Overview

Context

Market demand for a standardised approach to measurement

While the measurement of natural capital and ecosystem services has progressed, there is not yet consensus in the market – in principle or in practice – on a comprehensive approach to measuring nature-related dependencies, impacts, risks, and opportunities. A landscape assessment undertaken by the TNFD found that there are more than 3,000 different nature-related metrics in use already today by standards bodies, policy making and regulatory bodies and in major scientific reference reports. The lack of standardisation of nature-related metrics limits corporate and financial institution measurement, management and reporting of nature-related risks and opportunities and poses challenges for providing comparability in a practical way across and within sectors, one of the key requirements emphasised by market participants.

State of play: Measurement of impacts on nature

The progress made on nature-related corporate reporting standards has focused on the measurement of business impacts on nature, including direct drivers, such as business activities leading to ecosystem degradation and biodiversity loss, as well as indirect drivers, such as water usage, water and land pollution, air pollution and waste generation. Impact drivers are most often considered only in terms of negative impacts on nature, even though they can also have a positive impact on nature, for example, through business activities for nature restoration, conservation, regenerative agriculture, and invasive species removal.

State of play: Measurement of dependencies on nature

Nature-related dependencies and related risks are included in existing reporting standards to varying degrees, but remain less well developed, with science and conservation organisations acknowledging that further work needs to be done. Where these dependencies are covered, will vary in coverage by realm and ecosystem service. For example, water provision and risks from water scarcity have been addressed in some disclosure schemes, whilst exposure to loss of pollination services is rarely included. Addressing this underdeveloped aspect of natural capital measurement is a critical priority.

State of play: Measurement of financial risk and opportunity

The translation of impacts and dependencies into measures of risks and opportunities related to financial outcomes such as revenues, cashflows and enterprise value is less developed. This is particularly true for opportunities which have been underrepresented across all disclosure requirements. Guidance on how these measures can and should be used by financial institutions to inform their investments and decision-making is even more in its infancy.

Measurement for corporate reporting today is heavily focused on measuring business impacts on nature. Metrics for assessing dependencies, risks and opportunities are significantly less developed.

Objectives of the TNFD's approach to measurement

Consultations by the Taskforce with a wide range of market participants have clearly signalled that, as a response to these challenges, there is high demand for a standardised and integrated approach to measurement that:

  • Is scientifically robust and sensitive to changes in the location-specific state of nature, where business processes interface with natural ecosystems.
  • Levels the uneven landscape for nature-related metrics by improving metrics for assessing dependencies, risks, and opportunities as well as impacts.
  • Provides comparable, high-quality data and insights to inform corporate and financial institution decision making, including at aggregated loan and investment portfolio levels for financial institutions.
  • Is practical to implement and can be used at scale and at different levels (site, product, corporate) by organisations in a time and cost-effective manner; and
  • Can be used for risk and opportunity management, transition planning and corporate target setting, aligned with broader national and global public policy goals for reversing nature loss, as is now the case with the global climate ‘architecture for action’ used by government, business, and finance.

Achieving all these requirements in a unified approach to nature-related risk management and disclosure is a complex undertaking, requiring difficult trade-offs between comprehensiveness and clarity, and specificity and flexibility.

The TNFD’s iterative, open innovation approach to metrics and targets is designed to balance the complexity of science with the practical needs of the market. The approach outlined below is intended to facilitate feedback from a wide range of stakeholders and assist with pilot testing, leading up to the finalisation of the Taskforce’s recommendations in September 2023.

In future releases, the TNFD will expand and increase the specificity of guidance on indicators and metrics. The timeline for development of the TNFD approach to indicators, metrics and targets is as follows:

  • For release in March 2023 (v0.4) – revised guidance on disclosure metrics, including proposed core and additional disclosure metrics. Revised guidance on target-setting based on work by SBTN and CBD, sector-specific guidance for prioritised sectors and case studies.
  • For release in September 2023 (v1.0) – final set of indicators and metrics, including assessment and disclosure metrics (both ‘core’ and ‘additional’), categorised by realm. Finalised target-setting guidance.

