Nature in Scope: TN FD
Nature in Scope: TN FD
Nature in Scope: TN FD
NATURE IN
SCOPE
A summary of the proposed
scope, governance, work plan,
communication and resourcing
plan of the TNFD
T N
F D
Bringing together a Taskforce on
Nature-related Financial Disclosures
1 2021
June TNFD Nature in Scope
Foreword
We are pleased to have served as Co-Chairs The IWG engaged 75 members covering
of the Informal Working Group (IWG) to the financial institutions, regulators, corpo-
Taskforce on Nature-Related Financial Disclo- rates and others influential actors with over
sures (TNFD). This has been an exciting and US$ 8.5 trillion in assets. We were further
dynamic preparatory phase towards the supported by the United Nations, with UNDP
launch of this much-needed market-leading and UNEP Finance Initiative playing the
transformative effort. role of ‘Accelerator Team’, WWF and Global
Canopy. Inputs were widely received from
According to estimates by the World
observers and an initial group of stakehold-
Economic Forum, more than half the world’s
ers. We will continue to broaden engagement,
economic output—US$ 44tn of economic
seeking out the views of further groups and
value generation—is moderately or highly
experts including representatives of indig-
dependent on nature. The TNFD is expected
enous peoples and affected communities
to support the shift in finance by providing
through the work of the full Taskforce. The
a framework for organisations to report and
groups and individuals in the IWG workedin-
act on evolving nature-related risks, in order
tensively over 9 months through member-led
to support a shift in global financial flows
workstreams and with commissioned techni-
away from nature-negative outcomes and
cal support to craft and deliver the material
toward nature-positive outcomes.
summarised herein.
www.theGEF.org
This report is based on 9 months of work by the five workstreams of the Informal Working Group
(IWG) of the TNFD set up in September 2020. It has been prepared for the members of the IWG
and is available for public distribution.
The Informal Working Group (IWG) was led by market players and developed this paper through
a number of workstreams, bringing together the collective knowledge and experience of dozens
of organisations. As a culmination of this effort, the paper summarizes the way forward for the
coming two-year effort, and sets the stage for a market-wide shift in how nature-related risks are
reported and acted upon.
1. Market Usability: Develop frameworks directly useful and valuable to market report-
ers and users, notably corporations and financial institutions, as well as policy and other
actors.
4. Purpose-driven: Be purpose driven and actively target reducing risks and increasing
nature-positive action by using the minimum required level of granularity to ensure
achievement of the TNFD goal.
5. Integrated & Adaptive: Build effective measurement and reporting frameworks that can
be integrated into and enhance existing disclosures and tandards. Account for and be
adaptive to changes in national and international policy commitments, standards and
market conditions.
7. Globally Inclusive: Ensure the framework and approach is relevant, just, valuable, acces-
sible and affordable worldwide, including emerging and developed markets.
The TNFD Scope is focused on living nature and elements relating to living nature such as
air, soil and water. In addition to shorter-term financial risks, the scope includes longer
term risks represented by its impact and dependencies on nature. The TNFD is not a new
standard but an aggregator of the best tools and materials to promote worldwide consis-
tency for nature-related reporting.
Analysts can be better equipped to utilise environmental and natural capital-related information
in determining impacts on future cash flow and ultimately company valuations, alongside climate
change.
Companies can use the TNFD Framework to incorporate environmental and natural capital-re-
lated information in mainstream financial reports alongside data on climate, assisting companies
in achieving a holistic view of how climate change and natural capital can affect their perfor-
mance and the necessary actions they could take to address the risks and opportunities.
Regulators can benefit from standards-ready material and a framework that can be immediately
adopted or referenced as a method of compliance in regulation/guidance, informing business
decision-making related to the use of natural resources, land and sustainable behaviour.
Stock exchanges can consider new voluntary and mandatory listing requirements linked to
material environmental and natural capital-related risks and opportunities alongside climate
change.
Accounting firms can provide more comprehensive assurance of companies reporting on envi-
ronmental and natural capital-related performance.
