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Home Knowledge hub Blogs Navigating TNFD: A New Era in Nature Reporting

Navigating TNFD: A New Era in Nature Reporting

Reflections on A4S’s Sustainability in Action webinar on the Taskforce on Nature-related Financial Disclosures (TNFD) and natural capital accounting

Webinar date: October 2023

Speakers:

  • Emily McKenzie – Technical Director, Taskforce on Nature-related Financial Disclosures (TNFD)
  • Ria Bakshi – Global Head of Sustainability Accounting, Reporting and Impact, Olam Food Ingredients (ofi)
  • Luke McLaughlin – ESG Strategy Manager, United Utilities
  • Rebecca Speed – Natural Capital Implementation Manager, United Utilities
  • Dr Nina Seega – Director, Centre for Sustainable Finance at the Cambridge Institute for Sustainability Leadership

The value of TNFD

Nature underpins our economy: more than half of the world’s economic output is highly or moderately dependent on nature. However, Emily McKenzie from TNFD pointed out that “the majority of the [natural] services on which business and society depend are in decline”. This decline presents risks for businesses, financial systems and economies, and those risks are escalating in severity and frequency.

Emily explained that the framework TNFD has laid out can help organizations understand their impacts and dependencies on nature, together with associated risks and opportunities to their organization. The recommendations provide detailed practical guidance for organizations on managing these interactions, risks and opportunities by integrating them into governance, strategy and risk management processes.

TNFD intentionally builds on the Task Force on Climate-related Financial Disclosures (TCFD) framework, using consistent language and structure. Both frameworks share the same four pillars: governance, strategy, risk management, and metrics and targets. The same pillars are also used as the basis for the sustainability reporting standards from the International Sustainability Standards Board (ISSB).

While the TNFD recommended disclosures closely align with TCFD, the unique characteristics of nature meant that additional disclosures are needed. These include:

Engagement – the TNFD framework includes a recommended disclosure, with supporting guidance, on an organization’s engagement with Indigenous Peoples, local communities and affected stakeholders. This is important because, as Emily stated, nature is “very locally based”.

Location – for similar reasons, TNFD recommends that disclosures provide information about where organizations are “interacting with particularly sensitive locations” across the value chain.

Under the Kunming-Montreal Global Biodiversity Framework, signed by nearly 200 governments at COP15, governments agreed to ensure that all large companies and financial institutions assess and disclose their risks, dependencies and impacts on biodiversity by 2030. In this context, TNFD is expected to become a more central part of the reporting landscape over the next few years. It provides a ready-made, practical framework that governments worldwide can get behind as they seek to meet the goals and targets of the Global Biodiversity Framework.

Many organizations piloted the framework to inform the recommendations, with more volunteering to become early adopters since the final version was published. TNFD is also informing reporting standards as they develop, with the taskforce working closely with the Global Reporting Initiative and the International Sustainability Standards Board. Developments in nature-related reporting are progressing quickly – so if your company hasn’t yet started applying TNFD, now is a great time to do so.

Bringing TNFD into organizations

ofi, a food and agribusiness company, began its work in this area a few years ago, when the company began to develop its integrated impact statement. Through this work, Olam gained a clearer sense of the cost of inaction when it came to ecosystem services, which influence areas such as water supply, flooding protection and access to raw materials. Ria Bakshi noted that Olam uses emerging frameworks, particularly TNFD, to assess its nature-related risks and opportunities.

Data has been an important consideration for Olam. Nature is more complex than climate, Ria explained, so the company has been “trying to understand, from a biodiversity and ecosystem perspective what are the metrics [to use] and how we will put these metrics into our enterprise risk management … or our capex decision making”.

Rebecca Speed said that, as a water and wastewater services provider in the UK, United Utilities has recognized nature as a core business consideration for a long time. After launching its first integrated report in 2015, United Utilities began using natural capital accounting in 2018. In 2022, drawing on the experience of applying TCFD, the company restructured the integrated report around the four pillars of the TCFD/TNFD framework, bringing together climate and nature. The work on natural capital accounting directly fed into the companies’ approach to TNFD.

Getting started with TNFD and natural capital accounting: three actions for finance teams

1. See nature-related disclosures as an opportunity: Olam views TNFD as a useful tool for enhancing organizational resilience. Applying the recommendations helps the company to ensure that it has the right governance, strategy and decision-making processes in place to manage their nature-related risks. “It’s not just the end-of-cycle reporting … but ensuring that we have the right frameworks...and knowledge in place”, Ria said. Nina Seega from the Cambridge Institute for Sustainability Leadership agreed: “I really liked this idea of using reporting as an opportunity to rethink the way decisions are made and then getting the reporting right as a byproduct of it”. She said that integrating nature into business decision making “changes the way you think”, enabling you “to make decisions that better reflect how organizations … are embedded in our environment [and] … natural systems”.

2. Adapt TNFD and natural capital accounting to the needs of your business: When looking at TNFD and natural capital accounting, it is important to “bring it back to our business and make it real and … effective”, Ria said. ofi recognize that nature-related risks differed across business units and regions, which enables them to prioritize more effectively. Luke McLaughlin of United Utilities added that conducting a desktop review can help to identify and assess your organization’s dependencies, risks and opportunities. You can then use this analysis to support your internal business case and engagement. He suggested that this approach can “start bringing it home for people – that it’s not just this big unmanageable issue but that there are quite specific risks and opportunities related to nature that can be managed”. Nina agreed, referring to ENCORE and the WWF Biodiversity Risk Filter as additional tools to support a desktop review.

3. Upskill colleagues: It is important to bring people with you in the process. United Utilities has developed an e-learning module to give staff more information about natural capital. Rebecca builds on that through direct upskilling: “I personally go around to my colleagues who are trying to learn more about natural capital, and I will teach them how to incorporate it into their decision making”.

The role of finance

Luke, a Chartered Accountant turned sustainability accountant, highlighted three ways that finance has helped to drive a shift within United Utilities:

  1. CFO engagement – the CFO actively engages with investors and other external stakeholders on nature, and this enthusiasm has “flowed through into his team”, and from there to the rest of the organization.
  2. Communication – the investor relations team has played a crucial role in building alignment in United Utilities’ external reporting between TCFD, TNFD and the new ISSB sustainability standards.
  3. Capital allocation – as part of an internal working group, finance have “been supporting on capital allocation for our upcoming business plan”, with “natural capital measures … at the heart of that process”.

Where to go next

The A4S website has a lot of information on the importance of nature to business and how finance can help integrate nature into decision making, including practical actions for finance teams and a Briefing for Finance on Biodiversity.

Our A4S Essential Guide to Natural and Social Capital Accounting (which predates TNFD) includes an introduction to relevant terminology, real-world examples and a suggested set of principles to guide your approach. For more practical examples read our United Utilities, Yorkshire Water and GSK case studies.

For more about TNFD, we have information about what finance teams need to know about the TNFD recommendations and some top tips for finance teams on implementing them, along with a TNFD maturity map to guide organizations as they develop.

To join us for future interactive panel discussions, check out upcoming webinars in our Sustainability in Action series, and sign up for the A4S mailing list to stay up to date with all our latest blogs, publications and events.

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