Through this staged approach, the TNFD hopes to:

  • Stimulate initial feedback from the market and other key stakeholders to inform the further development of the approach to measurement at the heart of the TNFD framework.
  • Equip market participants with a scalable approach to measurement based on the current direction of global and national policy developments (including the CBD COP15 Global Biodiversity Framework), and related, existing measurement and target-setting approaches, which can be updated as they evolve.
  • Support pilot testing by providing an illustrative set of metrics that can be used. These metrics will draw on those already included by industry standards bodies and disclosure frameworks in their existing standards guidance, based on a landscape assessment undertaken by TNFD.
  • Encourage innovation and alignment by supporting all market participants to assist with building out the architecture for nature-related metrics and targets with integrity and speed.
  • Be cognisant of current data limitations, but not constrained by them. The Taskforce recognises the speed of innovation in data collection and analysis happening today and believes that this will rapidly improve what is possible. As such, the TNFD’s proposed approach to metrics and targets includes review mechanisms to update the approach to nature-related metrics and targets over time; and
  • Accommodate the use of metrics and targets that are currently less commonly used and reported on, but that are critical to assessing and managing nature-related risks and opportunities. These include metrics for assessing changes in the state of nature and nature-related financial risks and opportunities.

Link to pilot testing

Given the evolving landscape outlined above, this enables the TNFD to use the open innovation framework development period to 1 June 2023 to learn more from market experience, feedback and pilot testing and work with knowledge partners to determine which metrics are most robust, useful and important as Disclosure Metrics (both ‘core’ and ‘additional’).

Pilot testers are requested to provide feedback on the illustrative indicators and metrics provided in the v0.2 release. Pilot testers may also use – and provide feedback on – the overall metrics architecture and categorisation to help the Taskforce make progress on its approach toward the final framework publication in September 2023.

Outline of the TNFD’s approach to metrics

Metrics are defined as a system or standard of measurement (Biodiversity Indicators Partnership. 2011. Guidance for national biodiversity indicator development and use.)

An indicator is defined as a quantitative or qualitative factor or variable that provides a simple and reliable means to measure performance (OECD/DAC. 2002. Glossary of Key Terms in Evaluation and Results Based Management Development Assistance Committee. Available from: http://www.oecd.org/dac/evaluation/2754804.pdf)

Key elements of the proposed metrics and targets architecture

The TNFD’s approach to metrics and targets has been built around six design features:

  1. Distinguishes between ‘Assessment Metrics’ used internally by report preparers for assessment purposes to inform management decisions (including what to disclose) and ‘Disclosure Metrics’ to be used in external disclosures for report users.
  2. Aligns with the Task Force on Climate-related Financial Disclosures (TCFD) approach of focusing first on cross-sector metrics and builds on the work of standard-setting bodies, in recognition that considerable research, scientific expertise and feedback from market participants is embodied in these various measurement, standards and disclosure frameworks developed by organisations such as the UN Statistics Division, CDP, GRI, SASB and IIRC (now the VRF) and CDSB (the last three now incorporated into the new International Sustainability Standards Board).
  3. Configures to support end-to-end nature-related risk management and disclosure, following the LEAP approach introduced in the v0.1 release of the TNFD framework.
  4. Provides a common global set of core disclosure metrics (specifics to be provided in future releases) to provide a baseline for comparability within and across sectors, while also recognising the need to accommodate additional disclosures based on the specific needs of each sector and different regulatory requirements across jurisdictions.
  5. Enables periodic reviews of the measurement architecture to ensure it continues to be fit for purpose, based on further development of scientific knowledge, data and measurement innovation and reporting requirements; and
  6. Aligns with emerging global and national policy target-setting frameworks, such as the Global Biodiversity Framework (GBF), and corporate target-setting approaches such as those being developed by the Science Based Targets Network (SBTN).

