The Taskforce on Nature-related Financial Disclosures (TNFD) published an initial beta version of the framework on nature-related risks, opportunity management, and disclosures. The Taskforce also released a discussion paper on assessment of nature-related data and analytics availability; the paper sets out a landscape mapping of data platforms and sources, along with two case examples of how data and analytics can be used in the TNFD nature-related risk and opportunity assessment process.
The TNFD framework seeks to provide recommendations and guidance on nature-related risks and opportunities relevant to a wide range of market participants, including investors, analysts, corporate executives and boards, regulators, stock exchanges, and accounting firms. The Taskforce has developed a framework, through an open innovation approach, that will ensure its final recommendations are both science-based and practical to implement by market participants globally. The beta version of the framework represents the beginning of the consultation and pilot testing with market participants and will be open for feedback from market participants. The feedback and testing approach of the Taskforce will inform subsequent releases of beta versions through 2022 and 2023 and the finalized recommendations schedule to be published later.
TNFD intends to align its recommended disclosures closely to those of the Task Force on Climate-related Financial Disclosures (TCFD), to facilitate and encourage a move toward integrated disclosures. The initial beta version of the TNFD framework includes three core components which are as follows:
- An outline of fundamental concepts and definitions—TNFD recommends that market participants use these when assessing and disclosing their nature-related risks and opportunities. TNFD’s definition of nature-related risks includes longer-term risks presented by nature-related dependencies and nature impacts. Similarly, TNFD has defined nature-related opportunities as activities that create positive outcomes for organizations and nature by avoiding or reducing impact on nature or contributing to its restoration.
- Draft disclosure recommendations for nature-related risks and opportunities—The draft recommendations follow TCFD’s four pillars of disclosure: governance, strategy, risk management, and metrics and targets. The draft recommendations include four general requirements that disclosures should be based on: assessment of nature-related dependencies and impacts; consideration of location; consideration of capabilities for nature-related risk and opportunity assessment and management; and a statement of the scope of disclosures and what will be covered in future disclosures.
- Guidance for nature-related risk and opportunity assessment—TNFD has developed a first version of an integrated nature-related risk and opportunity assessment process, called LEAP (Locate, Evaluate, Assess, Prepare). The LEAP approach is voluntary guidance intended to support internal nature-related risk and opportunity assessments within corporates and financial institutions, which should in turn inform strategy, governance, capital allocation and risk management decisions, including disclosure decisions aligned with the TNFD’s draft disclosure recommendations.
TNFD intends to release additional material on these topics in the subsequent releases: climate-nature nexus; scenario approach, guidance, and timeframe; approach to materiality; social dimensions; sector-specific guidance; and data, metrics, and targets for nature-related risk and opportunity management and disclosure. The open consultation period will continue until June 30, 2023. Organizations can provide feedback on this first beta version as well as subsequent beta versions planned for release in June 2022, October 2022, and February 2023. This will culminate in the final release of the TNFD recommendations (v1.0) planned for September 2023.
- TNFD Press Release
- Framework (PDF)
- Discussion Paper on Landscape Assessment (PDF)
- UNEPFI Press Release
Keywords: International, Banking, Climate Change Risk, ESG, Disclosures, Nature-Related Risk, TNFD Framework, Reporting, TCFD, TNFD, Headline
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Next ArticleCFPB Publishes 2021 Annual Fair Lending Report
The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance, and superannuation industries.
The French Prudential Supervisory Authority (ACPR) published a notice related to the methods for calculating and publishing prudential ratios under the Capital Requirements Directive (CRD IV) and the minimum requirement for own funds and eligible liabilities (MREL).
The Financial Stability Institute (FSI) of the Bank for International Settlements recently published a paper proposing a framework for classifying financial stability regulation as either entity-based or activity-based.
The European Insurance and Occupational Pension Authority (EIOPA) published the risk dashboard based on Solvency II data and the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA).
The European Banking Authority (EBA) and the European Central Bank (ECB) published their responses to the consultations of the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.
A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.
The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.
The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.8.0 of the Solvency II data point model (DPM) and XBRL taxonomy.
The European Union published, in the Official Journal of the European Union, an opinion from the European Economic and Social Committee (EESC); the opinion is on the proposal for a regulation to amend the Capital Requirements Regulation (CRR).
HM Treasury published a draft statutory instrument titled “The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022,” along with the related explanatory memorandum and impact assessment.