News | Oct 2022
Joanna Wolstenholme, Programme Officer in UNEP-WCMC’s Nature Economy team, discusses how important it will be for businesses to explore and realise their nature-related opportunities.
The Taskforce on Nature-related Financial Disclosures (TNFD) is developing a new disclosure framework for businesses and financial institutions to assess and disclose how they impact on, and are impacted by, nature.
The development of this framework follows the success of the precursor framework developed by the Taskforce on Climate-related Financial Disclosures (TCFD), which has changed the way financial institutions and business consider their impacts on and from climate change, making it an issue that is now discussed at board level in many organisations.
There are now TCFD-aligned official reporting requirements in eight jurisdictions, including the EU, which has radically changed the level of commitment to climate impacts from businesses and financial institutions in these jurisdictions and beyond. TCFD supporters span 89 countries and jurisdictions and nearly all sectors of the economy, with a combined market capitalization of over $25 trillion. We have high hopes that the TNFD will have a similar mainstreaming effect for nature.
Within the TNFD framework - currently being developed through a consultative process - businesses and financial institutions are guided through the process of measuring and mitigating the risks arising from their organisation’s interactions with nature (by their own actions or in their supply chain). They will also be helped to consider their current and potential positive impacts, through the concept of ”nature-related opportunities”. We are encouraged to see this positive framing included, in addition to the consideration of risks, and have recently been considering how this could drive the development and widespread adoption of nature positive business models, particularly in the agricultural sector.
The TNFD defines nature-related opportunities as ”Activities that create positive outcomes for organisations and nature by avoiding or reducing impact on nature or contributing to its restoration”. This definition provides a useful start for organisations to consider how they can transition their business models to become win-wins for both the business and for nature.
As a TNFD Knowledge Partner, UNEP-WCMC has taken the concept of nature-related opportunities and is exploring its application in the context of the agricultural sector in order to support the development of further guidance. The agriculture sector, with its direct links and dependencies on nature, has clear potential nature-related opportunities, with some already being taken up by some companies and financial institutions. Such opportunities include the transition to sustainable, regenerative forms of agriculture that combine good yields for human consumption with the regeneration and restoration of ecosystems that have been previously damaged – thereby reducing biophysical risks. Such win-win cases, where environmental benefits are coupled with economic benefits, are in the essence of TNFD’s definition of nature-related opportunities and a prerequisite for promoting the transition towards sustainable food systems and land use.
Nature-related opportunities can both reduce nature-related risks, but also generate novel profit streams for businesses. For example, whilst sustainable actions on farm, such as reducing chemical usage and moving to more regenerative styles of agriculture, can reduce the nature-related risks arising from degraded ecosystems (such as the loss of pollinators and natural predators), they can also generate direct financial savings though reduced costs of inputs. Additionally, products are increasingly able to command a premium price if they are sustainably produced (a clear business benefit), and there is the potential for the development of more complex ”nature markets” where carefully constructed and assured credits for carbon, biodiversity and other ecosystem services could be traded to generate additional revenues. For example, farms and agricultural projects could set aside a portion of agriculturally unproductive land for nature, and make an income on that land through certified biodiversity and carbon credits.
Aspirations to shift businesses onto a more sustainable, but still profitable, footing are not new, and this is not the first time that there has been a call for a transition to a more nature positive economy. Yet if TNFD can reach the same level of acceptance as TCFD, it will put nature ”on the map” with company boards and add nuance to a sustainability conversation which is too often reduced to just carbon emissions.
We know that TCFD has radically changed the conversation on climate change – putting disclosures on carbon on par with audited financial disclosures in company reports. By raising climate disclosures to the board level, it has pushed companies to take more meaningful action, with greater oversight, and we hope that TNFD could do the same.
For many businesses and financial institutions to get to a point where they can properly understand, assess and disclose their nature-related opportunities and risks, they will need to invest in staff capacity – both for general nature literacy, and for the technical data skills required to manipulate and interrogate data on nature.
We have already seen the staffing and capacity issues generated by TCFD – Environmental Social and Governance (ESG) departments are too often understaffed and lacking in capacity to gather appropriate and meaningful data required across the supply chain. TNFD requirements will add to the challenge, particularly as nature-related data is more complex than for carbon, with many more variables and more geographic specificity.
To be able to gain the early adopter advantages of capitalising on nature-related opportunities, companies should start looking at nature and climate as a combined issue, bearing in mind the risks and dependencies between these two global challenges, which are too often dealt with in isolation.
Companies should invest now in upskilling staff, including senior management and board, in nature risks and opportunities, and build in the Geographic Information System data management skills and computing power required to manage their data on nature. Governments and other actors should look to make more datasets publicly available.
For those companies who are investing now in nature and climate literacy and capacity, the upside is huge. Not only can they take steps to future-proof their supply chains from increasing nature-related risks - with potential issues ranging from unpredictable water supplies to the loss of pollinators and natural predators - but also gain access to new markets, be they for sustainably produced products, or tradable credits arising from the protection of nature in their supply chains.
With an increasingly sustainability-conscious consumer, who is wising up to greenwashing, there are also obvious reputational benefits from investing in developing nature-related opportunities.
We would encourage any business or financial institution who is starting to work through the TNFD framework to start by assessing and mitigating their nature-related risks, but also to not forget about the opportunities. There are great business opportunities arising from leaning into nature-related opportunities, with win-wins for both profits and nature.
If you are interested in further exploring nature-related opportunities with UNEP-WCMC please do get in touch and email email@example.com
Version 0.2 of the TNFD Beta Framework can be accessed here, and v0.3 will be released in November 2022.