1. Two types of metrics: Assessment and Disclosure

The TNFD’s approach to measurement includes two types of metrics:

  • Assessment Metricsmetrics used within an integrated internal assessment process for nature-related risk and opportunity management . These Assessment Metrics help to inform internal decision making and would not be required to be disclosed (i.e. not part of TNFD-aligned disclosure against Metrics & Targets disclosure recommendation A) unless specified in the Disclosure Metrics.Assessment Metrics are relevant to the Locate, Evaluate and Assess phases of LEAP as well as the ‘Strategy and resource allocation’ components of the P phase (P1 and P2). Assessment Metrics for only the impact and dependency metrics categories have been identified in this v0.2 to v0.3 update release. Assessment Metrics for risk and opportunity analysis and strategy and resource allocation considerations will be included in the v0.3 release in November 2023.
  • Disclosure Metricsmetrics required to be disclosed to market participants in line with the TNFD’s disclosure recommendations (i.e. Metrics & Targets disclosure recommendation A[2]). Some, but not all, Assessment Metrics may also be Disclosure Metrics. Disclosure Metrics are not detailed in this v0.2 to v0.3 release and will be released for discussion and market feedback in a future release.

2. Configuring the LEAP approach for risk and opportunity assessment

In the v0.1 beta framework release in March 2022, the TNFD introduced an integrated assessment process for nature-related risk and opportunity management called LEAP.

The phased approach of LEAP makes clear the different types of assessment metrics required as report preparers assess nature-related risks and opportunities and identify a set of disclosures aligned with the TNFD’s draft disclosure recommendations (see table below).

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This v0.2 beta release focuses on the Assessment Metrics for dependencies and impacts on nature under the ‘E’ phase of the LEAP process. Further work will be undertaken by the Taskforce on the Assessment Metrics for the ‘L’, ‘A’ and ‘P’ phases of LEAP.

3. Cross-industry metrics categories

Aligned with the approach taken by the Task Force on Climate-Related Financial Disclosures (TCFD) and based on existing frameworks and standards in the marketplace, the proposed TNFD approach to metrics and targets starts by identifying categories of nature-related cross-industry metrics.

The proposed TNFD cross-industry metrics categories are provided in Table 6 and are supplemented with guidance in Annex 2.1 and an illustrative set of metrics in Annex 2.2.

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Metrics for each category should correspond to related indicators, selected using the illustrative assessment criteria set out below, in order to create a suite of related indicators across all metrics categories.

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A number of different levels of measurement will be relevant for Assessment and Disclosure Metrics. Indicators and metrics may be at the level of:

  • Direct operations (site, project or corporate level).
  • Upstream; and
  • Downstream (including portfolio level).[3]

Metrics levels should be hierarchical (i.e., corporate level metrics would be the aggregation of site or project-level metrics). Ecosystems and biomes intersect with the different levels of metrics.

The illustrative metrics in Annex 2.2 focus on direct operations as a starting point.

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4. Providing comparability yet flexibility for different disclosure regimes – Core and Additional Disclosure Metrics

As outlined above, one of the biggest challenges the TNFD faces in designing a nature-related risk management and disclosure framework is striking the right balance between simplicity and comprehensiveness. Ultimately, investors, creditors and regulators across markets and jurisdictions will make this judgement in different ways. As such, the TNFD will provide some flexibility in approach, while also recommending a common global set of ‘core’ metrics that allows comparability within and across sectors. This will help to ensure that the approach taken in the TNFD framework fits into a broader global baseline for integrated sustainability reporting and is manageable and cost effective for report preparers.

To ensure the analytic and reporting process is achievable, Disclosure Metrics recommended by the TNFD as part of the final framework in September 2023 would be delineated into ‘core’ and ‘additional’ metrics:

  • Core Disclosure Metrics are metrics that all organisations should disclose in line with the TNFD’s disclosure recommendations (Metrics & Targets disclosure recommendation A). These metrics would provide the market with consistent, decision-useful information, including for financial institutions. The TNFD recommends that organisations should consider Core Disclosure Metrics within the context of the regulatory disclosure requirements for the applicable jurisdiction they are operating in.
  • Additional Disclosure Metrics are metrics that a company or financial institution may choose to include in their disclosures, based on their specific industry, location and/or regulatory requirements, depending on their jurisdiction. As the name suggests, these would be additional to, not a substitute for, reporting on the core TNFD Disclosure Metrics, irrespective of whether all the core TNFD Disclosure Metrics are required by the relevant jurisdiction.

