More than half of the world’s GDP is dependent on nature. According to World Bank, we could see a $2.7 trillion decline in global GDP annually by 2030, caused by the potential collapse of vital ecosystems such as pollination.
Not surprisingly, regulators and investors are urgently calling for more transparency around exposure to these nature-related financial risks. The Taskforce on Nature-Related Financial Disclosures (TNFD) is a is market-led, science-based and government-endorsed initiative, consisting of a number of institutions that seek to integrate nature into financial and business decision-making and shift global financial flows toward nature-positive outcomes.
The TNFD has released a framework for managing and disclosing nature-related risk, offering practical “how to” guidance for the analysis of nature-related risk. The framework encourages companies and organisations to begin by taking a location-first approach. Dependencies and impacts on nature are inherently local, and conservation ultimately relies on local delivery — including through operations, value chains and portfolios.
Location Is a Critical Factor
Once location is established, the TNFD suggests organizations look carefully into which “biomes” their operations are situated before assessing how they affect environmental assets and ecosystems, such as water supply and flood mitigation, will ensure risks and opportunities are properly identified and quantified.
The clear and concise framework of the TNFD will make it easier for businesses and investors considering carrying out climate risk disclosure to embrace the new approach. If governments choose to make this form of reporting mandatory, integration of this approach will only accelerate.
Measure What Matters
In addition, where data is available, there is often a lack of understanding about how to interpret and use it. And adding to this problem, no globally agreed targets and metrics for nature protection and restoration exist. Organizations taking climate action can align with the Paris Agreement 1.5 degree Celsius threshold for global heating, but there is no similar target for nature.
Disclosure Reporting Could Be Elusive
Meanwhile, other related initiatives, such as the Science-Based Targets Network (SBTN) and tools like the WWF Water Risk Filter, offer detailed guidance on assessing risk and are developing approaches for businesses to set targets. But without clarity of purpose, consistent disclosure reporting will prove complicated.
Irrespective of what comes out of COP15, the challenge now is securing decision-useful data at the necessary granularity and identifying a coherent and comprehensive set of metrics and indicators that allow its framework to be put to the test and strengthened.
Over time, data gaps will be filled — but organizations should already start using and improving what is available today. And with data on the location of an organization’s assets and operations arguably the most critical in applying the TNFD framework effectively, the onus is on organizations to create and improve their own data sets.
Start Investing in Nature-Based Solutions Now
What is certain is that companies and financial institutions shouldn’t wait — for better definitions, more data, comprehensive metrics, or agreement on a global goal for nature — before investing in vital nature-based solutions that contribute to climate resilience and adaptation and in business models, products, services, and investments that help restore nature.