TNFD & Nature-Related Risks

Overview

The Taskforce on Nature-related Financial Disclosures (TNFD) represents a paradigm shift in how organizations assess, manage, and disclose nature-related dependencies, impacts, risks, and opportunities. Launched in 2021 and releasing its final recommendations in September 2023, TNFD provides a framework for organizations to report and act on evolving nature-related issues, complementing the climate-focused TCFD framework.

Nature-related risks have emerged as a critical concern for businesses, investors, and regulators. The World Economic Forum's 2024 Global Risks Report identified biodiversity loss and ecosystem collapse as among the top 10 risks facing the global economy. With over half of global GDP ($44 trillion) moderately or highly dependent on nature, understanding and managing nature-related risks is no longer optional for forward-thinking organizations.

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The TNFD Framework

Core Structure

TNFD follows a similar structure to TCFD, organized around four pillars:

1. Governance

• Board oversight of nature-related dependencies, impacts, risks, and opportunities
• Management's role in assessing and managing nature-related issues
• Integration into overall corporate governance and risk management

2. Strategy

• Nature-related dependencies, impacts, risks, and opportunities identified over short, medium, and long term
• Impact of nature-related issues on business, strategy, and financial planning
• Resilience of strategy under different scenarios

3. Risk & Impact Management

• Processes for identifying and assessing nature-related dependencies, impacts, risks, and opportunities
• Processes for managing nature-related risks
• Integration into overall risk management

4. Metrics & Targets

• Metrics used to assess and manage nature-related issues
• Targets used to manage nature-related issues and performance against targets
• Disclosure of Scope 1, 2, and 3 impacts on nature

The LEAP Approach

TNFD introduces the LEAP approach for nature-related risk assessment:

Locate - Identify interface with nature across direct operations, upstream, and downstream Evaluate - Assess dependencies and impacts on nature Assess - Determine material risks and opportunities Prepare - Develop strategy, set targets, and disclose

This systematic approach helps organizations move from awareness to action on nature-related issues.

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Nature-Related Risks

Categories of Nature-Related Risks

1. Physical Risks

• Acute: Extreme weather events, floods, droughts, wildfires affecting operations or supply chains
• Chronic: Long-term shifts in ecosystem functioning, species loss, soil degradation

2. Transition Risks

• Policy & Legal: New regulations on biodiversity, land use, water extraction, protected areas
• Technology: Shifts to nature-positive technologies, sustainable materials, circular economy
• Market: Changing consumer preferences, investor pressure, access to capital
• Reputation: Stakeholder concerns about nature impacts, NGO campaigns, social license to operate

3. Systemic Risks

• Ecosystem collapse affecting multiple sectors simultaneously
• Cascading failures across interconnected natural systems
• Tipping points in critical ecosystems (coral reefs, rainforests, wetlands)

Sector-Specific Nature Dependencies

Different sectors have varying levels of nature dependency:

High Dependency Sectors:

• Agriculture & food production (pollination, soil fertility, water)
• Fisheries & aquaculture (marine ecosystems, water quality)
• Forestry & paper (forest ecosystems, biodiversity)
• Pharmaceuticals (genetic resources, biochemicals)
• Tourism & recreation (natural attractions, ecosystem services)

Moderate Dependency Sectors:

• Manufacturing (raw materials, water, energy)
• Real estate & construction (land, materials, flood protection)
• Utilities (water supply, hydropower, cooling)
• Mining & metals (land, water, waste assimilation)

All Sectors:

• Climate regulation (carbon sequestration, temperature moderation)
• Water regulation (filtration, flow regulation, flood control)
• Disaster risk reduction (coastal protection, landslide prevention)

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Biodiversity Assessment & Measurement

Key Metrics & Indicators

1. State of Nature Metrics

• Species abundance and diversity
• Ecosystem extent and condition
• Habitat connectivity and fragmentation
• Threatened species presence

2. Pressure Metrics

• Land use change and conversion
• Resource extraction rates
• Pollution and waste generation
• Invasive species introduction
• Climate change impacts

3. Response Metrics

• Protected area coverage
• Restoration activities
• Sustainable sourcing commitments
• Nature-positive investments

Assessment Tools & Methodologies

ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure)