5. Ensuring flexibility and fitness for purpose – A periodic review process

The TNFD proposes that the specific metrics it recommends in the v1.0 framework in September 2023 be subject to periodic review initially every three to five years. This would help to ensure that advances in science, data, policy, and investor expectations can be reflected and incorporated, while providing medium-term consistency and certainty of approach for report preparers and users. Examples of advances to consider in the periodic updates include:

  • Reviews of the monitoring framework for the post-2020 Global Biodiversity Framework (GBF).
  • Major assessment reports undertaken by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES); and
  • Changes in regulatory arrangements and/or the information needs of financial institutions, including in the global baseline of reporting standards by the ISSB and/or elsewhere.

The TNFD welcomes feedback from market participants whether they would prefer a 3-year or 5-year review cycle, balancing consideration for medium-term reporting consistency on the one hand, with the need to incorporate technology and reporting advances on the other.

6. Aligning with emerging target-setting frameworks and approaches

The TNFD approach to measurement and target-setting will align with the emerging global and national policy target-setting frameworks, such as the GBF, and corporate target-setting approaches such as those being developed by the SBTN. As the GBF and SBTN approaches are still in development, the TNFD will work closely with the CBD, SBTN, ISSB and others to maximise alignment and work towards a joined-up approach to guidance for market participants.

Initial considerations for TNFD target-setting

Conceptually, metrics and targets (and data) need to line up at three different levels – global (the level of coordinated international policy), national (the level of national regulation and law) and local (the ecosystem level where business interfaces with nature), as outlined in the figure below.

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With respect to global action on climate change, this ‘architecture for action’ is fully developed and enabling action by governments, business, finance, and civil society. But for coordinated global action to tackle nature loss and achieve global targets that address nature loss, the architecture for action is largely incomplete (see figure below). No comparable global architecture for measurement and target-setting for nature – covering land, freshwater, oceans, and atmosphere (including dimensions beyond climate change such as air quality) – yet exists.

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At the global level, the TNFD seeks to align with the environment-related Sustainable Development Goals and the post-2020 GBF which is currently being negotiated through the UN CBD COP15 process. These global targets would then cascade down to the national level through the established mechanism of National Biodiversity Strategy and Action Plans (NBSAPs).

Local ecosystem targets can then inform measurement and target setting by companies and financial institutions. Following this approach, the TNFD also seeks to align with the corporate target-setting approach being developed by the SBTN.[4]

Numerous institutions are working to provide guidance for science-based target setting for nature by companies and cities, in parallel with the ongoing intergovernmental negotiations for a CBD post-2020 GBF. This includes progress by the SBTN on science-based target setting methodologies for corporates and cities. These institutional and global targets connect through the draft targets of the GBF including, but not limited to, the proposed Target 15. These targets may change in their relevance as a result of the ongoing negotiations within the CBD process.[5]

While the TNFD can help to address some of these challenges, others are primarily the responsibility of other international actors, such as policy makers, regulators, and scientific bodies. The TNFD is engaging these other international actors to encourage coordinated action. Development of all aspects of this metric, targets and data architecture will also ensure the TNFD’s own recommendations are fully enabled to achieve the desired outcome of informing better corporate and financial institution decision making that ultimately shifts the flow of global capital to nature-positive outcomes.

At the global level, the TNFD seeks to align with the environment-related Sustainable Development Goals and the post-2020 GBF currently being negotiated through the UN CBD COP15 process. At the organisational level, the TNFD also seeks to align with the corporate target-setting approach being developed by the SBTN.

Further detail on TNFD’s initial considerations for targets are contained in Annex 2.3.

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Targets: Guidance for corporates on science-based targets for nature

Nature-related targets are an important component of the TNFD beta framework. They are the manifestation of corporate decisions and commitments made as a result of the identification and assessment of nature-related dependencies, impacts, risks and opportunities.

Target-setting is reflected in both the LEAP approach and the disclosure recommendations as follows:

TNFD beta framework component
TNFD draft disclosure recommendation ‘Metrics and targets C’ Describe the targets used by organisations to manage nature-related dependencies, impacts, risks and opportunities and performance against targets.
TNFD LEAP approach for nature-related risk and opportunity assessment, component P2: ‘Target setting & performance management’ Describe how organisations set targets and define and measure progress.

