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TNFD publishes nature-related scenario analysis proposal

November 15, 2022|Written by Graham Caswell|Eastern Caribbean Central Bank, International Sustainability Standards Board, Network for Greening the Financial System, International Monetary Fund, Bank of England, Banque de France

A TNFD nature-related scenario analysis proposal, an IMF warning to Caribbean central banks, new ISSB climate disclosure rules, a BoE protest and more from this week in green central banking.

TNFD publishes nature-related scenario analysis proposal

The Taskforce on Nature-related Financial Disclosures (TNFD) has published a draft framework for nature-related scenario analysis. The third iteration in a comprehensive development and consultation process, the framework was developed in cooperation with the Network for Greening the Financial System (NGFS) and other strategic partners. It expands nature-related disclosure recommendations to include impacts on nature alongside risks and opportunities. It also adds further recommendations related to supply chain traceability, the quality of stakeholders, engagement, and alignment of an organisation’s climate and nature targets.

“The TNFD beta framework now provides a full spectrum of recommended disclosures across dependencies, impacts, risks and opportunities to support the reporting preferences and compliance requirements of report preparers everywhere,” TNFD co-chair David Craig said in a statement announcing the release. “Our objective is to provide the TNFD framework as a powerful tool that helps move business and finance to take action on nature-related dependencies, impacts, risks and opportunities sooner rather than later.”

The TNFD consists of 40 members representing financial institutions, corporations and market service providers with over US$20tn in assets. Its mission is to develop and deliver a risk management and disclosure framework for organisations to report and act on evolving nature-related risks, similar to that of the climate-related disclosure framework and recommendations developed by the groundbreaking Task Force on Climate-Related Financial Disclosures (TCFD).

The final version of these recommendations is expected to be published in September 2023.

IMF deputy warns Caribbean central banks of climate risk

The deputy managing director of the International Monetary Fund, Bo Li, has told Caribbean central bank governors that low levels of insurance coverage in the region requires governments to provide financial support for rebuilding following hurricanes and other extreme weather events associated with climate change.

Speaking at the 59th bi-annual meeting of Caribbean Community central bank governors, Li warned that this increases public debt and the risks to domestic financial institutions who hold it. “These risks will only grow as climate change intensifies,” he said. “Successive storms may delay economic recoveries for longer and may even deter private investment.”

Li’s remarks come as the Eastern Caribbean Central Bank begins a green finance initiative aimed at encouraging projects and investments to help members of the Eastern Caribbean Currency Union become more resilient to weather disasters and other climate shocks.

Global heating is dramatically increasing both the incidence and intensity of hurricanes in the Caribbean, damaging the economies of the countries caught in their wake.

ISSB climate disclosure rules to mandate scenario analysis

The International Sustainability Standards Board (ISSB) has unanimously decided that companies will be required to use scenario analysis to identify climate-related risks and opportunities, as well as to inform their understanding of resilience to climate-related shocks.

At a meeting earlier this month, the board also agreed to provide application support to report preparers on how to undertake scenario analysis, including making use of materials developed by the TCFD. This will include guidance on different types of scenario analysis, including quantitative, partially quantitative and qualitative.

At a minimum, reporting entities will be required to undertake qualitative scenario analysis as a basis for their resilience disclosures. At a separate meeting, the ISSB also said that reporting companies will have to incorporate elements of the Sustainability Accounting Standards Board framework in their disclosures.

Created last year, the ISSB is charged with developing a comprehensive global baseline of sustainability-related disclosure standards, which are expected to finalise by the end of 2022.

BdF to meet internal 1.5°C climate goal by 2026

Banque de France (BdF) governor François Villeroy de Galhau has said that European equities held in the central bank’s non-monetary policy portfolios will be aligned with the Paris Agreements’ 1.5°C target by the end of 2023, and that all portfolios will be Paris aligned by 2026.

In a speech to a Climate Finance Day event in Paris last month, De Galhau referenced recent research suggesting that the first global climate tipping points are likely to be crossed between 1.5°C and 2°C, including the collapse of Greenland and West Antarctica ice caps and the abrupt melting of carbon and methane-rich permafrost.

“Our accelerated pace is more than needed given the ever greater climate emergency: the extremely warm summer and autumn we are experiencing this year vindicate the latest IPCC reports,” he said.

De Galhau also proposed changes to the current approach of central banks and financial supervisors in responding to climate breakdown, including a shift from voluntary to mandatory climate disclosure and a shift from climate-related stress tests to green prudential capital requirements.

BoE targeted in Just Stop Oil protest

The Bank of England (BoE) has been targeted by climate campaign group Just Stop Oil.

Activists sprayed orange graffiti on the central bank’s London headquarters, demanding an end to funding for new oil and gas projects. The Home Office, MI5 building and the headquarters of News Corp were also targeted. Eight people were arrested during the coordinated action.

“We are not prepared to stand by and watch while everything we love is destroyed, while vulnerable people go hungry and fossil fuel companies and the rich profit from our misery,” a Just Stop Oil spokesperson said following the protest.

The BoE protest follows four weeks of continuous civil resistance by Just Stop Oil supporters during which the UK police have made 637 arrests.

This page was last updated November 16, 2022

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