sector basics:
- Sector definition and brief description of the key economic activities and production processes included under the sector.
- A table providing equivalencies to the most commonly used sector classification systems (e.g., ISIC – NACE in European Union, SIC codes in the UK, SIC/NAICS Code in the USA, ISIC and ICB).
- A general business case for taking nature into account, with reference to the management and disclosure of nature-related risks and opportunities most relevant to the sector.
- An overview of sector-specific data requirements to conduct an assessment of nature-related risks and opportunities (e.g., data on the economic activities performed, data on management practices across the supply chain and contextual data on nature).
- A compilation of nuanced definitions and terms relevant to the sector used throughout the specific guidance/recommendations.
- Linkages to relevant nature-related issues
- An overview of relevant dependencies on nature associated with the sector.
- An overview of relevant impacts on nature associated with the sector, as they relate to direct and indirect activities (upstream and downstream).
- An overview of relevant nature-related risks associated with the sector.
- An overview of relevant nature-related opportunities associated with the sector.
- Use cases (see figure below)
- Industry-specific use cases showing why and how organisations apply the TNFD framework, integrating relevant nature-related issues. Use case design will enhance understanding and drive action and exemplify what the process looks like for that sector.
- The use cases will illustrate and guide users on how nature-related risks and opportunities have been assessed, managed, and disclosed by different organisations in the sector.
- Use cases will follow the structure of the LEAP approach and highlight specifics relevant to the sector.
- Signposts to existing sector-specific guidance materials, building on those already in the online portal
- Signposts to selected relevant sector-specific disclosure guidance provided by TNFD knowledge partners (e.g., SASB standards and disclosure topics, GRI sector standards).
- Signposts to relevant sector-specific research and tools developed by TNFD knowledge partners and piloting partners (e.g., UNEP-WCMC, UNEP FI and Global Canopy (ENCORE), SBTN – Sector materiality tool, SASB Materiality Finder, GRI Sector Standards) and industry associations.
- Signposts to relevant regulatory requirements for disclosure and management performance (e.g., mandatory disclosure requirements, green taxonomies defining technical screening criteria) for the sector.
Nature-related issue specific guidance
Nature-related issue specific guidance has not yet been developed for beta v0.2. Over the next year, the TNFD envisages developing additional guidance for market participants around specific nature-related issues, including dependencies, impacts, risks and opportunities. This will include the following content (see figure below), and may be further refined:
- Metrics and targets
- Links to specific impact driver metrics, building on guidance in the v0.2 release
- Links to specific targets related to impacts on nature.
- Metrics and targets
- Linkages to specific dependency metrics, building on guidance in the v0.2 release.
- Linkages to specific targets related to dependencies on nature, building on guidance in the v0.2 release
Guidance on nature-related risks and opportunities will be considered as the approach to metrics and targets for risks and opportunities is developed by the Taskforce.
Realm-specific guidance is not yet developed for beta v0.2. Over the next year, the TNFD envisages developing additional guidance for market participants related to each of the four nature realms (ocean, freshwater, land and atmosphere) and by biome (introduced in the v0.1 beta framework). This guidance will assist report preparers in understanding dependencies and opportunities in an integrated fashion across realms and biomes.
Realm and biome specific guidance would include:
- Links to relevant disclosure tools (e.g. CDP forest and water questionnaires).
- References to relevant data and analytics tools and platforms covering specific realms (e.g., Aqueduct for freshwater); and,
- Definitions of ecosystem integrity or high-risk ecosystems and state of nature metrics, related to specific biomes.