In v0.3 of the beta framework, the TNFD builds on its previous guidance from v0.2, which introduced a range of considerations for target-setting for nature. Consistent with the Taskforce’s commitment to build on and incorporate best practice methods and frameworks already widely used or under development, v0.3 includes guidance on methods under development by the Science-Based Targets Network (SBTN). The ‘Additional draft guidance for corporates on science-based targets for nature’ published as part of this v0.3 release, incorporates the five-step approach to setting science-based targets for nature developed by the SBTN. The TNFD beta framework provides an overview of relevant SBTN guidance and signposts to SBTN documentation for further details. The TNFD’s guidance on target-setting will be updated as SBTN releases further updates to their methods and guidance.

When corporates applying the TNFD framework set targets for nature and measure performance against those targets, the TNFD recommends that they set science-based targets for nature following SBTN guidance.

The Taskforce recognises that some organisations may choose another process for setting targets on nature, particularly while the SBTN methods are still in development. If organisations choose to follow another approach to target setting, the TNFD strongly recommends that target-setting follow the basic principles of science-based targets used by SBTN. This means that the targets set should be measurable, actionable and time-bound and based on the best-available science on nature and societal needs.

SBTN is a core knowledge partner of the TNFD and has worked with the TNFD to develop the ‘Additional draft guidance for corporates on science-based targets for nature.’ The TNFD and SBTN are working to align further to make it easier and more efficient for corporates to apply both frameworks.

SBTN target-setting methods generate data and analytical outputs that help corporates apply parts of the TNFD’s LEAP approach for nature-related risk and opportunity assessment. Conversely, applying the LEAP approach can help corporates generate data needed to set science-based targets (SBTs) for nature.

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Both the TNFD framework and science-based targets for nature are in development. The TNFD and SBTN are working to align these further to make it easier and more efficient to use both frameworks.

The scope of the TNFD beta framework’s recommendations on targets go beyond SBTN’s current methods. Targets in the TNFD framework context include targets for:

  • Use by financial institutions;
  • Downstream value chains
  • Impacts on nature in the atmosphere realm, including air quality; and
  • Dependencies on nature; and
  • Nature-related risks and opportunities.

Further target guidance covering these areas, as well as transition plans will be a focus of the v0.4 beta release.

The TNFD will also look to the Convention on Biological Diversity’s forthcoming Global Biodiversity Framework, including specific global targets agreed as a result of the CBD COP-15 process, to inform development of targets and transition plans. These targets are also informing the development and ambition levels of SBTN guidance on science-based targets.  The Taskforce will also look towards the development of goals and objectives for nature and biodiversity within national and local policies, which – along with global targets – will set the level of ambition and context for enterprise-level targets set by corporates and financial institutions.

Timeline – development of TNFD’s approach to measurement and target-setting

TNFD cross-industry metrics categories

Category Sub-category Description TNFD release Approach in v0.3
Assessment metrics
Dependencies

and impacts on nature

Impact drivers Amount of natural resources that are used as an input to
production or product outputs of a business activity

v0.2

Guidance and illustrative metrics
State of nature The condition and extent of ecosystem assets, including
positive or negative changes, and risk and abundance of
species

v0.2

Guidance and illustrative metrics
Ecosystem services/dependencies The provision of ecosystem services, including those the
business depends on

v0.2

Guidance and illustrative metrics
Nature-related

risks

Physical risks Exposure to nature-related risks based on dependency and
impact metrics (v0.2) and magnitude of financial
implications (v0.3)

v0.3

Guidance and illustrative metrics
Transition risks

v0.3

Guidance and illustrative metrics
Nature-related systemic risks Relationship of systemic risks with other nature-related
risks

v0.3

Guidance on relationship with other risk types
Nature-related

opportunities

Business performance Exposure to nature-related opportunities based on
dependency and impact metrics (v0.2) and magnitude of
financial implications (v0.3)

v0.3

Guidance and illustrative metrics
Resource efficiency
Products and services
Markets
Capital flows and financing
Reputational capital
Sustainability performance
Ecosystem protection, restoration and regeneration
Sustainable use of natural resources
Response To include management, governance, strategy and performance
metrics, including progress against targets

v0.4

Disclosure metrics
Core metrics Core metrics to be included in all disclosures following
the TNFD disclosure recommendations

v0.4

Additional metrics Additional metrics that a corporate or financial
institution may choose to include in their disclosure

v0.4

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