• Database mapping enterprise dependencies and impacts on nature
• Covers 167 economic sectors and 21 ecosystem services
• Helps identify material nature-related risks

IBAT (Integrated Biodiversity Assessment Tool)

• Global biodiversity data for site-level screening
• Protected areas, threatened species, key biodiversity areas
• Used for due diligence and impact assessment

SBTN (Science Based Targets Network)

• Methodology for setting science-based targets for nature
• Covers freshwater, land, oceans, biodiversity, climate
• Provides sectoral guidance for target-setting

Biodiversity Footprinting

• Mean Species Abundance (MSA) metrics
• Potentially Disappeared Fraction (PDF) of species
• Biodiversity Intactness Index (BII)

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Natural Capital Management

Natural Capital Accounting

System of Environmental-Economic Accounting (SEEA)

• UN statistical framework for environmental-economic accounts
• SEEA Ecosystem Accounting tracks ecosystem extent, condition, services, and monetary value
• Enables integration of natural capital into national accounts and corporate reporting

Natural Capital Protocol

• Standardized framework for identifying, measuring, and valuing natural capital impacts and dependencies
• Nine-stage process from framing to application
• Sector guides for apparel, food & beverage, finance

Valuation Approaches

1. Market-Based Valuation

• Direct market prices for ecosystem products (timber, fish, water)
• Replacement cost for ecosystem services (water filtration, pollination)
• Avoided cost approach (flood protection, air purification)

2. Revealed Preference Methods

• Hedonic pricing (property values reflecting environmental quality)
• Travel cost method (recreational value of natural sites)

3. Stated Preference Methods

• Contingent valuation (willingness to pay for conservation)
• Choice experiments (trade-offs between ecosystem attributes)

4. Benefit Transfer

• Applying values from existing studies to new contexts
• Database of ecosystem service values (TEEB, ESVD)

Nature-Positive Strategies

Avoid

• Prevent biodiversity loss through site selection, design, operational practices
• No-go areas, biodiversity-sensitive procurement, sustainable sourcing

Reduce

• Minimize impacts through efficiency, technology, best practices
• Water efficiency, pollution prevention, habitat-friendly infrastructure

Restore & Regenerate

• Active restoration of degraded ecosystems
• Regenerative agriculture, reforestation, wetland restoration, coral reef rehabilitation

Transform

• Systemic change in business models toward nature-positive outcomes
• Circular economy, nature-based solutions, biomimicry, sustainable finance

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TNFD Adoption & Implementation

Early Adopters (2024-2026)

Over 320 organizations have committed to early adoption of TNFD recommendations, including:

Financial Institutions:

• Banks: BNP Paribas, Santander, Standard Chartered, ING
• Asset Managers: AXA IM, Schroders, Robeco, PGGM
• Insurance: Swiss Re, AXA, Zurich Insurance

Corporates:

• Consumer Goods: Unilever, Nestlé, Kering, H&M Group
• Extractives: Rio Tinto, Anglo American, Holcim
• Agriculture: Olam, Bunge, Cargill

Regulatory Developments

European Union

• Corporate Sustainability Reporting Directive (CSRD) includes biodiversity disclosure requirements
• EU Taxonomy includes biodiversity criteria for sustainable activities
• Proposed Nature Restoration Law

United Kingdom

• Taskforce on Nature-related Financial Disclosures support
• Biodiversity net gain requirements for development
• Environmental reporting guidance

Other Jurisdictions

• Australia: Nature Repair Market, biodiversity credits
• Brazil: Amazon disclosure requirements
• Singapore: Green Finance Action Plan includes nature

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Challenges & Limitations

Data & Measurement Challenges

Data Availability

• Limited biodiversity data for many regions and ecosystems
• Lack of standardized metrics and methodologies
• High cost of biodiversity surveys and monitoring

Complexity

• Nature systems are complex, interconnected, and context-specific
• Difficult to attribute impacts and dependencies
• Multiple spatial and temporal scales

Valuation Difficulties

• Challenges in monetizing non-market ecosystem services
• Ethical concerns about commodifying nature
• Risk of undervaluation due to incomplete information

Implementation Barriers

Capacity Constraints

• Limited expertise in biodiversity assessment within organizations
• Need for training and capacity building
• Reliance on external consultants

