Practical perspectives on reporting #18: From TCFD to TNFD: resolutions for a new world
By Tamara O’Brien, TMIL’s roving reporter
This webinar is dedicated to Claire’s father Roger Windsor, veterinary surgeon, animal welfare expert and advisor to governments worldwide, who died just before Christmas.
Is mid-January too late for talk of resolutions? Surely not, when the stakes are this high. Anything that lights a spark of hope in these dismal days, metaphorically and meteorologically, is not to be dismissed on a technicality. Because, wonder of wonders, our webinar on the Taskforce for Nature-related Financial Disclosures (TNFD) did indeed spark hope.
Regular readers will know that, as a generalist copywriter, I often find myself running to catch up with the discussion between ESG reporting specialists (though it’s always fun to watch experts in full flow with their peers). Luckily Claire, an ESG specialist as well as corporate communicator, is adept at gently steering the conversation into more accessible waters, should the need arise. But today what came through loud and clear, even to me, was that TNFD could be a game-changer.
Building on TCFD’s pioneering work in establishing how companies should report their CO2 emissions, TNFD applies TCFD’s principles and processes to the wider world of air, water, earth, plants and animals. Including us homo sapiens.
Climate and nature are interdependent of course, so it makes sense that there’s congruence in how companies report on their impacts in these areas. And having a proven model to work from certainly helps with the logistics of introducing such systems into global corporate finance; especially in the face of powerful opposition, regulatory spaghetti and plain old inertia.
But the excitement isn’t just over process and precedent. ‘Nature’ is an intrinsically more immediate and emotive proposition than ‘climate’. To put it crudely, the idea of protecting and supporting nature is an easier sell to the general public than that of reducing gaseous emissions. But it can be much more difficult to sell to a corporate world, given its complexity and lack of a single metric to tie it all up neatly in the annual report.
Nonetheless, TNFD is giving it a go. So could it be the thing that finally propels corporates’ relationship with nature out of the realm of ideas, and into the real world? Both panel and audience explored this prospect with a hesitant kind of hope, putting me in mind of Keats’ On First looking into Chapman’s Homer:
…Like stout Cortez when with eagle eyes
He star'd at the Pacific—and all his men
Look'd at each other with a wild surmise—
Silent, upon a peak in Darien.
What Cortez and his crew didn’t have was a set of resolutions to help guide them through this brave new world. So, extrapolating from the discussion, here are some I’d like to propose.
1. Don’t let the perfect be the enemy of the good
The world urgently needs to address nature loss, and businesses don’t need to wait for the full TNFD standards and data sets in September. “The TNFD panel has tried to make the two frameworks [TCFD and TNFD] as interconnected as possible,” explained Sarah. Simon agreed: companies can begin scenario analysis and assessing their impacts on nature now, using the same four pillars as TCFD – governance, strategy, risk management, and metrics and targets. Further encouragement comes from the International Sustainability Standards Board, who announced at COP15 that they will take nature into account in their new standards to be released in June.
2. If not us, who?
“Please comment and get involved,” said Sarah. “The final beta version for TNFD will be in March, and we want as many companies as possible to comment on how the framework works for them. Give your feedback on TNFD proposals here. Measuring and accounting for companies’ dependencies on the natural world is very much an emerging field. We at GSK want to be part of that journey. We’ve already started identifying our impacts and dependencies in the locations we operate in. We’re also collaborating with partners such as the Science-Based Targets Network to better understand our dependencies.”
3. Don’t swerve the hard stuff
Paul came at the subject from the investor angle. The great thing about TCFD, he said, is that CO2 emissions can be captured in a single measure. One tonne of CO2 emissions has largely the same impact roughly anywhere in the world, so it’s capable of being aggregated [given a composite value] across a portfolio of funds. There’s no single such measure for nature and biodiversity, and rightly so, given its complexity; yet the fund managers who invest on behalf of pension companies and other asset owners must somehow try to aggregate across portfolios, and the asset owners themselves need to aggregate across portfolios of portfolios… a huge challenge that TNFD and the industry urgently need to tackle.
So those are my suggested resolutions, which could apply to most situations in life come to think of it. Certainly if I followed them myself, my 31 January tax return would now be nestling in the vaults of His Majesty’s Revenue and Customs, rather than taking the form of stern post-it messages stuck on my printer…
Any questions?
The topic prompted a torrent of questions from the audience. Do companies that aren’t so reliant on nature really have to pay attention to this issue right now? What happens when measures to combat climate change [such as encouraging the uptake of electric vehicles, or photovoltaic panels] clash with nature loss, i.e. the depletion of minerals and raw materials used in their manufacture? Can nature be audited anyway? What types of analysis are most helpful in assessing which nature-related risks and opportunities are material to a company? Is ‘impact on nature’ really part of a company’s fiduciary duty?
Answers to these questions and more can be found in the video link below. Finally, some parting words of advice on TNFD from our panellists:
Sarah: Two things – firstly, familiarise yourself with TNFD – there’s lots about it online. Secondly, start now! You’ll probably be surprised how much information you have already, and can start to develop.
Simon: This is a cross-functional piece, don’t try and do it on your own. Whether you sit in sustainability, reporting or finance, make sure you’re all working together across the organisation. One, it’ll be more fun, and two, you’re much more likely to be successful!
Paul: Picking up on what Sarah said about GSK, how they’re identifying their impacts on nature in their locations – TNFD makes us think about geographical specificity, our place in the world. You have to get to that level of granularity to make sense of this challenge. Start that process now.
TNFD: THE ESSENTIALS
Why we need it
Nature loss/decreasing biodiversity is a major risk to business.
Nature-positive investment presents opportunities for business.
The TNFD framework helps businesses factor nature into their financial and business decision-making.
This benefits business, while shifting global finance flows away from harmful and towards positive outcomes for nature.
What it covers
The Taskforce proposes metrics for an organisation’s positive and negative impacts on:
The five drivers of nature change:
Land/ocean/freshwater use change
Climate change
Resource use/replenishment
Pollution/pollution removal
Invasive alien species introduction/removal.
The four realms: ocean, freshwater, land, atmosphere.
How it works
TNFD is market-led – designed to be used by organisations of all sizes, in all sectors and jurisdictions, whatever their compliance environment or approach to materiality and reporting.
It sets science-based targets for nature (SBTN), on the same lines as those for greenhouse gas emissions. “At GSK we have a two-pronged approach,” said Sarah. “Taking ‘no regrets’ [forward planning] actions in water, waste, materials and biodiversity; and using the SBTN Network’s methodology to measure impacts.”
It provides a risk and opportunity assessment approach, called LEAP (Locate, Evaluate, Assess, Prepare)
Why not see how it works for yourself? Find out about the TNFD framework pilot test.
When it’s happening
·The framework will be launched in September 2023.
The final beta version, v0.4, will be released in March 2023 – giving organisations the chance to comment before the launch.