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The Taskforce on Nature-related Financial Disclosures (TNFD) released its final recommendations today. This is a historic moment to encourage and support action on nature. The groundbreaking framework enables companies to assess, disclose and manage nature-related risks and impacts which will lead to consistent and comparable reporting on nature-related risks and impacts by businesses and financial institutions worldwide. In this article, we explain the role of UNEP FI and our members in developing this innovative tool and outline how financial institutions can get involved.
Our economy, financial stability and the broader resilience of society depend on nature. Yet the biological diversity of our planet is being lost at an unprecedented rate, exposing businesses to increasing, explicit and material risks. According to UNEP’s State of Finance for Nature report, the USD 4.1 trillion financing gap in nature must be closed by 2050 for the world to meet its climate change, biodiversity and land degradation targets. Currently, most of the financing aimed at nature-positive outcomes come from the public sector. To close the funding gap, the private sector must step up and increase their financing of nature.
The framework and guidance for the management and disclosure of nature-related risks and impacts released by the TNFD are a game-changer for corporates and financial institutions. Developed in consultation with a broad range of stakeholders, including leading businesses, policymakers, civil society organisations, knowledge partners and standard settings, TNFD’s pragmatic and science-based framework is the result of the deployment of an open innovation approach, which encourages co-creation by market participants, iterations of market consultation and global pilot testing. It provides an integrated risk and opportunity assessment method – the LEAP approach for businesses and financial institutions to assess, monitor, disclose and report on nature-related risks, dependencies, impacts and opportunities, and is a great enabler for business, financial institutions and other investors to integrate nature into their financial and business decisions.
The final recommendations released today help businesses and financial institutions anticipate upcoming regulatory shifts as a result of the adoption of the Kunming-Montreal Global Biodiversity Framework (GBF). The disclosure recommendations, which are designed to allow for comparable reporting worldwide, are expected to improve transparency and accountability, therefore encouraging nature-positive actions. Moreover, as final recommendations from the TNFD are designed to mirror and complement the Task Force on Climate-related Financial Disclosures (TCFD), financial institutions that are already acting on climate risks can now use TNFD’s integrated approach to address nature-related financial risks at the same time.
Financial institutions interested in learning more about TNFD’s disclosure recommendations, sector metrics and current examples of disclosures specific to the sector should consult the Sector Guidance for Financial Institutions. Institutions interested in learning how to take their first steps, should consult the Getting Started Guidance co-authored by UNEP FI. A new guidance on the LEAP approach is also available now.