Nature’s value can never be overstated, especially during a global pandemic when evidence suggests biodiversity loss, at a current rate of 68%, and pandemic risk factors are connected. The World Economic Forum (WEF) calculated that $44trn of global economic output, over half the world’s GDP, is moderately or highly dependent on nature and its services. In a separate piece of research, they also concluded that enhancing nature could create over $10trn worth of additional value and result in almost 400 million jobs by 2030. Beyond economic value and its ecosystem services it provides to us, nature is an inherently priceless commodity to humans around the world, offering joy and happiness to the global population. As such, the relationship between nature and global prosperity cannot be understated, yet business to date suggests there has been a failure to recognise the economy’s impacts and dependencies to it, as previously stated by the Dasgupta Review earlier this year.

Earlier today the Taskforce for Nature-related Financial Disclosures (TNFD) was officially launched, with the endorsement of financial institutions, governments and multinational companies from around the world. Its proposed goal is as follows:

“The goal of the TNFD is to provide a framework for organisations to report and act on evolving nature-related risks, in order to support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.”

This goal has been aligned with the Convention on Biological Diversity (CBD) Global Biodiversity Framework’s goal of “no net loss by 2030 and net gain by 2050”. The framework will be piloted and likely out for consultation in 2022, with the aim of a launch in 2023. This timeline will ensure the necessary rigour has been applied in its design, whilst also allowing institutions some breathing room whilst already applying a growing list of ESG regulations and mandatory TCFD. The initiative comprises of a working group of 74 members across 24 countries, consisting of representation across business, academia, NGOs, regulators and governments. The TNFD will be designed for and will aim to serve the needs of all stakeholders in society, including those in its working group as well as ratings agencies and members of society who wish to have a greater understanding of how their personal investments are impacting nature.

The TNFD will follow the Taskforce from Climate-related Financial Disclosures (TCFD) in structure, using the same four-pillar approach of Governance, Strategy, Risk Management and Metrics & Targets. The reasons for this are two-fold, firstly it will build on the success of what is becoming a globally accepted framework, this in theory will allow the TNFD to be integrated more seamlessly within financial institutions already working with the TCFD. Secondly, by aligning to an existing standard it is the next necessary step in moving towards a global recognised framework and set of standards for ESG disclosure. The technical scope note also acknowledges this by stating it aims to be integrated into existing standards including the forthcoming International Financial Reporting Standards (IFRS) Sustainability Standards board.

Nature does come with its own set of unique challenges and additional complexities when compared to climate. The TNFD acknowledges this and as a result will use a broader definition of terms for nature-related risks and opportunities compared to the TCFD. However, it will still use the same two risk approach of separating risks into physical risks and transition risks. What has not been communicated is whether nature could be separated into smaller sub-categories such as biodiversity, water, deforestation in devising standards and categorising risks or whether it attempts the challenge of tackling nature as a single concept. What is certain is that there are already a plethora of measurement and valuation tools for the working group to draw upon, with DEFRA having published natural capital valuation guidance last year to coincide with the Dasgupta Review.

As well as COP26 for climate change being hosted in the UK, there is also the lesser heard of COP15 for Biological Diversity taking place in Kunming, China. Where stakeholders hope to discuss the Fifth Global Biodiversity Outlook and update its post-zero draft of the 2020 Global Biodiversity Framework. Perhaps they will now be adding an additional agenda item.

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