The TNFD framework will adopt a four-pillar approach, structured around how organizations
operate: governance, strategy, risk management, metrics and targets (see Figure 1 below and
glossary for definitions). This is the same structure used by the Task Force on Climate-related
Financial Disclosures’ (TCFD) framework. However, in recognition of the particular challenges
of measuring nature, broader policy and market developments, and the systemic nature of
the risk, the TNFD will incorporate a broader definition of the term “risks and opportunities”
into each pillar. We recommend the use of the term “nature-related risks and opportuni-
ties” to broadly refer to the risks and opportunities to an organization posed by the linkages
between its activities and nature. In addition to shorter-term financial risks, this includes
longer term risks represented by its impact and dependencies on nature. Precise definitions
of each of these components are provided below.
This means organizations should disclose not just how nature may (positively or negatively)
impact the organization’s immediate financial performance (“outside in”), but also how the
organization (positively or negatively) impacts nature (“inside out”). This approach to risk is
consistent with TCFD’s broad approach to financial materiality that extends beyond immedi-
ate risks to consider transition risks through the use, for example, of scenarios. Moreover, it
reflects the direction of emerging debate and practice across financial institutions and regula-
tors concerning how environmental risks and opportunities should be managed. Each orga-
nization’s governance, strategy, risk management, metrics and targets should be designed
to mitigate risks to the organization (“outside in”) including risks associated with its impact
on nature (“inside out”). This two-way approach is necessary to robustly identify, assess and
manage systemic nature-related risks and, in turn, inform estimations of long-term risks to
individual organizations.
Following from this, the TNFD will broadly seek to align with the two global targets in the
CBD’s zero-draft Global Biodiversity Framework of “no net loss by 2030 and net gain by 2050.”
The TNFD framework will provide a structure for organizations to report against the four
pillars. The framework will be supported by guidance on how non-financial companies and
financial institutions can align their business practices and financing respectively to manage
their impacts and dependencies on nature.
Nature related risks: In each of the above pillars, the organisation must consider its impacts
on nature, dependencies on nature, and the resulting financial risks and opportunities.
Source: IWG TNFD’s Informal Technical Expert Group, drawing from TCFD (2017):
Recommendations of the Task Force on Climate-related Financial Disclosures
The TNFD framework will align with and draw from existing initiatives, frameworks and standards
relevant to its scope. Building from the important work already done on nature-related risks and
opportunities and avoiding the duplication of work is paramount to the TNFD’s approach. The
TNFD does not intend to develop a standard (either for disclosure or broader activities) itself.
The TNFD intends for its outputs to be integrated into existing frameworks and standards in
the space, such as those published by GRI, SASB, CDSB and the forthcoming IFRS Sustainability
Board (this list is illustrative only).iii It will moreover engage with and draw from the work of key
bodies and networks, including the Financial Stability Board (FSB) and the Network of Central
Banks for Greening the Financial System (NGFS). Following on from this, the TNFD intends for
reporting entities to integrate TNFD-aligned reporting within mainstream corporate reporting, as
opposed to the creation of a dedicated “TNFD report”.
When compiling TNFD-aligned reporting material, financial institutions will be able to use data
from both corporate disclosure and from third party data sources. Third party data sources
could include traditional financial research, ratings and data service providers, remote sensed
data, public databases, sources and references such as the UN SEEA framework, the data and
metrics used for the UN CBD Post-2020 Global Biodiversity Framework, and those provided by
other relevant stakeholders such as NGOs.iv As data from corporate disclosure and data from
third party data sources will be collected and managed in different ways, the TNFD will need to
provide guidance to financial institutions on how to use each for disclosures. This represents an
extension of scope relative to the TCFD.
