Overview
Introduced: 2021
Effective from: September 2023
Last modified: N/A
Region(s): Global
About
The Taskforce on Nature-related Financial Disclosures (TNFD) provides companies and financial institutions with a risk management and disclosure framework to identify, assess, respond to, and disclose their nature-related dependencies, impacts, risks, and opportunities. The TNFD framework is designed to align with the Kunming-Montreal Global Biodiversity Framework and global sustainability standards such as the ISSB’s IFRS Standards.
The goal is to help organizations integrate nature-related financial risks and opportunities into their corporate reporting, strategy, and risk management processes, fostering a nature-positive approach.
Criteria for compliance
Entities covered
The TNFD framework is applicable to all organizations across jurisdictions, sectors, and industries. It is particularly aimed at companies and financial institutions that wish to improve their transparency and reporting on nature-related risks and impacts.
Reporting structure
The TNFD framework consists of four key pillars:
- Governance: Organizations must disclose their governance approach to nature-related dependencies, risks, and opportunities.
- Strategy: Disclose the impact of nature-related factors on the organization’s business model, strategy, and financial planning.
- Risk and impact management: Organizations should explain how they manage, assess, and prioritize nature-related risks and impacts in their operations and value chains.
- Metrics and targets: Disclose the metrics and targets used to monitor and manage nature-related risks and opportunities.
Compliance timelines
- September 2023: The final TNFD recommendations were issued.
- Companies are encouraged to start integrating TNFD recommendations as soon as possible, with reporting timelines determined based on each organization’s internal processes and external regulatory requirements.
Disclosure requirements
Governance
Companies must disclose the board’s and management’s oversight of nature-related dependencies, impacts, and risks. This includes how they engage with Indigenous Peoples, local communities, and stakeholders affected by these risks.
Strategy
Organizations must describe how nature-related risks and opportunities have affected their business strategy and financial planning in the short, medium, and long term. They should also assess the resilience of their strategy in response to various nature-related scenarios.
Risk and impact management
Disclose how the organization identifies, assesses, prioritizes, and manages nature-related risks and impacts across its direct operations and value chains.
Metrics and targets
Companies must disclose the metrics and goals they use to manage nature-related risks, including dependencies and impacts on ecosystems. Performance against these targets should also be tracked and reported.
Third-party auditing
While TNFD does not mandate third-party auditing, it is encouraged to enhance the credibility of disclosures. Companies are advised to align their reporting with recognized standards, and third-party assurance may be sought for higher transparency.
Penalties for non-compliance
TNFD operates on a voluntary basis, so there are no formal penalties for noncompliance. However, failure to comply with or integrate TNFD recommendations could lead to reputational risks, reduced stakeholder confidence, and missed opportunities in nature-related financial markets.
