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 three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.
Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)
The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)