The Taskforce on Nature-related Financial Disclosures (TNFD) has released the second draft of its framework for companies to report their nature-related risks and impact, including more guidance on how to measure and report in this area.
This comes a week after the European Commission proposed a nature restoration law requiring member states to restore 20% of the EU’s land and sea area by 2030 and all ecosystems in need of restoration by 2050.
The TNFD’s new draft itself follows the consideration of more than 500 pieces of feedback from the industry worldwide on the first draft of the framework, which was launched in March.
Metrics
The TNFD’s disclosure recommendations and the locate, evaluate, assess, prepare (LEAP) assessment approach remain the same. But the new draft includes architecture for metrics and targets and an illustrative set of assessment metrics to support pilot testers.
It distinguishes between assessment metrics and disclosure metrics, because with mainstream financial management and reporting, what gets disclosed to report users is only a sub-set of what gets analysed internally to inform risk management and decision making.
The Taskforce will also develop additional sector-specific metrics, such as in the Taskforce on Climate-related Financial Disclosure (TCFD), as part of specific guidance in future releases.
The new illustrative assessment metrics will include risk, opportunity, and response assessment metrics as well as disclosure metrics in future updates to the beta framework scheduled for November 2022 and February 2023.
Guidance
Draft two also includes further guidance on how to undertake dependency and impact evaluation as well as the identification of priority locations as part of the LEAP approach (which has been enhanced) and guidance on how to pilot test the framework.
One area of feedback since the March release is that nature and nature-related risk assessment is new to most market participants and that additional detailed guidance from the TNFD would be helpful.
Further sector guidance and guidance on the use of scenarios is under development and will be provided in draft form for consultation in subsequent updates to the framework in November 2022 and February 2023, the TNFD said.
Finally, the second draft contains an overview of the Taskforce’s approach to the future development of additional guidance for market participants, including sector classification aligned with the approach taken by the International Sustainability Standards Board, the Sustainability Accounting Standards Board and the TCFD.
TNFD co-chairs, Elizabeth Mrema and David Craig, said: “We are delighted with the level of market interest and feedback in the process and will continue to develop a science-based, practical approach aligned as much as possible with other standards-setting, regulatory and policy developments globally as they evolve.”
Market feedback can still be submitted ahead of the TNFD’s recommendations due in September 2023.
