Towards integrated climate-nature risk disclosures

In December, representatives from many governments around the world gathered in Montreal to agree a new Global Biodiversity Framework. This landmark agreement sets out the actions that all countries now need to take to reverse the loss of biodiversity, and was remarkable not only for its ambition, but also for the level of engagement from businesses—the largest in the Convention’s history.

One of the key drivers for this interest was ‘Target 15’ of the Global Biodiversity Framework, which specifically calls on governments to ensure that “transnational companies and financial institutions monitor, assess, and transparently disclose risks and impacts on biodiversity through their operations, portfolios, supply and value chains.” Individual government’s will now take the Global Biodiversity Framework and translate it into new national-level action plans. This may include the development of, for example, new legislation and policies for businesses to ensure the effective implementation of Target 15.

Nature is now in the business spotlight. For the last four years, biodiversity loss has featured as one of the top five economic risks in the World Economic Forum’s Annual Global Risk Reports. This recognizes the role nature plays in underpinning the world’s economy, as well as its critical role in supporting other key economic risks, such as climate change mitigation and adaptation.

Businesses are now aiming to understand their ‘touchpoints’ with nature, and how this translates to material risks and opportunities. The Taskforce on Nature-related Financial Disclosures (TNFD) is helping to lead the way by developing a global, market-led risk management and disclosures framework, which will help organizations to report and act on evolving nature-related impacts, dependencies, risks and opportunities. This framework can provide a blueprint for guiding businesses with contributing to the implementation of the Global Biodiversity Framework. To date, the TNFD has released three iterative beta versions of its framework; you can find more information and insights about previous versions here and here and here.  

The much-awaited beta version 0.4, launched on the 28 March, has some notable updates that provide requested guidance for businesses: 

• The first full version of the framework, including additional guidance for some sectors and biomes and guidance on target setting; 
•  A complete set of 14 draft recommended disclosures with implementation guidance for 'All Sectors';
• Six 'General Requirements' for TNFD disclosures that cut across the four pillars of recommendations, including guidance on approaches to materiality, alignment of TNFD with other sustainability-related disclosures, and on incorporating stakeholder engagement; 
• Additions to the LEAP approach, including more detailed guidance on business footprints, interfacing with nature and identifying priority locations and sectors;
• New practical guidance on stakeholder engagement and scenarios; and
• Addition of three risk assessment methods and guidance for conducting: heatmapping, asset tagging and scenario-based risk methods.

The TNFD Secretariat are now calling for further inputs and feedback from the market by 1 June 2023. With the aim of launching the final version in September 2023. We can expect the following elements in the months to come:

• Additional sector and biome guidance, to be released on a rolling basis, including identification of core sector disclosure indicators and metrics; 
• Case studies and use cases, including illustrative TNFD disclosure statements; 
• Lessons learned and practical insights from pilot testing; 
•  Further development of the scenarios guidance and toolkit, including for financial institutions, based on insights from further pilot testing; 
• Consideration of the need for TNFD guidance on transition plans;
• Development of guidance on linkages between climate and nature. 

The TNFD framework contributes an important piece to the broader ESG reporting puzzle, complementing existing corporate reporting standards such as the Global Reporting Initiative (GRI) and the European Sustainability Reporting Standards (ESRS) and building on the same pillars of the Taskforce on Climate-related Financial Disclosures (TCFD). The TNFD also supports Target 15 of the Kunming-Montreal Global Biodiversity Framework, which encourages measures that enable businesses to regularly monitor, assess, and transparently disclose their risks, dependencies and impacts on biodiversity throughout their value chains and portfolios. This highlights the importance of considering material issues such as climate- and nature-related risk holistically, across the business. 

The final draft draws from, and is designed to inform, relevant standards including those from the International Sustainability Standards Board (ISSB) and GRI, both knowledge partners to the TNFD.  

KPMG have a large and active community of expert nature and biodiversity practitioners (covering over 200 practitioners in over 30 countries) and are supporting their firms’ clients with the TNFD framework.  

KPMG firms have deep sustainability reporting and risk management expertise and are working with a wide range of leading companies and financial institutions to help identify nature-related impact, dependencies, risks and opportunities. We can help you to test the framework in the context of your own organization and sector, and to help you prepare the foundations for implementing the TNFD framework. We can also support you in developing science-based targets for nature, nature positive transition strategies, and scenario analysis and with creating the internal business case for nature to mitigate risks, unlock opportunities, build greater resilience and create long-term value. We can also help you navigate the underlying data, analytical and technologies that will make nature risk analysis easier.    

Please get in touch with one of the contacts below to discuss how we can help.