Nature Guidelines for Legal Professionals
The Taskforce on Nature-related Financial Disclosures (TNFD) releases nature guidelines for legal professionals, aimed at helping them identify, assess, and respond to nature related issues, and incorporate natural factors into legal risk management, compliance procedures, and strategies.
The TNFD believes that nature may have material legal impacts on enterprises, and some mandatory laws and environmental litigation may result in legal, policy, regulatory, and liability exposures.
Related Post: Taskforce on Nature-related Financial Disclosures Releases Nature Guidelines for CFOs
Introduction to Nature Guidelines for Legal Professionals
The natural guidelines for legal professionals propose a total of 13 natural related Q&As, which can be divided into five aspects, namely:
Natural Relevant Professional Abilities
Question 1: How do legal professionals maintain their professional competence in natural issues
Legal professionals need to maintain an understanding of financial, legal, and regulatory policies related to nature, establish a knowledge network related to nature, clarify the attribution of nature related issues, regularly review company business dynamics, and develop internal policies and operational manuals.
Board Accountability
Question 2: Is the board of directors clearly authorized and adequately trained
The board of directors ensures that natural risks are treated as a core issue, understands the laws of the region where the company is located, the requirements of investors, and the financial and reputational risks that may arise from natural issues.
Question 3: Is nature included in the internal control framework
The board of directors should be able to obtain information on the dependencies, impacts, risks, and opportunities related to nature, incorporate nature into the internal control framework, establish due diligence processes, and define data collection, technology applications, and accountability.
Question 4: Legal impact of greenwashing
Inaccurate sustainability statements may lead to litigation, and the board of directors should be aware of natural data sources, documentation, and governance.
Incorporate Nature into Legal Professionals Decision-making
Question 5: How to include natural matters in corporate disclosure
Enterprises need to respond to the requirements of investors and regulatory agencies for natural transformation plans, and legal professionals need to ensure that terms such as nature, biodiversity, and nature positivity pass legal review in information disclosure.
Question 6: Identify business activities with substantial financial risks
The degradation of natural resources may lead to contract breaches and loss of operating licenses. Legal professionals need to understand the impact of the enterprise and its value chain, identify the potential revenue and operational risks that may arise from business activities.
Question 7: How to incorporate natural related risks into long-term capital allocation decisions
Legal professionals need to establish a natural risk due diligence process for mergers and acquisitions and capital expenditures, assessing natural related legal liabilities, land ownership, and transformation risks.
Question 8: Ensure natural obligations in the value chain
Legal professionals review corporate contracts to ensure they are consistent with regulatory policies and corporate commitments. For example, including mandatory natural compliance clauses in some contracts to avoid legal risks for enterprises caused by the impact of upstream and downstream supply chains.
Natural Risk Management for Legal Professionals
Question 9: Utilize legal protection to safeguard internal evaluation results
Natural issues in internal evaluations of enterprises may be mishandled or confidentiality may be compromised. Legal professionals need to establish control processes to protect internal evaluation results and promptly address related risks.
Question 10: Comply with the natural obligations of the jurisdiction
Legal professionals need to incorporate nature and biodiversity into due diligence, reduce environmental risks in the value chain, and avoid litigation risks in jurisdictions.
Wide Range of Natural Risks and Opportunities
Question 11: Natural related risk coverage in insurance policies
Standard insurance policies typically include pollution exclusion clauses, meaning insurance companies may refuse to provide protection for biodiversity loss and ecosystem degradation. Legal professionals need to review these terms and address them through governance mechanisms or contract framework revisions.
Question 12: Participation in emerging natural markets
Emerging natural markets include tools such as biodiversity credits, but immature market development may result in a lack of consistency, credibility, and verifiability among these tools. Legal professionals need to study the structure of these tools to guide contract negotiations and risk management.
Question 13: Manage risk of legal conflicts in different jurisdictions
Multinational corporations need to face global legal regulation on natural issues, and legal professionals need to set defensible baselines consistent with the strictest standards, while considering incentives and market access pathways in specific jurisdictions, choosing globalization and localization methods for business, and potential risks arising from legal differences.
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