TNFD releases its final nature-related risk recommendations

The Taskforce on Nature-related Financial Disclosures (TNFD) has released its final recommendations for companies to explain their nature-related risks to investors.

Nearly two years in the making, the recommendations are meant to help create a shift in global financial flows and align with the requirements of a G20-backed set of global rules on climate risk reporting. They are meant to mirror how companies already report their financial and economic reporting.

“Nature risk is sitting in company cash flows and capital portfolios today. The costs of inaction are mounting quickly. Businesses and financial institutions now have the tools they need to take action,” said David Craig, co-chair of the TNFD and founder and former CEO of data company Refinitiv.

The TNFD published 14 recommended disclosures under four main pillars: governance, strategy, risk and impact management, and metrics and targets.

Some of the recommendations include: disclosing the board’s oversight of nature-related dependencies and opportunities; identifying nature-related impacts, risks, and opportunities; disclosing the metrics used to assess climate risk; and describing the process for managing risks.

There are six additional requirements related to the application of materiality, scope of disclosures, location of nature-related issues, integration with other sustainability-related disclosures, time horizons, and engagement of local and indigenous communities.

The TNFD recommendations join a host of other reporting measures, including the Intergovernmental Panel on Climate Change and Global Reporting Initiative standards. The taskforce includes 40 members, with representatives from BlackRock, HSBC, Tata Steel and others.

Mixed response from advocacy groups

WWF welcomed the release of the recommendations, saying they were in line with WWF’s expectations.

“We hope it will be very soon taken up by main financial standards setters and implemented at jurisdictional levels to provide the data we need to finance the transition towards a nature-positive economy,” said Maud Abdelli, who leads the greening financial regulation initiative at WWF.

However, not everyone is satisfied with the final TNFD results, with some critics calling it “a circus”.

“The easiest way to move the market on biodiversity is to push for laws that deliver real-world consequences for businesses that are trashing nature. It’s not rocket science. The whole TNFD exercise has been a circus that distracts us from this very simple fact,” said Merl van der Mark, coordinator for the Forests and Finance Coalition.

Rainforest Action Network (RAN) criticised the TNFD early on for its focus on the private sector and corporations, and for cutting out communities impacted by climate change. The advocacy group is also critical of the recommendations only including material risks, which it says will create subjective risk assessments.

“It is full of loopholes that can allow for rampant greenwashing and its reporting takes a generalised form that means company claims cannot be checked against realities on the ground,” said Shona Hawkes, an advisor at RAN.