Taskforce for Nature-related Financial Disclosure releases its v.02 beta framework for comment

Following the Taskforce on Nature-related Financial Disclosures’ (TNFD) initial beta version in March 2022 and feedback from market participants, the TNFD has released its second iteration of its disclosure regime for nature impacts and dependencies, beta v.02.

We’ve already examined the TNFD’s beta framework and its conceptual setting. In this article, we look at key differences and additions following market participation and the first round of stakeholder feedback.

New features in the TFND beta version

The TFND beta v.02 retains the three core components of the v.01 version (nature concepts and definitions, disclosure recommendations and assessment metrics through the LEAP approach) with additional enhancements and features.

The additions include:

• A first draft architecture for metrics and targets:

(image: The TNFD Nature-Related Risk and Opportunity Management and Disclosure Framework Beta v0.2, June 2022)

• Draft guidance on, and an illustrative set of, dependency and impact metrics.

  A focus of beta v0.2 is the maturation of assessment metrics within the “E” phase of LEAP (“evaluate”), with the other phases, including disclosure metrics to be further developed in later releases. The result is the TFND’s example dependency and impact metrics, which adopt the TFND’s design approach to balance the complexity of science with the practical needs of the market for a standardised approach to measuring business use and activity as it relates to natural capital and ecosystem service.

• A proposed approach to specific guidance (sector, issue and ecosystem specific)

  The beta v0.1 draft disclosure recommendations were sector neutral, applying generally regardless of the corporate setting. However, market feedback noted the need for specific recommendations tailored to the use context. The TFND’s proposed approach for sector guidance is informed by existing sector-specific research and assessments on nature-related dependencies, impacts, risks and opportunities. Initially, sector specific guidance will focus on 8 thematic sectors, 13 sub-sectors and 19 industries and will be further refined in later versions.

• An update to LEAP-FI (the LEAP approach adapted for financial institutions).

The beta v0.2 also includes new scoping questions, which aid the four phased approach of LEAP. Scoping questions will assist financial institutions to prioritise and situate nature-related risks recognising that the entry points to assessing portfolio risks will vary. Scoping questions cover the type of business (including business functions), entry points (sector/geography, type of asset class and biome/ecosystem) and type of analysis (ie., whether assessment is appropriate at the project, company or portfolio level).