The Taskforce on Nature-related Financial Disclosure (TNFD) has released the second iteration of its beta framework for nature-related risk reporting. The framework now includes a draft of metrics and targets, as well as information on voluntary pilot testing. The announcement comes three months after the launch of the first beta framework and is built on feedback from market participants.
This is an interactive project. With three beta versions planned ahead of the final release in September 2023, market participants have been involved in drafting the voluntary measurement of nature-related dependencies, impacts, risks and opportunities.
Focus on metrics
With disclosure frameworks, the questions are always the same: What do we report on and how do we measure it?
The TNFD’s second beta version brings clarity to the kinds of metrics available for reporting, related to asset location, state of nature and services. The recommendations push for nature-related target-setting and the measurement of businesses impact on nature realms.
According to the report, market participants explicitly want to keep the framework aligned with pre-existing regulatory development, specifically the science-based target initiative (SBTi) and the International Sustainability Standards Board (ISSB).
If we want to mobilize and redirect the flow of capital towards nature-based solutions, we’re going to need a dashboard of metrics linked to a set of targets
Yet, for all that is said on the necessary convergence of disclosure requirements internationally, the framework must account for different jurisdictions imposing their own regulatory restrictions based on the ecosystems and communities they govern.
There is also a key tension between the demand for a clear and simple methodology applicable to business models and the complexity of the science. But feedback is clear. Businesses and financial institutions want sector-specific recommendations and greater clarity on the intrinsic value of nature- and biodiversity-loss implications.
As a result, this second beta distinguishes between assessment metrics – to be used by market participants internally – and disclosure metrics for external reporting purposes. The Taskforce also differentiates between a set of core and additional metrics.
The aim is to allow for more flexibility and to enable the framework to be adapted to individual business models, local regulatory environments and shareholder preference.
“The data and metrics required to assess an organization’s dependencies and impacts vary greatly, depending on factors such as the type of environmental asset, the location and sector” the report states.
It suggests that metrics should be reviewed every three to five years, as the science progresses and understanding of the impacts on the land, fresh water, oceans and the atmosphere improves.
Examples include waste-water volumes, water consumption, land use, species abundance and habitat assessments.
Lessons from climate
The TNFD framework was designed using the same architecture as the Task Force on Climate-related Financial Disclosure (TCFD), focusing on the four pillars related to how companies operate: governance, strategy, risk management, and metrics and targets.
It is looking to adapt the conceptualization of Scope 1, 2, and 3 emissions, and its implications on indirect impacts up and down the supply chain.
For this, better access to asset location data is essential.
“Ultimately, models are only as good as their data and relevance, but collecting spatially explicit information for the entire value chain of companies will be both challenging and time-consuming for companies,” TNFD writes, in its landscape assessment of nature-related data and analytical availability.
The question remains whether nature-based frameworks will direct attention to achieving a net-zero-style target for all institutions to work towards, as with climate.
“We’re all hoping that the Global Biodiversity Framework (GBF) gets finalised this year,” says Tony Goldner, TNFD executive director, pointing to the much-anticipated COP15 due to take place in Montreal in December.
But for Goldner, a single target may not be as sensible. Unlike climate, where the use of emissions as a proxy metric has facilitated the process of drawing up a reporting framework, nature-related measurements are complex and multiple.
“If we want to mobilize and redirect the flow of capital towards nature-based solutions, we’re going to need a dashboard of metrics linked to a set of targets,” he says. “The GBF can help to focus global attention on a key set of goals and animate action.”
