Taskforce's Suggestions for Financial Reporting Concerning Nature Revealed
In a significant stride towards environmental protection, the Taskforce on Nature-related Financial Disclosures (TNFD) has released a set of recommendations aimed at helping financial institutions and businesses assess and disclose their impacts on nature. Launched in 2021, the global initiative consists of 40 business and finance leaders worldwide.
The TNFD's guidance on engagement also provides a set of questions which could be used throughout the LEAP approach when engaging with Indigenous Peoples, local communities, and affected stakeholders. This guidance builds on existing international law and best practice international standards, ensuring a responsible and inclusive approach.
The need for informed, professional, commercial, and nature-attuned legal guidance has never been more critical, as regulatory frameworks shift in favour of reporting on environmental protection. In June 2023, ASIC chair, Joe Longo, warned professional services about the seismic expectation for organizations to collect and analyze data for ESG, climate change, and nature.
The TNFD has also released additional sector guidance for financial institutions, developed following the Sustainability Accounting Standards Board's standards and the EU's Sustainable Finance Disclosure Regulation (SFDR). This guidance includes a range of proposed TNFD disclosure metrics that present SFDR principal adverse impact equivalents for each driver of nature change.
The TNFD framework has been piloted in various regions, including Canada, where 27 organisations from mining companies to commercial banks have undertaken a TNFD assessment. While it is unlikely that TNFD will be put into wide use quickly in Canada, piloting the TNFD Recommendations has allowed Canadian organisations to build knowledge and capability in identifying and assessing their impacts to natural assets.
Australian regulators have been welcoming of the TNFD Recommendations, with ASIC and the Department of Climate Change, Energy, the Environment and Water (DCCEEW) supporting the release. In fact, DCCEEW supported the release of the TNFD Recommendations as a strategic funding partner and hosted a series of workshops with industry bodies to pilot the application of the draft TNFD framework in Australia.
The TNFD has also released additional biome guidance, which maps organisational activities that rely on ecosystem services and how such organisational activities would be impacted if the ecosystem services are disrupted or changed in the future. This guidance aims to provide a comprehensive understanding of an organisation's reliance on nature and the potential risks associated with changes to ecosystem services.
The final version of the additional sector guidance for financial institutions is expected to be published in 2024. As the TNFD Recommendations gain traction, it is clear that the financial sector is increasingly recognising the importance of nature conservation and the role it plays in long-term financial stability.
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