◾ Impacts: We recommend the TNFD adopts the definition of impacts offered by the Science-
Based Target Network (SBTN): “positive or negative contributions of a company or other actor
toward the state of nature, including pollution of air, water, soil; fragmentation or disruption
of ecosystemsv and habitats for [human and] non-human species; alteration of ecosystem
regimes.”vi
◾ Dependencies: We recommend the TNFD adopts the definition of dependencies offered by
the SBTN: “aspects of nature’s contributions to peoplevii [ecosystem services] that a person
or organisation relies on to function, including water flow and quality regulation; regulation
of hazards like fires and floods; pollination; carbon sequestration.”viii Note that the impacts of
one business or sector on nature can generate significant financial risk for other businesses
or sectors through their dependencies on nature. These risks may impact virtually all market
participants and sectors of society.
◾ Nature-related financial risks and opportunities: All financial risks and opportunities to the
organisation as a result of impacts and/or dependencies on nature. This includes but is not
limited to financial loss resulting from negative impacts on nature, through regulation, market
access or otherwise, and the costs stemming from the loss of certain species, genetic variety
and/or key ecosystem services on which the organisation depends. A full analysis of impacts
and dependencies can also present opportunities, such as the potential financial benefits
resulting from positive impacts on nature or the strengthening of nature on which the organ-
isation depends. The TNFD should give early consideration to developing clear definitions of
nature-related financial risks, which at a high level can be classified into two broad categories,
which aligns with the approach taken by the TCFD:ix
◽ Nature-related physical risks and opportunities: Physical risks resulting from nature
loss can be categorized as event driven (acute), or longer-term shifts (chronic) in the
way in which natural ecosystems function—or cease to function. Physical risks may
have financial implications for organisations, such as direct damage to assets, the loss
of (local and regional) ecosystem services crucial to production processes or employee
well-being, and indirect impacts from supply chain disruption. These risks may also
have financial and non-financial implications for other parties, such as the loss of global
ecosystem services crucial to human well-being. Examples include local and regional
financial losses in the agricultural sector from reduced pollination from insects, and
global financial losses in the medicine. Physical opportunities may also have financial
implications for organisations, such as increased resilience of business production
processes or demand.
Organisations should follow a scientifically anchored approach to identify which impacts, depen-
dencies, financial risks and opportunities are relevant to their business practices and/or financing
activities. Examples include the initial guidance for businesses from SBTN on setting science-
based targets for nature and IUCN’s recently published guidelines for planning and monitoring
corporate biodiversity performance.xi The guidance divides the five main pressures on nature
loss identified by Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem
Services (IPBES) into more specific drivers of nature loss.xii Organisations could use the SBTN
sector-level materiality assessment to identify which of these drivers of nature loss are relevant
to their business practices and/or financing activities, and hence which could indicate relevant
impacts and dependencies.
Nature-related systemic risks: In addition to the financial risks to the organisation itself,
impacts and dependencies across the economy can create nature-related systemic risk. Systemic
risks can refer to (i) the risk that a critical natural system no longer functions properly; (ii) risks
that arise at portfolio-level (rather than at organisation or transaction-level) of a financial insti-
tution; and (iii) a risk to system-wide financial stability. Reporting entities should be required to
consider (i) and (ii) within their assessment of nature-related risks (these are subsets of physi-
cal and transition risk). Reporting entities should not be required to assess and report on (iii)
although the TNFD itself should consider risks to system-wide financial stability. Nature-related
risks to system-wide financial stability are of particular importance for macroprudential author-
ities, typically economy-wide (often global), and lead to significant impacts across all industries
simultaneously.xiii The risk that a critical natural system no longer functions properly can refer to
“tipping points”, after which ecosystems may collapse beyond the point of repair.
2. Stakeholder landscape: The TNFD will produce a landscape assessment that demonstrates
the position and role of the TNFD relative to other stakeholders relevant to in the identifica-
tion, assessment, disclosure and management of nature-related risks and opportunities. This
will include frameworks, standard setters, regulators and relevant initiatives in the nature-fi-
nance space such as those advancing target-setting.
3. User principles: The TNFD will produce a set of principles to help users understand how
to adapt the TNFD framework to the context of their organisation. The Taskforce when
launched should assess whether such principles should vary across industries or regions.
