Task force issues disclosure recommendations for nature, biodiversity risk

As global regulators finalize reporting standards for climate-related risk, potential standards for nature and biodiversity risk took a major step with the G20-backed Taskforce on Nature-related Financial Disclosures (TNFD) issuing its final recommendations.

The task force’s recommendations aim to enable companies and investors to factor nature-based risks into capital allocation decisions alongside financial, operational and climate risks — and to shift capital flows toward efforts that protect forms of natural capital, such as biodiversity.

“The recommendations aim to inform better decision-making by companies and capital providers, and ultimately contribute to a shift in global financial flows toward nature-positive outcomes,” the TNFD, whose members represent over US$20 trillion in assets under management, said in a release.

The final recommendations, which follow two years of design and development and are accompanied by guidance designed to facilitate the implementation of the proposed standards, build on the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) and are consistent with the global climate standards recently proposed by the International Sustainability Standards Board.

“Nature loss is accelerating, and businesses today are inadequately accounting for nature-related dependencies, impacts, risks and opportunities,” said David Craig, co-chair of the TNFD and founder and former CEO of Refinitiv. “Nature risk is sitting in company cash flows and capital portfolios today. The costs of inaction are mounting quickly.”

“Businesses and financial institutions now have the tools they need to take action,” he said. “Building on the language, structure and approach of the TCFD and consistent with the ISSB’s sustainability reporting baseline, the adoption of the TNFD recommendations represent a step-change in the momentum and capacity for business and finance to identify, assess and disclose their exposure to nature-related issues in a manner consistent with climate-related-reporting.”

“We are pleased to note the high-level of consistency within the finalized TNFD recommendations and the ISSB standards, which both incorporate the architecture of the TCFD recommendations,” said ISSB vice-chair, Sue Lloyd, in a release.

“We will consider the TNFD’s work — subject to the outcome of our recent consultation on future priorities — as we strive to simplify the disclosure landscape to deliver consistent, comprehensive sustainability-related disclosure for investors,” she said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.