The Taskforce on Nature-related Financial Disclosures (TNFD) published their final nature disclosure framework this week, setting out a clear framework and recommended metrics for companies to report on nature related impacts and dependencies.
Ann Meoni, Senior Sustainability Analyst at abrdn, explains why for asset managers, the framework should help provide comparable data to enable better assessment of investee companies.
“The risks associated with the unsustainable use of natural capital are increasingly financially material for investors. But company reporting on nature-related risks and opportunities and how these are managed has historically been poor and difficult to compare. Disclosure is key and should be encouraged and that’s why the framework set out this week marks an important step forward. The recommendations of the TNFD are expected to become a global framework for companies to report on their financially material nature-related risks and opportunities, which should provide some much-needed clarity and consistency of reporting.
“Existing information relies on modelled data that might not fully consider complex and location specific nature-related risks. Encouragingly, the recommended framework suggests that there is enough information to create an initial heat map of potential risk exposure and it’s our view that this should be the focus for investors before basing analysis on heavily modelled data.
“Improved disclosures in alignment with the framework should help support our analysis of nature-related financially material risks. An increasing number of clients ask about our approach to TNFD and specifically how we are considering nature-related risks and opportunities in our portfolios. There is also interest in the development of investment products focusing on companies that provide solutions to address nature degradation.”
