A new report from UNEP FI and Global Canopy identifies key challenges that corporates and financial institutions face in assessing, managing and reporting on their nature-related risks. The report’s recommendations are intended to inform the forthcoming global framework for nature-related risk management and disclosures currently being developed by the Taskforce on Nature-related Financial Disclosures (TNFD).
Global Canopy and the United Nations Environment Programme Finance Initiative (UNEP FI) undertook an initial pilot study to support the development of the first beta version of the TNFD’s global framework for nature-related risk management and disclosures, which will be released in March 2022. The project aimed to identify what a framework for nature-related risks, specifically the TNFD framework, would need to consider to be practically implementable by corporates and financial institutions.
To do this, UNEP FI and Global Canopy developed a high-level exploratory framework which presented concepts laid out in the TNFD’s Proposed Technical Scope. Alongside examples, data and metrics, the high-level framework was tested with a small group of organisations who operate within, or provide finance to, soy supply chains. These included Rabobank, Santander, Tesco, Vitasoy, Danone and McDonald’s. WWF also provided additional technical input.
“The soy pilot has deepened our insights in the impacts and dependencies from the soy value chain on nature that TNFD aims to address. It has proven useful in identifying available data and where further improvements can be made in the framework to enhance its practical use. We fully support the TNFD framework development and are therefore actively involved as a Taskforce member.”
– Bas Rüter, Global Head Food System Transition Rabobank & Chair of TNFD Working Group 5 on Pilot Testing
The project looked at soy supply chains specifically because this sub-sector is associated with nature-related financial risks and has relatively good availability of relevant data. Future pilot tests of the beta versions of the TNFD framework itself will look at other sectors and sub-sectors. Global Canopy is already preparing to pilot test the first beta version of the framework in the palm oil sub-sector as soon as the framework is released next month.
Four key takeaways for the TNFD framework
The initial pilot testing with organisations in soy supply chains identified four key takeaways that should inform the next phases of developing a global framework for nature-related risk management and disclosures. While the learnings came from organisations involved in soy supply chains specifically, the considerations are expected to be relevant for a wide range of sectors:
- Need for practical guidance. A global framework for nature-related risks should include detailed case-studies, tools, data, metrics and approaches to enable organisations to interpret and practically apply guidance. Since one of the aims of a framework for nature-related risk management and disclosures is comparable disclosures across organisations, detailed guidance will be critical. A high-level framework alone is likely to be interpreted very differently by different organisations, resulting in inconsistent disclosures.
- The importance of a staged approach. As highlighted in the TNFD’s Proposed Technical Scope, a framework for nature-related risks should allow organisations to gradually align with the ambitions set out in the framework. More work is required to better clarify how this staging will work, and the expectations of reporting entities at each stage.
- Action needs to be integrated. A framework for nature-related risks should consider incorporating action to mitigate nature-related risks and implement nature-related opportunities throughout its framework and recommended disclosures. Due to the severity of the current climate- and nature crises, organisations cannot wait until they have detailed, comprehensive and robust disclosures before they start acting by avoiding and reducing their impacts and transitioning investment to more nature-positive sectors, industries and projects.
- Significant knowledge gaps remain. There are significant gaps in data, guidance and understanding linked to the assessment, measurement and disclosure of nature-related risks. Research areas for future work include developing a better understanding of linked social concerns, and how nature-related risks translate into financial risks.
Looking ahead: testing the first beta version of the TNFD framework
When the first beta version of the TNFD framework is released in March 2022, TNFD has announced they want organisations across different sectors and geographies to test the initial draft of the framework and provide feedback to the Taskforce. Alongside individual corporates and financial institutions testing and piloting the framework, broader sector-wide pilot projects – similar to this soy supply chains pilot and Global Canopy’s forthcoming palm oil pilot – will be run. Additional beta versions are expected to be released later this year and early next year, before a final version of the TNFD framework will be published in 2023.
Learn more about the TNFD: tnfd.global