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Nature-related financial disclosures that organisations should report
Organisations require responsible leadership today, one that draws connections and embraces sustainability the right way to create long-term financial success for organisations.
The Task Force on Nature-related Financial Disclosures (TNFD) recommends a list of disclosure requirements for organisations when reporting on their management of nature-related risks and opportunities.
The recommendations have been developed to align with the International Sustainability Standards Board (ISSB). For example, the TNFD disclosure pillars (governance, strategy, risk management, metrics and targets) align with the four content pillars of the ISSB standards IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures).
Therefore, organisations preparing for the mandatory application of IFRS S1 and IFRS S2 can leverage knowledge gained from this process to better understand the TNFD disclosure requirements.
The TNFD can be applied by a wide range of organisations, of different sizes and across various sectors of the economy. Organisations that use the TNFD will more easily assess financial exposures from natural capital losses and plan more effectively to mitigate their adverse effects.
Under the governance pillar, organisations are expected to disclose the governance of nature-related dependencies, impacts, risks and opportunities.
Organisations should describe the roles of the board and management, including their human rights policies and engagements with indigenous peoples, local communities, and other affected stakeholders.
The strategy pillar aims to help organisations disclose the effects of material nature-related dependencies, impacts, risks, and opportunities on their business model, strategy, and financial planning. It includes the time horizon and analysis of these dependencies, impacts, risks, and opportunities, and their effects on transition plans.
Organisations are expected to include disclosures on scenario analysis and disclose the priority locations of assets and activities. The risk management pillar aims to enable an organisation to disclose how it identifies, assesses, and manages nature-related dependencies and impacts, risks, and opportunities within its direct operations and across its value chain.
Also, organisations are expected to disclose how nature-related risks have been integrated into and inform their organisation’s overall risk management process. Lastly, the metrics and targets pillar requires organisations to disclose the metrics, targets and goals used to assess and manage nature-related dependencies, impacts, risks and opportunities.
Adopting the TNFD disclosure will provide investors with decision-useful information.
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