Recommendations on Nature-related Information Disclosure
The Taskforce on Nature-related Financial Disclosures (TNFD) released recommendations on nature-related information disclosure, aiming to provide a framework for natural risk management and information disclosure.
TNFD has more than 40 members and managed more than US$20 trillion assets. As regulators, investors, and asset management companies increasingly pay attention to nature-related risks and opportunities, the release of this recommendation will provide more assistance for their assessment and decision-making.
Background to Nature-related Information Disclosure
With the development of ESG, the world has recognized the risks and opportunities that natural resources bring to society and the economy. Despite the material significance of nature issues, there is no globally consistent framework for nature-related assessment and disclosure. This is mainly due to the lack of corresponding requirements from regulatory agencies and the difficulty in obtaining natural data.
Related Post: TNFD Releases Global Natural Data Report
Some jurisdictions have already begun to develop nature-related reporting standards. For example, the European Sustainability Reporting Standards (ESRS) have begun requiring companies to disclose natural matters. After issuing two sustainability standards (IFRS S1 and IFRS S2), ISSB also plans to use nature-related disclosure standards as a third research targets (probably IFRS S3).
After two years of researches, TNFD released the nature-related information disclosure recommendations, which provide the market with a natural information disclosure framework from a voluntary perspective and meet the latest requirements of stakeholders for sustainable development.
Contents of Nature-related Information Disclosure
To maintain global disclosure consistency, TNFD’s disclosure framework is aligned with that of the Task Force on Climate-related Financial Disclosures (TCFD). TNFD’s disclosure framework is divided into four parts, namely Governance, Strategy, Risk and Impact Management, and Metrics and Targets. These classifications incorporate nature-related risks and opportunities and meet the requirements of the COP15 Global Biodiversity Framework (GBF).
TNFD has formulated 14 disclosure recommendations for these parts, namely:
Describe the board’s oversight of nature-related impacts, risks and opportunities.
Describe senior management’s role in assessing and managing nature-related impacts, risks and opportunities.
Describe the company’s work to assess and address nature-related matters.
Describe the identified short-, medium- and long-term nature-related impacts, risks and opportunities.
Describe the impact of nature-related matters on business models and financial planning.
Describe the company’s ability to adapt to natural events under different circumstances.
Describe the company’s nature-related assets and liabilities.
Risk and Impact Management (4):
Describe the process for identifying and evaluating natural matters directly involved in the company.
Describe the company’s process for identifying and evaluating natural matters in upstream and downstream.
Describe the company’s processes for managing nature-related impacts, risks and opportunities.
Describe how the company integrates natural risk management into its overall risk management approach.
Metrics and Targets (3):
Describe metrics for the company’s assessment of opportunities to manage natural risks.
Describe metrics for the nature impact of business assessment management.
Describe the company’s performance metrics for natural matters.
How Can Companies Use the Recommendations
TNFD believes that after companies already understand the nature-related information disclosure framework, they still need to strengthen their understanding of natural knowledge to recognize the material impact of natural matters. At the same time, companies should develop a natural disclosure framework from the perspective of the board of directors and senior management and carry out preparation work in accordance with TNFD standards.
In the disclosure of nature-related information, companies can also develop relevant roadmaps and gradually expand the scope of disclosure. Companies can also communicate with financial institutions, asset management companies, etc. on disclosure progress and obtain information on the value chain. Finally, companies also need to supervise the disclosure process and issue disclosure reports regularly.