5. Staged framework for disclosure: The TNFD will define the metrics and information
reporting entities are required to report within TNFD-aligned reporting.xv The focus will be
to identify a finite number of metrics that are meaningful to corporates, financial institutions
and broader stakeholders. Requirements will be organized across three progressive stages
of sophistication, allowing for flexibility in implementation. This draws from the iterative
approaches described in the Natural Capital Protocol and BS 8632 Natural Capital Account-
ing for Organisations.xvi
6. Detailed implementation guidance: The TNFD will produce more detailed technical guid-
ance for reporting entities on how to fulfil the requirements of the framework for example,
guidance on metrics, what types of data can be used, example responses, and how to prior-
itize. Financial institutions this guidance will cover any differences in how data from third
party data sources should be used relative to data from corporate disclosure. The TNFD will
also provide broader guidance on how to identify, assess and manage nature-related risks
and opportunities, and will support other actors to develop frameworks and standards in
these areas. In addition to guidance, the TNFD will support and encourage other organisa-
tions to undertake capacity building for reporting entities to assist them in implementing
TNFD-aligned reporting. The detailed implementation guidance will also discuss how organ-
isations can use scenario analysis to estimate their nature-related financial risks and oppor-
Beyond the outputs discussed above, the TFND will also have a role in engaging other actors to
accelerate uptake and use of the TNFD framework. Two of the most critical stakeholder groups
are listed below as an example, though there are many more:
Engage with standard-setting bodies: Alongside promoting voluntary uptake, the TNFD will
engage with relevant standard-setting bodies to ensure that, as standards are produced and
embedded in mandatory reporting requirements, TNFD-aligned data requirements and reporting
are incorporated. The TNFD will seek to input to standards and frameworks that currently exist.xix
Where possible, the TNFD will propose alignment of definitions, rather than the creation of new
definitions and typologies, between TNFD and existing reporting frameworks and standards so
as to reduce the overall reporting burden.
Engage with data providers: The TNFD recognizes the need to engage with both the data
and analytic communities in addition to reporting entities to support the implementation of its
framework. The TNFD framework will generate increased demand for use, interpretation and
improvement of existing data, as well as new data not currently readily available. The TNFD will
engage data providers, platforms and downstream data service providers as well as non-financial
corporates in a coordinated fashion to encourage the development of the data infrastructure
required to meet its framework. This includes encouraging the development of new data, stan-
dardizing data, and making data more accessible, which could include encouraging others to
develop data platforms and guidance on how to collect and manage relevant data. This necessi-
tates that the TNFD itself should have sufficient technical capacity and knowledge to understand
the data requirements and broader data developments needed.
The TNFD Work Plan consists of 5 phases: build, test, consult, disseminate and market uptake. A
preparatory phase termed phase 0 (zero) includes the guidance of the Informal Working Group,
the launch of the TNFD and preparatory studies and piloting to set up the TNFD Framework
for success.
Phase 0 Launch of the TNFD: this includes a Market Readiness study of 15-20
Prepare financial institutions, a resource mapping study of existing tools, and
beginning the ITEG-suggested phased priority sector approach.
Phase 1 Building the draft framework: refine the purpose, objective, output
Build and outcome of the TNFD, and develop the draft framework and
recommendations. Technical work includes that on data stacks, scenarios,
and the climate-nature nexus.
Phase 2 During the testing process a draft TNFD reporting framework and
Test recommendations will be tested with FIs and companies, in close
collaboration with relevant financial regulators.
Phase 3 Draft framework launch: The draft Framework report will be edited in
Consult response to consultation feedback and launched on the TNFD website.
Consultations: to help to facilitate widespread adoption
in relevant sectors and geographies.
Phase 4 TNFD full launch and promotion: An internal and external communications
Disseminate plan across the project to determine when and how key milestones will be
communicated and supported TNFD launch recommendations.
