New draft guidance from the Task Force on Nature-related Financial Disclosures (TNFD) has been unveiled at COP 16 in Cali, Colombia to help companies and financial institutions shape their nature transition plans. 

The guidance proposes a basic structure for corporates to follow in their nature-based planning and reporting and builds on the work of the Glasgow Financial Alliance for Net Zero (GFANZ) – plus recommendations for climate transition disclosure set out by the Transition Plan Taskforce (TPT).

The guidance is designed to further the mission of the Kunming-Montreal Global Biodiversity Framework (GBF), adopted two years ago at COP 15. Backed by almost 200 countries, the GBF aims to halt and reverse biodiversity loss by 2030, paving the way for the world to live in harmony with nature by 2050.

According to TNFD, delivering on that global transition requires significant changes to business practices across every sector. The nature transition plan proposed in the guidance sets out a range of goals, actions, accountability measures and resources that corporates should prioritise in their efforts to meet the GBF’s vision.

Metrics and targets

The guidance encourages businesses and financial institutions to base their nature transition plans around five core themes:

1. Foundations. The overall approach towards nature transition, including scope, priorities and changes to its business model and value chains – plus the transition financing strategies it plans to implement.

2. Implementation strategy. Actions to align business policies, activities, products and services with the priorities of the transition plan.

3. Governance. Structures and processes at board and management level to oversee, incentivise and support the transition plan’s implementation.

4. Metrics and targets. Goals and measurements to monitor progress against the transition plan’s priorities.

5. Engagement strategy. Collaborative steps to support the delivery of its plan and accelerate the transition of the whole economy.

The draft guidance does not require a nature transition plan to immediately cover all relevant locations, dependencies, impacts, risks and opportunities. An organisation may start with an initial set of priorities and boost the coverage and accuracy of its plan over time, in step with its maturing grasp of the nature-related issues it is facing.

A financial institution, the guidance notes, should consider its place in the broader financial system and relationships with actors in the real economy. Based on that overview, it should examine how its investment practices can best contribute to the transition implied in the GBF. In line with the outcome of that assessment, its plan should set out the transition financing strategies it intends to pursue going forward.

Bending the curve

TNFD Technical Director Emily McKenzie says every business has impacts and dependencies on nature: “They also face growing physical, transition and systemic risks as the resilience of nature underpinning our economies and societies continues to erode. It is now critical for organisations to consider the concrete actions they are going to take to address those issues – for the benefit of their own organisation and to contribute to the achievement of nature-positive outcomes as called for by the GBF.”

GFANZ Vice Chair Mary Schapiro welcomes the report’s publication: “Transparent data is critical for accurately and effectively taking action to protect biodiversity,” she says, “and clear, consistent disclosure is the first step to accessing that data.”

WWF International Finance Practice Lead Aaron Vermeulen says meeting ambitious, science-based goals – such as “bending the curve” of biodiversity loss – means breaking down the process of systemic change into smaller, achievable steps.

“Nature transition planning unlocks this, and disclosure of such plans provides investors with the essential information necessary to finance the transition. Over the past few years, WWF has been actively promoting transition planning. We are thrilled to see the first comprehensive guidance and disclosure recommendations released.”

Surging interest

The initiative also proposed a roadmap for upgrading market access to decision-useful, nature-related data. In light of new reporting, target setting, transition planning and capital allocation activities, TNFD said, corporate demand for such data is set to grow exponentially in the coming years.

TNFD Co-Chair David Craig explains: “This roadmap reflects our ongoing commitment to develop a comprehensive and collaborative approach to addressing the gaps in nature-related data availability, consistency and quality – efforts that are critical to empowering business and finance to take concrete action as soon as possible.”

Interest in the TNFD framework is growing; the total number of organisations committed to voluntarily reporting their nature-related issues in line with TNFD now stands at 502: a 57% increase since First Adopters were announced in January. Publicly listed companies that have signed up represent more than $6.5tn in market capitalisation. Meanwhile, finance signatories hold $17.7tn in assets under management.

ICAEW Nature and Biodiversity Manager Toby Roxburgh says: “The surge of business interest in TNFD reflects a growing understanding that corporate nature risks are rising and that opportunities are open to companies that embrace a nature-positive transition. Businesses and investors now have focused guidance and tools to bring nature into their strategies and transition plans.”

Roxburgh says the accounting profession has a vital role to play in this transformation. In their roles as company leaders and advisers, accounting and finance professionals have the necessary expertise in organisational governance, strategy, risk management and assurance to help integrate nature into business and financial decision-making. 

“The profession is integral to TNFD’s mission. Chartered accountants are instrumental in enabling the businesses they lead and advise to adopt and implement the recommendations and guidance,” Roxburgh adds.

Provide feedback on TNFD’s draft guidance.

Register to become an adopter of TNFD-aligned disclosures.

Further resources

During COP 16, GFANZ issued its own voluntary guidance on how financial institutions should include nature in climate and net-zero transition plans. Provide feedback on GFANZ’s guidance. 

The Transition Plan Taskforce (TPT) Nature Working Group’s advisory paper The Future for Nature in Transition Planning looks at how TPT’s approach to climate transition planning could be applied to nature objectives.

For more information vist ICAEW’s Nature and Biodiversity Hub.