February 9, 2024

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.

What you need to know about the Task Force on Nature-Related Financial Disclosures (TNFD)

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:

  1. Governance
  2. Strategy
  3. Risk and impact management
  4. Metrics and targets

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:

  1. Locate your interface with nature;
  2. Evaluate your dependencies and impacts on nature;
  3. Assess your nature-related risk and opportunities; and
  4. Prepare to respond to, and report on material nature-related issues (aligned with the TNFD’s recommended disclosures).

From voluntary to mandatory?

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.

The differences between disclosing climate and nature risks

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.

7 steps your company can take to prepare for TNFD reporting and beyond

  1. Educate yourself and build capacity and awareness around nature and biodiversity: It’s essential to have the necessary resources to drive your company’s nature-related work, as well as a solid understanding of the importance of nature and biodiversity – why it matters, how business depends on it, and where the impacts are. This will allow your company to better identify risks and opportunities that arise as a result. Guidance and resources continue to emerge. A few examples:
    TNFD in a Box: A capacity building tool for TNFD reporting.
    Business and Biodiversity: Your company’s path towards nature positivity: A guide for Canadian businesses that outlines practical steps companies can take to assess, minimize and transform their impacts on nature.
    The Nature-Positive Ecosystem Guide: A tool that provides a practical guide to major initiatives focused on protecting and restoring nature.
    TNFD Tools Catalogue: An online database of nature-related data tools.
  2. Understand your current state: Exploring where and how your business interacts with nature and what nature-related data your company collects is a key first step. In addition to that, you can look at what nature-related initiatives you are already engaged in. For example, do you have a partnership with a conservation organization? Do you plant trees? Do you support local nature-based initiatives? Understanding your current initiatives, practices, and data availability can provide insight into your company’s stage in its nature journey. This can serve as a starting point for more ambitious action on nature.
  3. Conduct a TNFD gap analysis: Evaluate your company’s nature-related practices against the TNFD’s recommendations under the four disclosure pillars (see above) to identify areas of alignment and gaps. This is an important step in identifying your company’s readiness – knowing what information needs to be collected and how much effort and resources it may take to prepare a first disclosure.
  4. Conduct a nature-related risks and opportunities identification exercise: Before developing a nature strategy, it’s important to understand what aspects of nature and biodiversity have the greatest impact on your organization. This involves getting the right people to the table and evaluating your direct operations as well as looking up and down your supply chain. Identifying key nature-related risks and opportunities will inform your future strategy and support resource allocation and the development of mitigation tactics.
  5. Leverage your business’ climate reporting and action: Your reporting on climate can serve as a starting point for developing an approach to nature-related disclosures. You may be able to leverage existing processes, data, reporting capabilities, relationships, and more. This is especially true if you have already compiled a TCFD report; you will find many similarities, given the TNFD was modeled after the TCFD.
  6. Set goals: Start with simple objectives, such as building a preliminary action plan in Year 1, piloting the TNFD, or enhancing data collection. These initial steps will help you prepare for setting more ambitious and long-term nature positive targets in the following years.
  7. Join the conversation: Join Delphi and others in the TNFD Forum, a group of global organizations dedicated to taking action to conserve and restore nature. Stay up to date on TNFD’s impactful work, contribute to guidance material, and engage in knowledge sharing. If you’re located in Canada and looking to support awareness of the TNFD, build capacity for nature-related reporting, and identify current knowledge gaps, consider joining the Canadian Consultation Group. It’s convened by the Institute for Sustainable Finance and Chartered Professional Accountants of Canada. We will see you there!

Looking ahead

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 imilne@delphi.ca, Sarah at sfalloon@delphi.ca, Hayley at hmacvicar@delphi.ca, or Dave at dphotiadis@delphi.ca.