By Isla Milne, Senior Analyst; Sarah Falloon, Senior Consultant; Hayley MacVicar, Consultant; and Dave Photiadis, Senior Director.
Lately, there has been a lot of attention on Mother Nature – and for good reason. In a nutshell: we need her. Nature and biodiversity (the variability of living organisms found in nature) are crucial for supporting life (and business) on our planet. They underpin systems responsible for our soil, food, air, water and weather. Research by the World Economic Forum found that “$44 trillion of economic value generation – more than 50% of the world’s total GDP – is moderately or highly dependent on nature and its services”.
And here’s the thing, she’s in trouble. Pollution, deforestation, unsustainable land use, the spread of invasive species, and climate change are putting approximately one million species at risk of extinction. Recent research suggests that biodiversity is declining faster than at any time in human history. Additional research warns that we may be even further down the road of biodiversity loss than previously thought, highlighting the need for urgent action. Hitting what the World Bank called “ecological tipping points” of damage to some natural services could hurt global GDP by $2.7 trillion by 2030.
The good news? Momentum is building for the “nature-positive” movement. Businesses, investors, policymakers, and customers are starting to pay attention. For example, over 300 companies and financial institutions have recently announced their intentions to become early adopters of the Task Force on Nature-related Financial Disclosures (TNFD). This is just one of many indications that nature is set to become a hot topic in ESG reporting in the coming years. The TNFD is a market-led, science-based, and government-supported global initiative that helps guide organizations in assessing, managing, and disclosing their nature-related risks and opportunities. Curious to learn more about the TNFD and what it means for your organization? Read on.
The TNFD, modelled after the Task Force on Climate-Related Financial Disclosures (TCFD), was launched in 2021. The final recommendations were released in September 2023. These recommendations aim to establish a standardized risk management and disclosure framework for nature-related impacts, dependencies, risks, and opportunities.
The TNFD enables investors, lenders, insurers, and other stakeholders to make informed choices, and ultimately aims to shift global financial flows away from nature-negative outcomes and toward nature-positive ones. The disclosure framework includes reporting requirements on:
The TNFD disclosure recommendations, structured around these four pillars, were designed to be consistent with the TCFD. This approach allows companies already reporting under the TCFD to effectively leverage their existing efforts and furthers the goal of consistency and consolidation in the ESG reporting space.
One of the biggest challenges when applying the TNFD recommendations is identifying where and how your organization interacts with nature. This includes where you impact or are dependent on nature, and how that translates into risks and opportunities for your organization.
In response to this challenge, the TNFD has developed the LEAP approach, which includes four phases:
Reporting on nature-related issues using the TNFD framework is currently voluntary. But as momentum for nature and biodiversity protection grows, companies should be prepared for future mandatory disclosures. The TCFD, focused on the management and oversight of climate-related disclosures, began as a voluntary initiative but has since become the basis for many emerging national and international regulatory disclosure regimes. The International Sustainability Standards Board (ISSB) has signaled its intention to look to TNFD guidelines in future nature-related work. This suggests that the TNFD will follow a similar trajectory to the TCFD and quickly become a widely adopted best practice for nature-related reporting.
Nature and climate are deeply interconnected. In fact, there is now “clear scientific evidence that net zero is not possible without nature.” However, while there is alignment between the TCFD and the TNFD, addressing nature-related issues is much more complex than climate-related ones. There are a number of key differences in how we think about impacts, such as:
While reporting on nature-related risks and impacts is potentially more daunting, the good news is that if you are reporting on climate, you are well-positioned to get started on nature. And if you care about climate, you need nature to help you meet your climate targets.
While nature-related disclosure is in its early days, organizations should start to get their heads around their impacts and dependencies or risk being left behind. Businesses that identify and address their nature-related risks and impacts will not only help stop and reverse nature loss and climate change, they’ll also gain a competitive advantage. Opportunities include access to new and emerging markets and nature-related finance; developing value streams from waste materials; and increasing business resilience.
Addressing such a complex issue can be paralyzing at times, so don’t let perfect be the enemy of the good. Pick something. Get started. You don’t have to do it alone. There is lots of guidance available (see above!), and our team of sustainability and climate experts is here to help, wherever you may be on your nature journey. There is no time like the present.
At Delphi, we’re keeping on finger on the pulse of nature-related disclosure and actions as members of the TNFD Forum and the Canadian Consultation Group for the TNFD. Are you interested in more information on how your organization can make a nature-positive impact? Contact Isla at firstname.lastname@example.org, Sarah at email@example.com, Hayley at firstname.lastname@example.org, or Dave at email@example.com.