Just as global investors prepare to onboard new climate disclosure standards another, broader, set of non-monetary reporting measures is in the offing.
Hot on the heels of the Taskforce for Climate-related Financial Disclosures (TCFD) moves are afoot to take the process a step further into the natural world.
While still in embryonic phase, the Taskforce for Nature-related Financial Disclosures (TNFD) will ultimately supply investors with a template for understanding portfolio risks linked to factors such as biodiversity loss.
And according to Nicky Chambers, co-chair of the technical expert group helping to develop the TNFD, nature could be a bigger risk than climate.
“We can’t solve climate change without addressing deforestation,” Chambers said.
Of course, climate and nature are complementary forces rather than competitors but she said investors would benefit from the proposed dual risk-reporting regime.
The TCFD is rapidly gaining acceptance as the global best-practice benchmark for climate risk disclosure among investors, corporates and governments. For instance, the NZ government based its recently introduced climate-reporting regime on the TCFD.
Chambers said the proposed new financial risk framework could likewise be the “fulcrum for change”, providing a clear pathway for industries to move to nature-friendly practices.
But knocking the TFND into fit-for-purpose shape could be a tougher job than even the climate-related original.
Unlike the TFCD, which centres on carbon emission metrics, the nature-based reporting framework must include a range of measures including “geo-specific risks” that are not yet readily available in “decision-grade data” formats.
“It’s much more complex than carbon reporting,” she said.
A (virtual) keynote speaker at the Responsible Investment Association Australasia (RIAA) NZ conference slated for Auckland this week, the UK-based Chambers is also programme and impact director for environmental research and consultancy firm, Global Canopy. (The RIAA conference has been postponed due to the latest COVID lockdown in Auckland. However, Chambers will still make her online presentation as scheduled at 10:20am on Wednesday March 3 for registered conference delegates. Further information on the RIAA conference changes is available here.)
Global Canopy aims to fill in the natural world data blanks “enabling companies, financial institutions and governments to tackle their hidden sustainability risks – while at the same time enabling campaigners and the media to hold to account those that are failing to act”, the firm says.
The TNFD remains a work-in-progress with a projected two-year timeframe to produce a first draft – even that could be an optimistic deadline, Chambers said.
Officially set in motion last July, the TNFD project “will provide a framework for corporates and financial institutions to assess, manage and report on their dependencies and impacts on nature, aiding in the appraisal of nature-related risk and the redirection of global financial flows away from nature-negative outcomes and towards nature-positive outcomes”, according to the group’s website.
The plan to load the weight of the natural world onto the shoulders of finance might seem a little ambitious, especially given the industry has yet to come to terms with new climate responsibilities, however, Chambers said the urgency for action is only increasing.
But in a 30-year career in the environmental sector, she said the level of interest in efforts to preserve the natural world, partially spurred by the TFND, has never been higher.
“I’ve been amazed at the response we’ve seen over the last year,” Chambers said.
The one-day RIAA NZ conference was set down for March 3 at the Hilton Auckland but has been postponed following the return to Level 3 COVID conditions in the region on Sunday morning for a seven-day period.
“We are currently in discussions with the venue and will advise on the alternative date as soon as it is confirmed,” RIAA says in a conference update.