Between the SEC and California, climate disclosures seem to be getting all the attention in ESG. However, frameworks are arising for disclosure around other ESG issues, including nature and biodiversity. The Taskforce on Nature-related Financial Disclosures (TNFD) published their inaugural risk management and disclosure framework. The goal is to provide a global baseline for companies to report biodiversity and nature risk. MSCI writes about the framework in a recent Linkedin post, stating that:
“The TNFD framework aims to guide companies and investors in assessing and publishing their nature-related impacts, dependencies, risks and opportunities. More broadly, the framework aims to standardize nature-related disclosure and raise awareness among investors and other capital-markets participants of the economic significance of nature and the risks that its degradation and loss holds for society.”
The TNFD outlines four pillars and 14 global indicators for reporting across sectors, along with sector-specific recommendations. Additionally, the framework – voluntary for the time being – provides a methodology for identifying and responding to nature-based risks. However, we may see jurisdictions move towards nature-related financial disclosures once details of such mandates are ironed out. In the EU, mandatory CSRD reporting already reaches beyond climate-related disclosures and into other areas of ESG.
In the process of adapting to emissions disclosures, companies will build stronger relations with suppliers and adopt new technologies for data gathering. Once that capacity is built, ESG reporting can be broadened. With demand for ESG disclosures growing, jurisdictions may adopt frameworks like the TNFD as mandatory in the future.
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