Divya Mankikar is Global Head of ESG Market Engagement at S&P Global Sustainable1. She represents S&P Global on the TNFD working group that drafted the beta framework.

Most people would say they value nature – but that isn’t always reflected in business decisions. Companies and investors are increasingly aware of their dependence and impact on nature and are looking for ways to translate this awareness into financial value. In fact, the World Economic Forum estimates half of global GDP — $44 trillion — relies on nature. Still, the pace and magnitude of biodiversity loss and ecosystem destruction has never been higher, meaning there is critical need for companies, governments and investors to pay attention to their interaction with natural capital.

This month, the Taskforce for Nature-related Financial Disclosure, or TNFD, released its beta framework to help link business decisions to nature.

What is the TNFD and why is this new framework important?

The TNFD is a group of global leaders — individuals belonging to the Taskforce, and public or private organizations that compose the Forum. S&P Global is pleased and proud to contribute to both TNFD chambers. Fellow members include world-leading companies, including the world’s largest:

• • asset manager: BlackRock
  • sovereign wealth fund manager: Norges Bank Investment Management
  • food company: Nestle

The TNFD is market-led, composed of 34 Taskforce members and more than 300 institutional supporters. It also has the political support of the G7 and G20 finance and environment ministers. The approach is balanced by collaboration with world-leading scientific and standard-setting bodies.

Together, the Taskforce and Forum form a global, multidisciplinary network of institutional supporters who share the vision and mission of the TNFD. S&P Global is also grateful for the opportunities since the TNFD launched last fall to inform the beta framework with our insights and research into how corporates interact with and can begin to value nature.

Underinvestment in nature presents risks that increase uncertainty for our economies, financial systems and society. Leveraging this new framework, the TNFD aims to shift global capital toward nature-positive outcomes and away from nature-negative impacts.

Listen to this episode of the ESG Insider podcast from S&P Global Sustainable1 to hear an interview with TNFD Co-Chair Elizabeth Mrema about the goals of the task force.

This framework looks familiar

You may be familiar with the TCFD or Task Force for Climate-related Financial Disclosures. It isn’t a coincidence that the TNFD has a similar name, and for good reason! The TCFD helped galvanize corporate and investor action on climate change by creating a common framework. The TNFD will build on the success of the TCFD framework in creating a globally accepted basis for dialogue among companies, investors and stakeholders. Securities regulators in the EU and U.K. have begun adopting the TCFD framework, and some U.S. regulators have expressed interest in it. In staying true to the TCFD structure, the TNFD aims for its recommendations to be part of a wider move toward integrated disclosures.

What is this new framework?

The beta version of the TNFD Framework (v0.1) is the first draft on which the TNFD members are seeking public input and feedback, with the goal of finalizing the framework by the end of 2023. Developed over the past six months, the draft will be continually improved through multiple iterations of a “build-release-test-iterate” or open innovation approach. The Taskforce welcomes comments from corporate entities and financial institutions, including those in the TNFD, to enhance the framework.

The key elements of this release package are three documents

1. “Understanding nature” for market participants

This section sets out the TNFD’s basic concepts and definitions for understanding nature and draws on the most authoritative science- and consensus-based existing definitions. For example, the TNFD defines nature “as a construct of four realms – Land, Ocean, Freshwater and Atmosphere.” This is distinct from natural capital, defined as “natural resources that combine to yield a flow of benefits to people.”

2. The TNFD draft disclosure recommendations

As noted in the document: “By aligning the TNFD’s recommended disclosures closely to those of the TCFD, the TNFD intends to facilitate and encourage a move towards integrated disclosures.”

The framework’s general requirement recommends assessing dependencies and impacts on nature, by location, and disclosure on the scope of the assessment and ability to manage the risks. Its four pillars of recommended disclosure reflect those of the TCFD: governance, strategy, risk management and metrics and targets.

3. The LEAP nature risk assessment approach

Companies are recommended to measure nature-related risk through a process called LEAP. The stages of the LEAP process include:

• • Locate interactions with nature
  • Evaluate impacts and dependencies
  • Assess risks and opportunities
  • Prepare to manage and report on material risks

The LEAP process begins with locating physical assets or mapping operations, and layering these with natural assets by specific location, including ecosystems and biomes.

Future developments and next steps

This initial version of the framework is just the first step. The TNFD plans to release further material on other topics, including:

1. Materiality: The TNFD encourages stakeholders to consider materiality from two perspectives: how companies are dependent on nature and how they impact nature.
2. Climate-nature nexus: In the beta framework’s words, “climate change and nature loss are mutually reinforcing” — they are two sides of the same coin. Physical risks emerge from both climate change and nature loss, and either can worsen the other. Climate change is one of the five direct drivers of nature loss, and nature loss reduces the ability of ecosystems to store carbon, amplifying the effects of climate change.
3. Metrics and targets will be contemplated in a future release of the framework, as there is not yet a globally agreed-upon metric for nature protection and restoration.
4. Related to scenario analysis, there will also be collaboration with the Network of Central Banks and Supervisors for Greening the Financial System, or NGFS.

The TNFD has launched a learning community to gather feedback on and pilot test the beta framework and build market awareness on the road. The second version of the framework is scheduled for release in June, with September 2023 targeted for a full 1.0 release.