Every Company Needs to Assess Its Nature-Related Risk – BRINK – Conversations and Insights on Global Business

More than half of the world’s GDP relies on nature. The potential collapse of ecosystem providers comparable to pollination and water-based meals is threatening to trigger a $2.7 trillion decline in international GDP yearly by 2030.

Not surprisingly, regulators and buyers are urgently calling for extra transparency round publicity to these nature-related monetary dangers. The Taskforce on Nature-Related Financial Disclosures (TNFD) is a market-led initiative (of which the WWF is a co-founder and data associate) that seeks to combine nature into monetary and enterprise decision-making and shift international monetary flows towards nature-positive outcomes. 

Nature Loss and Climate Change Are Two Sides of the Same Coin

In a chunk of fine information, the TNFD has launched its first beta framework for managing and disclosing nature-related threat, providing extremely sensible “how to” steerage for nature-related threat and alternative evaluation.

Nature loss and local weather change are two sides of the identical coin, and the TNFD suggestions align with the now well-established Task Force on Climate-Related Financial Disclosures (TCFD).

Organizations taking local weather motion can align with the Paris Agreement 1.5 diploma Celsius threshold for international heating, however there isn’t a related yardstick for nature. 

The framework encourages corporations and monetary establishments to start by taking a location-first strategy. As very important a compass as a world objective for nature akin to the Paris Agreement 1.5 diploma Celsius goal can be for motion on nature, dependencies and impacts on nature are inherently native, and conservation finally depends on native supply — together with by operations, worth chains and portfolios.

Mirroring TCFD steerage, the TNFD expects organizations to disclose materials nature-related dangers and alternatives associated to impacts and dependencies in belongings and direct operations and upstream and downstream worth chains.

Location Is a Critical Factor

For monetary establishments, for instance, this implies disclosing nature-related dangers in financing actions comparable to lending, investing and insuring, in addition to all different advisory actions — a job that’s doubtless to be extraordinarily complicated. While carbon dioxide emissions contribute to international impression no matter the place they happen, dependencies and impacts on nature, comparable to land or water use, may be benign or calamitous relying on context.

This is why the emphasis of the TNFD’s stepwise Locate, Evaluate, Assess, Prepare (LEAP) steerage on a science-based, location-first strategy to incorporating nature into enterprise and portfolio threat administration is so essential. Inviting organizations first to look fastidiously into which “biomes” their operations and worth chains are located earlier than assessing how they have an effect on environmental belongings and ecosystem providers, comparable to water provide and flood mitigation, will guarantee dangers and alternatives are correctly recognized and quantified.

Nature may be understood by a assemble of 4 realms: Land, Ocean, Freshwater and Atmosphere. These are main elements of the pure world that differ basically of their group and operate.

As far as potential, the TNFD has adopted the identical language and constructions because the TCFD, overlaying governance, technique, threat administration, and metrics and targets. 

Whether or not the 2 frameworks merge sooner or later is an open query however sturdy alignment will make it simpler for companies and buyers already finishing up local weather threat disclosure to embrace the brand new strategy. It would additionally encourage built-in reporting and alignment with ESG reporting norms rising from the International Sustainability Standards Board (ISSB). If governments represented on the TNFD Forum select to make TNFD and TCFD reporting necessary, integration will solely speed up.

Measure What Matters

Despite the progress that the TNFD framework beta launch marks, one of many fundamental challenges forward is deciding what to measure and how. The TNFD hasn’t but specified what nature-related info organizations ought to use and has additionally recognized limitations in present knowledge and metrics.

While many corporations concerned within the TNFD already collect related knowledge, and monetary establishments are utilizing fashions that combination knowledge on places, gaps stay, and knowledge high quality and consistency differ significantly throughout totally different areas, biomes and ecosystems, with a selected scarcity of knowledge in marine and freshwater biomes. 

In addition, the place knowledge is out there, there’s typically a lack of awareness about how to interpret and use it. Compounding the issue, no globally agreed targets and metrics for nature safety and restoration exist. 

Organizations taking local weather motion can align with the Paris Agreement 1.5 diploma Celsius threshold for international heating, however there isn’t a related yardstick for nature. Many hope a landmark settlement will emerge at COP15 in Kunming, China, later this 12 months and additionally that main investor backing for the TNFD will encourage ambition. This would assist fill the hole and higher outline nature-positive outcomes. 

Disclosure Reporting Could Be Elusive

Meanwhile, different associated initiatives, such because the Science-Based Targets Network (SBTN) and instruments just like the WWF Water Risk Filter, supply detailed steerage on assessing threat and are creating approaches for companies to set targets. But with out readability of objective, constant disclosure reporting will likely be elusive, and as the favored adage goes, you may’t handle what you may’t measure.

Irrespective of what comes out of COP15, the problem now for the TNFD is securing decision-useful knowledge on the vital granularity and figuring out a coherent and complete set of metrics and indicators that enable its framework to be put to the check and strengthened. Subsequent beta releases promise additional steerage on metrics and targets, together with these relevant to any group and these which might be sector-specific.

Over time, knowledge gaps will likely be stuffed — however organizations ought to already begin utilizing and enhancing what is out there immediately. And with knowledge on the placement of a company’s belongings and operations arguably probably the most important in making use of the TNFD framework successfully, the onus is on organizations to create and enhance their very own knowledge units.

Start Investing in Nature-Based Solutions Now

What is for certain is that corporations and monetary establishments shouldn’t wait — for higher definitions, extra knowledge, complete metrics, or settlement on a world objective for nature — earlier than investing in very important nature-based options that contribute to local weather resilience and adaptation and in enterprise fashions, merchandise, providers, and investments that assist restore nature.

Building on current assist for the TNFD, together with from 34 investor members collectively chargeable for belongings value over $18.3 trillion, and over 350 organizations in its discussion board, corporations and monetary establishments ought to have interaction wholeheartedly in its open innovation strategy because it iterates, pilots and finalizes a probably game-changing framework over the subsequent 18 months. 

The want to sort out nature-based dangers and pursue nature-positive outcomes might scarcely be clearer.