ESG: TNFD consults on final draft of beta disclosure framework

What's been published?

On 28 March 2023, the Taskforce on Nature-related Financial Disclosures (TNFD) published the fourth and final beta version of its disclosure framework.

The TNFD is consulting on this version from 30 March 2023 to 1 June 2023.

Its final recommendations and pilot testing (v1.0) will be published in September 2023.

Our summary of the first, second and third beta versions can be found here, here and here, respectively.

What is the TNFD?

The TNFD is an international initiative that builds on a model developed by the Taskforce on Climate-Related Financial Disclosures (TCFD). Its aim is to provide a framework which enables organisations to address environmental risks and opportunities with the end result that capital is channelled into positive action.

Funding for the TNFD is provided by governments (including those of Australia, the Netherlands, Switzerland and the United Kingdom), the UN and a number of philanthropic foundations.

Its work is guided by seven principles: market usability, science-based, nature-related risks, purpose-driven, integrated & adaptive, climate-nature nexus and globally inclusive.

What is the TNFD's draft framework?

Like the TCFD, the TNFD is developing a global framework, rather than a standard.

The aim is to provide market participants with a risk management and disclosure framework to identify, assess, respond and, where appropriate, disclose their nature-related issues, thereby supporting "a shift in global financial flows away from nature-negative outcomes and towards nature-positive outcomes".

The final draft draws from a number of relevant standards including those from the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI). The draft disclosure recommendations are also closely aligned with those of the TCFD.

The draft framework is anchored by the same four pillars of the TCFD approach and has three principal elements:

• core concepts and definitions
• the proposed risk and opportunity assessment approach (LEAP) and
• the draft disclosure recommendations aligned with those of the TCFD.

What does the new draft contain?

Since the last release, the Taskforce has made minor adjustments to its proposed risk and opportunity assessment process and has reduced the number of proposed recommended disclosures from 15 to 14. 

The TNFD has, for the first time, outlined its approach to disclosure metrics by proposing a tiered approach of leading indicators that seeks to strike the right balance "between being science-based and yet practical for market participants to use as part of the annual reporting cycle and on a limited assurance basis".

The three tiers of the TNFD's proposed disclosure metrics are:

• Core Global Disclosure Metrics (relevant to organisations across sectors and reflected in global policy priorities, such as the Global Biodiversity Framework agreed in December 2022)
• Core Sector Disclosure Metrics (which allow capital providers to make comparable assessments of businesses within a sector) and
• Additional Disclosure Metrics (which enable report preparers to include metrics that are of particular relevance to their business model and nature-related issues).

Aligned with the TCFD approach, the Taskforce has also released draft guidance on its proposed approach to the use of scenarios for nature-related issues.

As part of its package of updates and new components, the TNFD has also published draft guidance for four sectors (Agriculture & Food; Mining & Metals; Energy; and Financial Institutions) and for four biomes (tropical forests; rivers and streams; intensive land use systems; and marine shelf). Additional sector and biome guidance will be released in the coming months on a rolling basis.   

Relevant disclosure metrics for each sector are available through the TNFD's online platform.