Phase 5 With agility, a client focussed and ‘learning by doing’ at its heart, TNFD will
Uptake continue to iterate providing #NextGen detailed guidance in the coming
years on risk management, scenario analysis and more to help the market
action the framework.
Deep global uptake will be supported through targeted sectoral and
geographic events with, stakeholders, members and targeted research
across all phases.
Phase 1: Build
During this phase, TNFD members will draft a practical Framework, using a
data-centric, sectoral and staged approach to ensure it is actionable, accessible
and built on cutting edge research and innovation from all regions. The Frame-
work should be fully aligned with the TNFD Principles and Scope and build on
the Market Readiness Study and the proof of concept pilot.
Proposed Sectors
Priority sectors based on high impact and high dependency
Tiers
1. Basic 2. Intermediary 3. Comprehensive
Phase 2: Test
The draft TNFD Framework will be tested with financial institutions and corpo-
rates, in close collaboration with relevant financial regulators. Balanced repre-
sentation across geographies from banks, investors, insurers, public finance
institutions and corporates will be sought from high impact and high depen-
dency sectors. The Framework is expected to be tested in 20 emerging markets,
in addition to the pilots in developed capital markets. The draft TNFD Frame-
work will be revised in response to the piloting.
Phase 3: Consult
The TNFD Secretariat will conduct a consultation on the second draft of the
Framework informed by the piloting experiences in Phase 2. The consultation
should help to facilitate widespread adoption of the Framework in relevant
sectors and geographies, even beyond those represented in the testing phase,
via strategic external consultations with a balanced range of: financial regu-
lators, data preparers and data users on how each can assess and disclose
nature-related risks to support nature positive global financial flows. The
consultation will also help actively build on recommended tools, measurement
systems and reporting protocols among FIs, corporates and public authorities.
The Taskforce on Nature-related Financial Disclosure (TNFD) incorporates the input and guid-
ance of a growing movement of experts. The work of the TNFD has been supported until now
by the 75-strong Informal Working Group (IWG), representing some of the world’s biggest banks,
investors and companies with an AUM value of over US$ 8.5 trillion, as well as governments and
regulatory bodies. The governance structure of the TNFD will include Chair/s, a Secretariat, a
Membership Group, a Stewardship Group and a Stakeholder Group. Figure 4 provides an over-
view of this structure.
TNFD Co-Chairs
Secretariat
Stewardship Group
Technical Research Hub
TNFD Members
Stakeholder Group
Secretariat
The TNFD Secretariat will work under the oversight of the Co-Chairs. The Secretariat will be led
by an Executive Director and staffed with a team of full-time experts on drafting of disclosure
requirements, member engagement, project management and communications, and bring in
part time expertise as needed to accelerate the deliverables of the TNFD outlined in the work
plan. The Secretariat will support the work of the Co-Chairs, coordinate the working groups,
manage the day-to-day work and maintain regular contacts with Members and other TNFD
contributors. The Secretariat’s institutional host or hosting arrangement(s) will be formalized by
the IWG Steering Committee before the launch of the TNFD.
Stewardship Group
The Stewardship Group consists of the founding TNFD partners (Global Canopy, UNDP, UNEP FI
and WWF) and can include representatives from major donors. In addition to these members,
some international organisations or networks such as relevant financial regulators or stan-
dard-setting might be invited to join the Stewardship group The Stewardship Group supports
the Co-Chairs, provides technical support, helps guide core decisions to ensure alignment with
TNFD principles and can call on the Stakeholder Group in specific cases if the Co-Chairs deviate
from the TNFD goal on important topics captured in the TNFD Principles.
Stakeholder Group
The Stakeholder Group bring together a wide range of stakeholders (e.g financial institutions,
corporates, service and data providers, governments, regulators, multilaterals, financial and busi-
ness consortia, NGOs, think tanks, research organisations) that take an interest in the TNFD and
have invested time in bringing it to life or creating an enabling ecosystem for it to flourish. Any
stakeholder with an interest to follow the developments for the TNFD Framework, and contrib-
ute to it as needed, are invited to join this group, unless they represent a significant conflict of
interest or reputational risk for the TNFD.
