DB schemes will lack the information they’ll need to understand how nature and climate related risks affect them without an integrated approach to sustainability reporting, warns Hymans Robertson, as it launches its briefing note on Taskforce on Nature-related Financial Disclosures. Delivering real-world change will rely on pension schemes and other institutional investors taking a holistic approach to sustainability disclosures, given that the climate and biodiversity crises are interrelated, says the leading pensions and financial services consultancy. The briefing note aims help DB schemes understand how the TNFD framework works and the key actions asset owners should take now to ensure successful TNFD reporting.
The TNFD framework aligns with existing sustainability disclosure frameworks and the Global Biodiversity targets agreed at the COP15 conference last year, explains the briefing note. It also points out that there are four key elements at the heart of the TFND framework. These are dependencies, impacts, risks and opportunities. Collectively they are referred to as nature-related issues.
• Dependencies, look at the reliance of an organisation on natural ecosystem services.
• Impacts, help organisations understand changes in the state of nature as a result of their actions.
• Risks, highlight potential threats linked to nature dependencies and impacts.
• Opportunities, shows where commercial and growth opportunities related to nature-positive outcomes may lie. By assessing these nature-related issues investors can understand the exposure of their asset portfolios to nature loss and start acting on these nature-related issues.
Commenting on the need for an integrated approach to sustainability reporting, André Ranchin, Investment Consultant and Biodiversity Lead, Hymans Robertson said: “The launch of the TNFD framework is great news, as it’s designed to align with the TCFD climate framework. We expect it will play a key role in future regulatory frameworks and is a positive step towards addressing the biodiversity crisis. Nature and climate issues are two sides of the same coin. As such, DB schemes will need to ensure they develop an integrated approach to their sustainability reporting. This will help them produce the consistent disclosures and understand the actions needed to achieve the long-term goal of helping to reverse nature and biodiversity loss.
“The core elements of the TNFD framework recognise that dependencies and impacts on nature are location-specific, and that risks or opportunities will also vary according to organisation type and economic sector. It is vital, therefore that investors assess their own needs and set out a roadmap that covers education and engagement, data and monitoring, and disclosure and strategy. These are the three areas where they can take-action now to ensure they deliver robust reports when the time comes.”
Initial key actions for successful TNFD reporting
1) Education and engagement
Read TNFD’s Getting Started Guide and take training on TNFD, natural capital and biodiversity. Take the time to engage with investment managers and portfolio companies on nature-related issues.
2) Data, metrics and monitoring
Understand the TNFD’s core metrics and agree which ones to focus on first. Also, carry out data gap analysis to understand baseline position. Make an initial assessment of portfolio exposure to sectors and locations with significant impacts or dependencies and set targets relating to key nature metrics.
3) Disclosure and strategy
Develop sustainability disclosures that incorporate TNFD guidance, alongside climate disclosures and TCFD. Consider how biodiversity and nature fit into wider sustainability reporting for example, ISSB and GRI. Also, monitor impact related to specific themes such as, deforestation and marine life and set policies and or targets where needed. Take measures to reduce exposure to nature loss and invest in companies and sectors that support nature preservation.
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