Taskforce on Nature-related Financial Disclosures publishes final recommendations
On 19 September 2023, the Taskforce on Nature-related Financial Disclosures (the "TNFD") published its final recommendations to help organisations identify, assess and manage the disclosure of their material nature-related issues (the "Recommendations"). The TNFD is a science-based, government-supported initiative launched in 2021 to assist companies with incorporating nature into their decision-making processes.
The Recommendations mark the end of a two-year process of extensive market consultation, including eleven consultation groups across twenty countries, pilot tests by over two hundred organisations and the participation of twelve hundred TNFD Forum Member Organisations.
The Recommendations are consistent with the approach of the International Sustainability Standards Board (the "ISSB") and reflect the four pillars set out in the recommendations made by the Task Force on Climate-related Financial Disclosures (the "TCFD"):
- Governance: the company's governance processes and controls used to monitor and managed nature-related issues
- Strategy: the company's business model and approach to managing nature-related issues
- Risk and management: the processes employed to assess nature-related dependencies, impacts, risks and opportunities
- Metrics and targets: the measurements and targets used to assess and manage nature-related issues
Each pillar is accompanied by a set of recommended disclosures, similar to how the TCFD recommendations are structured.
The TNFD Recommendations have also been designed to accommodate different approaches to materiality across jurisdictions and make clear that organisations should clearly state the materiality approach taken.
The TNFD recommends that report preparers use the ISSB's definition of material information (provision of information required to meet the material information needs of capital providers) as a baseline and can choose to adopt a broader materiality approach (reporting information consistent with the needs of stakeholders).
Who are the TNFD early adopters?
Companies can voluntarily adopt the Recommendations with the assistance of additional guidance published by the TNFD. Although there is appetite to do so, it remains to be seen how quickly this can be done. Around thirty five percent of the corporate and financial institution members of the twelve hundred organisations in the TNFD Forum said they are likely to start disclosing in alignment with the Recommendations by 2024. Seventy five percent of corporate and sixty percent of financial institution members said they could do so by 2025 or earlier.
GlaxoSmithKline, the British pharmaceutical group, was the first company to announce its commitment to publish its disclosures in alignment with the TFND Recommendations from 2026 and a list of further TNFD adopters is expected to be released at the World Economic Forum in January.
Further information about the TNFD and the Recommendations in full can be found on the TNFD's website.