The preservation of nature has never been so important for the Asia Pacific region. The finance sector has a critical role to ensure investment, lending, underwriting and business within the region support nature positive outcomes and not further degradation of nature.
In September 2020, an international market-led Informal Working Group (IWG) was established to plan and support the establishment of a Taskforce on Nature-related Financial Disclosures (TNFD). The taskforce is a critical step towards achieving this outcome.
The IWG comprised of representatives from 74 financial institutions, corporates, governments, regulators, supervisory bodies, think tanks and consortia. It was brought together to define a recommendation for the technical scope and operating model of the TNFD.
The TNFD is catalysed by founding partners United Nations Development Program (UNDP), United Nations Environmental Program Finance Initiative (UNEP FI), Global Canopy and World Wide Fund for Nature (WWF). The TNFD officially launched on 4 June 2021 and has already received broad endorsement by the global finance community, governments and the G7 Finance Ministers, the G20 Environment Ministers.
Proposed goal of the TNFD
The goal of the TNFD is to develop and deliver a transparent and practical framework for organisations (financial institutions and corporates) to report and act on evolving nature-related risks, with the objective to ultimately support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.
It aims to enable organisations to better understand their risks, impacts and dependencies on nature and build momentum for market adoption. The framework will be supported by guidance on how organisations can align their business practices and financing, underwriting and lending approaches.
Importantly, the TNFD does not intend to create a new standard but will align with and draw from existing initiatives, standards and metrics relevant to nature-related risks and opportunities, such as those published by the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), Climate Disclosure Standards Board (CDSB), and the forthcoming International Financial Reporting Standards (IFRS) Sustainability Board.
The TNFD will broadly seek to align with the two global targets in the UN Convention on Biological Diversity's (CBD) zero-draft Global Biodiversity Framework of “no net loss by 2030 and net gain by 2050”.
How will the TNFD work?
Over the next 2 years, the TNFD will develop and test the framework and consult with a broad range of stakeholders globally. Meanwhile the TNFD will continue to build capacity and awareness to mitigate the negative impacts of the financial sector on nature and biodiversity.
The TNFD is also expected to produce more detailed technical guidance for reporting entities on how to fulfil the requirements and provide broader guidance on how to identify, assess and manage nature-related risks and opportunities and more to help the market action the framework.
What to expect
In time, we can expect nature and biodiversity-related financial disclosures to be required in the same way as climate-change disclosures (TCFD) is are now expected by capital markets and increasingly required by regulators.
To be ready to adapt to the new TNFD standards of disclosure, financial institutions, asset managers and corporates should proactively start identifying their short, medium and long-term exposure to nature-related risks in their current value chains and portfolios.
Then, they should begin to consider appropriate metrics, targets and internal reporting mechanisms, and be particularly wary of assets that are at risk of becoming ‘stranded’ during the transition towards nature-positive economies.
KPMG is committed to helping accelerate the transformation of capital markets to a sustainable future and has been on the journey of the TNFD from the very beginning. Over the 12 months KPMG co-chaired the TNFD resourcing workstream and actively collaborated with banks, corporates, governments, NGOs, regulators and consortiums to provide critical recommendations for the objectives and roadmap of the TNFD. The TNFD is a market-leading transformative effort and we look forward to continuing our support for the journey to ahead.
Download the report
Our report, Taskforce on Nature-Related Financial Disclosures (TNFD) – Putting nature at the heart of finance and business, covers:
- the Nature Challenge and it’s relevance to the ASPAC region
- the anticipated TNFD Framework
- how the TNFD Framework will enhance nature-relates disclosure
- what to expect.
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