Nature-focused financial framework launched to build on TCFD successes

A new market-led global initiative seeking to “build upon the success" of the Taskforce on Climate-related Financial Disclosures (TCFD) has been launched, with a specific focus on nature-related risks.

The Taskforce on Nature-related Financial Disclosures (TNFD) aims to provide financial institutions and corporates with a full picture of their environmental risks and opportunities.

In line with this, it has committed to delivering a framework for organisations to report and act on evolving nature-related risks by 2023, with the framework expected to undergo testing and refinement prior to this in 2022.

Plans for the TNFD were first announced in July 2020, with an informal working group, made up of 74 members across 24 countries, subsequently working to create the practical recommendations for the scope and workplan of the TNFD.

Refinitiv CEO and London Stock Exchange Group group leader of data and analytics division, David Craig, and UN Convention on Biological Diversity executive secretary, Elizabeth Maruma Mrema, have since been confirmed as the two chairs leading the group.

The broader taskforce, meanwhile, will consist of around 30 members, with an equal representation of financial institutions, corporates and data/service providers from developed and emerging markets, and will be informed by a diverse stakeholder group.

Major financial institutions and multinational corporates have already endorsed the launch of the group, with the Finance Ministers from the G7 also since endorsing the launch, stating: “We look forward to the establishment of the TNFD and its recommendations.”

This was highlighted by Maruma Mrema as a "vital and clear signal" to global businesses and governments of the need for "urgent action" to halt nature loss, emphasising that “now is the time for decisive action”.

Indeed, the initiative seeks to build upon the progress made by the TCFD, complementing the existing framework to support organisations to report and act on both their nature-related risks.

The group also clarified, however, that the new nature-focused taskforce will face “unique challenges”, particularly in relation to data, metrics and methodologies.

“Measuring and disclosing nature-related risks is an even more complex challenge than it is for climate-related risks,” Craig and Maruma Mrema explained in a letter announcing the launch of the group.

“A key challenge is that, unlike for climate, it is not just what your activities are, but where they are, which matters, which means having more location-specific data from corporates will be part of the solution.

“Improving corporate disclosures will also only be one of many levers to close the data gap on nature-related financial risks. In the climate space, better corporate disclosures were at the centre of the solution to the data challenge. Satellite data may also play a significant role in closing data gaps on nature-related risks.

“As the TNFD kicks off its work over the coming months, the challenge is to learn from what’s worked for climate, while carefully considering how nature requires a different approach."

Commenting more broadly on the launch, Marume Mrema stated: “Science and economists are clear: nature is too big to fail. The health of the ecosystems on which we, and our economies, depend is deteriorating more rapidly than ever.

"Over the next few years we will work with taskforce members, and other stakeholders, to design a framework that can be impactful and ultimately practical to companies and financial institutions.

"We encourage a wide range of financial institutions and corporates to participate in the TNFD and to become early adopters of the TNFD framework when it launches in 2023.”

Adding to this, Craig stressed that without "urgent action", ongoing loss to biodiversity poses "unprecedented risks" for business, both now and in the future.

"Better nature-related data that enables informed decision-making by financial institutions and companies is how we will solve the global ecological crisis," he stated. "Financial disclosures are essential to a market-based solution to nature loss.

"A properly functioning, informed market will price in risks appropriately and be empowered to channel investments to more sustainable opportunities.”

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