Nature-related disclosure in 2023

In December, representatives from 188 nations gathered for the fifteenth meeting of the Conference of the Parties (COP15) in Montreal and agreed to a landmark resolution on biodiversity. We expect this global commitment will expedite the number of businesses assessing corporate biodiversity footprints and disclosure standards in the year ahead.

This blog post will provide an overview of disclosure initiatives, such as the Taskforce on Nature-related Financial Disclosures (TNFD), that are emerging in response to evolving nature-related risks.

The nature-positive transition

Built on the same architecture as the TCFD framework, the TNFD is a global initiative developed to improve corporate sustainability reporting through nature-related financial disclosures. Disclosure is organised around four key pillars: governance, strategy, risk management, and metrics and targets. The TNFD issued its beta framework in spring 2022 and has since made several amendments to it ahead of its official launch later this year.

The latest beta proposes new disclosure recommendations related to supply chain traceability, based on the quality of stakeholder engagement and data. It also attempts to better align organisations climate and nature targets. Owing to the complexities caused by a lack of simple metrics, and the localised nature of factors involved, the TNFD’s approach will focus on moving from nature-negative activities to ‘nature-positive’ activities.

The importance of these disclosures cannot be overstated; according to some estimates, sustainable investments could reach $50 trillion by 2025 — making them an increasingly important part of asset managers’ portfolios. As such, understanding the risks and opportunities associated with natural capital is becoming increasingly important for asset managers who wish to capitalise on this growth potential.

Integrated frameworks set course for regulation

The TNFD also provides reference points for other organisations looking to introduce similar frameworks for voluntary disclosure initiatives. For example, the Carbon Disclosure Project (CDP), launched its own Global Climate Change Reporting Framework designed to support companies’ efforts towards greater climate transparency. This framework provides guidance on how companies should disclose their climate-related data and aligns with the principles set out by the TNFD’s framework.

More disclosure in this area comes from the Science Based Targets initiative (SBTi). Supported by the WWF, SBTi have launched the world’s first Standard for companies in land-intensive sectors such as food, agriculture and forestry, to set science-based targets that include land-based emissions reductions and removals – the Forest, Land and Agriculture (FLAG) Science Based Target Setting Guidance.

These integrated initiatives all signify a broad movement towards the inclusion of nature into emerging disclosure standards, likely to become regulations. The development of climate disclosures has pathed the way so that nature-related standards could become regulations faster.

A more transparent future

Climate change is one of the greatest challenges facing our society and planet today, and resilient natural ecosystems are needed to withstand its impacts. Biodiversity disclosure plays an integral role in helping us better understand how we can mitigate its effects. Disclosure initiatives like those outlined above help ensure that investors have access to reliable nature-related data so they can make informed decisions when it comes to supporting sustainable development projects around the world. They help hold companies to account, and reflect growing stakeholder demand for more sustainable financial practice.

As we move into 2023 and beyond, these initiatives will become even more important as corporations strive towards greater transparency regarding their environmental impact. And as investment is increasingly observed through a nature positive lens, preparation through detailed disclosures is a must.

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