Supply Chain Complexity

• Difficulty tracing impacts through multi-tier supply chains
• Limited leverage over upstream suppliers
• Data gaps in sourcing regions

Cost Considerations

• Investment required for assessment, monitoring, and reporting
• Perceived trade-off between nature protection and profitability
• Need for business case and ROI demonstration

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Integration with Other Frameworks

TNFD & TCFD Alignment

• Complementary frameworks addressing interconnected climate and nature crises
• Similar structure (governance, strategy, risk management, metrics & targets)
• Nature and climate risks often overlap (e.g., deforestation drives both biodiversity loss and emissions)

TNFD & ISSB Standards

• ISSB S1 (General Requirements) and S2 (Climate) provide foundation
• TNFD recommendations can inform future ISSB nature-related standards
• Growing investor demand for integrated sustainability disclosure

TNFD & GRI Standards

• GRI 304 (Biodiversity) provides detailed reporting guidance
• TNFD focuses on financially material nature-related issues
• Organizations can use both for comprehensive reporting

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Future Outlook

Market Trends

Growing Investor Focus

• 165 financial institutions with $24 trillion AUM committed to nature-positive investing (2024)
• Integration of biodiversity into ESG ratings and indices
• Development of nature-related financial products

Nature-Based Solutions

• $200 billion annual investment in nature-based solutions (2024)
• Carbon credits from forest conservation and restoration
• Blue carbon markets (mangroves, seagrass, salt marshes)

Technology Innovation

• AI and satellite imagery for biodiversity monitoring
• eDNA sampling for species detection
• Blockchain for supply chain traceability

Policy Developments

Kunming-Montreal Global Biodiversity Framework (2022)

• Target 15: Mandatory biodiversity disclosure for large companies and financial institutions
• 30x30 goal: Protect 30% of land and sea by 2030
• Mobilize $200 billion/year for biodiversity by 2030

Potential Mandatory Disclosure

• EU likely to mandate TNFD-aligned disclosure under CSRD
• Other jurisdictions considering mandatory nature reporting
• Integration into securities regulations

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Practical Guidance

Getting Started with TNFD

1. Build Awareness & Capacity

• Educate board and senior management on nature-related risks
• Train sustainability and risk teams on TNFD framework
• Engage with TNFD Forum and peer organizations

2. Conduct Initial Assessment

• Use LEAP approach to identify nature touchpoints
• Prioritize material nature-related issues
• Leverage existing tools (ENCORE, IBAT, SBTN)

3. Integrate into Existing Processes

• Incorporate nature into enterprise risk management
• Include nature considerations in capital allocation decisions
• Engage suppliers on nature-related impacts

4. Set Targets & Take Action

• Develop science-based targets for nature (SBTN)
• Implement nature-positive strategies (avoid, reduce, restore, transform)
• Invest in nature-based solutions

5. Disclose & Engage

• Report using TNFD recommendations
• Engage with investors, customers, and stakeholders
• Participate in collaborative initiatives (e.g., Business for Nature)

Key Resources

• ISSB Standards Navigator
• GRI Standards

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Further Reading

Key Resources

• TNFD Recommendations (2023) - Official TNFD framework and guidance
• TNFD Additional Guidance - Sector-specific, biome-specific, and value chain guidance
• ENCORE Database - Nature dependencies and impacts by sector
• Science Based Targets for Nature - Target-setting methodology
• Natural Capital Protocol - Measurement and valuation framework

Academic Research

• Dasgupta, P. (2021). The Economics of Biodiversity: The Dasgupta Review. HM Treasury.
• Johnson, J. A., et al. (2024). "Corporate biodiversity footprinting: Methods and applications." Nature Sustainability, 7(2), 145-158.
• Deutz, A., et al. (2020). "Financing Nature: Closing the global biodiversity financing gap." Paulson Institute.

Organizations

• Taskforce on Nature-related Financial Disclosures (TNFD) - tnfd.global
• Science Based Targets Network (SBTN) - sciencebasedtargetsnetwork.org
• Business for Nature - businessfornature.org
• Natural Capital Coalition - capitalscoalition.org
• Convention on Biological Diversity (CBD) - cbd.int

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Last updated: February 2026