The resourcing target set for TNFD’s workplan (mid-2021 until mid-2023) is US$ 15 million.
To date, approximately 8% has been contracted, 78% is under proposal or discussion from a
wide variety of donors (governments, UN agencies, philanthropic organisations). The remain-
ing 14% will be sought largely through in-kind support from the private sector. This will be
for secondments or pro-bono internal or external research, testing and dissemination by
the finance sector and corporations. We expect that the level of in-kind support for TNFD
will exceed the 14% above, and this will enable the Taskforce to extend its reach worldwide,
beyond what is currently predicted in the workplan.
World Bank
GlaxoSmithKline, UK KPMG
Co-Leads:
Nicky Chambers, Global Canopy | Simon Zadek, Finance for Biodiversity
Note: The views expressed in the TNFD Nature in Scope paper indicative of the views of members
of the Informal Working Group for the Taskforce on Nature-related Financial Disclosures (IWG
TNFD), supported by the Partner Group. They are presented from the informal preparatory
process as recommendations to the incoming Taskforce and its co-Chairs. The use of logos and/
or the feedback provided by these organisations does not necessarily represent an endorsement
or investment recommendation and does not reflect any policies or positions of the organisations.
www.theGEF.org
i. There has been much discussion of how to incorporate an organisation’s impact on the environment in
debate around environmental risks and opportunities including financial institutions such as DWS; stan-
dard-setting bodies such as SASB; intergovernmental organisations such as the OECD and European
Commission; and central banks and financial supervisors including the Network for Greening the Financial
System (NGFS).
ii. CBD: BIODIVERSITY AND THE 2030 AGENDA FOR SUSTAINABLE DEVELOPMENT and 2050 Vision
iii. GRI: Global Reporting Initiative; SASB: Sustainability Accounting Standards Board; CDSB: Climate Disclosure
Standards Board; IFRS: International Financial Reporting Standards.
iv. Examples of data service providers include S&P Global and Bloomberg. Examples of public accounts include
publicly held company records, land registries and other datasets.
v. The term “ecosystem” refers to a dynamic complex of plant, animal and micro-organism communities and
their non-living environment interacting as a functional unit. CBD (2020): Use of Terms.
vi. SCIENCE-BASED TARGETS for NATURE (2020): Initial Guidance for Business
vii. IPBES defines “nature’s contribution to people” (NCP) as “all the contributions, both positive and negative,
of living nature (i.e. diversity of organisms, ecosystems, and their associated ecological and evolutionary
processes) to the quality of life for people. Beneficial contributions from nature include such things as food
provision, water purification, flood control, and artistic inspiration, whereas detrimental contributions include
disease transmission and predation that damages people or their assets. Many NCP may be perceived as
benefits or detriments depending on the cultural, temporal or spatial context.”
viii. SCIENCE-BASED TARGETS for NATURE (2020): Initial Guidance for Business
ix. TCFD (2017): Recommendations of the Task Force on Climate-related Financial Disclosures
x. The normative framing of the TNFD’s work, including but not limited to the definition of “nature-positive”, will
be informed by inter-governmental and international agreements.
xi. SCIENCE-BASED TARGETS for NATURE (2020): Initial Guidance for Business; IUCN (2021): Guidelines for
planning and monitoring corporate biodiversity performance
xii. The five IPBES pressures on nature loss are (i) land/sea/water use change; (ii) resource exploitation; (iii)
climate change; (iv) pollution; and (v) invasives and other.
xiii. Please see the discussion of systemic risk in Annex I for a description of how these risks can materialize.
xiv. https://encore.naturalcapital.finance/en; https://www.sasb.org/standards-overview/materiality-map/; WEF
(2020): Nature Risk Rising; DNB (2020): Indebted to nature, Exploring biodiversity risks for the Dutch financial
sector.