TNFD Guidelines for Corporate Risk Analysis

𝗧𝗵𝗶𝘀 𝗶𝘀𝗻'𝘁 𝗺𝗮𝗿𝗸𝗲𝘁𝗶𝗻𝗴. 𝗜𝘁'𝘀 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗿𝗲𝘀𝗶𝗹𝗶𝗲𝗻𝗰𝗲. Nestlé. Mars (private). Unilever. They're core holdings in your equity portfolio. Can you quantify the risk to their margins if ecosystems collapse? They all depend on Nature: 🌊 Healthy oceans for fish 🌾 Fertile soil for crops 🐝 Pollinators for yields 💧 Freshwater to produce at scale Did you know the global pet food market is 𝘄𝗼𝗿𝘁𝗵 $𝟭𝟯𝟬𝗯𝗻, growing at 𝟱.𝟱% 𝗮𝗻𝗻𝘂𝗮𝗹𝗹𝘆? Mars Petcare is one of the largest players on Earth, with nearly 50 brands, several of them having billion-dollar franchises. Mars earns $𝟮𝟬𝗯𝗻 𝗳𝗿𝗼𝗺 𝗽𝗲𝘁 𝗰𝗮𝗿𝗲. One of those brands is Sheba, which depends on fish from coral reef ecosystems. 𝗡𝗼 𝗿𝗲𝗲𝗳, 𝗻𝗼 𝗳𝗶𝘀𝗵. 𝗡𝗼 𝗳𝗶𝘀𝗵, 𝗻𝗼 𝗦𝗵𝗲𝗯𝗮. According to WWF, over half of tropical coral reefs are already lost ecosystems that support a quarter of all marine species. So Sheba Cat Food (Mars) is restoring reefs off Indonesia not as marketing but as supply chain protection. This is Nature as resilience: protecting cash flow and margin. This is where the Taskforce on Nature-related Financial Disclosures (TNFD) comes in: → 𝗗𝗲𝗽𝗲𝗻𝗱𝗲𝗻𝗰𝗶𝗲𝘀: What ecosystems does the business rely on? → 𝗥𝗶𝘀𝗸𝘀: How does Nature loss affect supply, price, brand, and regulation? → 𝗠𝗮𝘁𝗲𝗿𝗶𝗮𝗹𝗶𝘁𝘆: Where is Nature loss financially significant to enterprise value? → 𝗢𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝗶𝗲𝘀: Where can ecosystem protection drive long-term financial sustainability? As an asset owner, ask your consultants and fund managers: ✅ Have you mapped Nature dependencies across our portfolio? (e.g. Norges, Scottish Widows) ✅ Have you commissioned a Nature risk assessment across our equities? → Deep-dive your top 10 holdings in FMCG, agriculture, and food; which are most exposed to ecosystem collapse? ✅ How are you integrating TNFD into stewardship, risk oversight, and engagement? 📌 The EU CSRD and UK SDR are raising the bar on Nature disclosures for companies and asset owners. This should be as standard as your TCFD report. We've built dashboards for carbon. Where's the equivalent for Nature? 🎥 Watch 𝗥𝗲𝗲𝗳 𝗕𝘂𝗶𝗹𝗱𝗲𝗿𝘀 on Prime Video & Amazon MGM Studios.  Set in Indonesia, it follows a team of coastal communities and marine biologists who brought a dying reef back to life, proving that Nature recovery is possible and essential to business survival. 🪸 This is why Sheba Cat Food (Mars) invests in coral reef restoration. https://lnkd.in/eMuj2YV2 #FromRiskToResilience #NaturePositive #NatureRisk #ReefBuilders #ShebaHopeGrows #TNFD

🌍 What if every infrastructure project could deliver for nature and people? A year ago, we set out to answer that by piloting the TNFD LEAP framework on infrastructure projects. At AECOM, we’ve always recognised that nature underpins the success of infrastructure—whether it’s water for energy systems or biodiversity providing resilience to protect assets from climate risks. But the challenge has always been: how do we properly assess this? The focus has always been on protecting nature impacts but infrastructure dependencies are rarely thought about. That’s why we undertook the Taskforce on Nature-related Financial Disclosures (TNFD) with Global Canopy and Nature-based Insights, applying the LEAP approach across a range of real-world infrastructure projects. Here’s what we did: 🔍 We assessed nature-related dependencies, from water security to ecosystem services that support asset performance. 📉 We identified impacts on biodiversity and ecosystem condition, including risks to species, habitats, and natural capital. 🌱 We looked for opportunities to deliver nature-positive outcomes, like enhancing biodiversity, restoring ecosystems, and embedding nature-based solutions into project design. 👉 What stood out was how interconnected these risks and opportunities are—and how important it is to consider them early, not as an afterthought. 👉 We also found that the LEAP framework works, but to make it mainstream for infrastructure, we need better data and more sector-specific guidance. 👉 The TNFD framework has highlighted how much more should probably be considered as part of EIAs - we should be considering nature's value and benefits far more than just impacts to ensure dependency resilience. One year on, the insights we gained feel even more relevant. The TNFD is gaining traction, and nature-related risks are climbing higher on the agenda. For infrastructure to be truly sustainable—and resilient—we need to reconsider nature as a beneficial asset that protects infrastructure. Our pilot summary is here if you’d like a deeper dive: 🔗 https://lnkd.in/gNYwcJqT #TNFD #Infrastructure #NaturePositive #Biodiversity #LEAP #FutureOfInfrastructure

#Nature risk is rapidly rising on the agenda for financial institutions — but knowing where to begin can feel overwhelming. We’ve recently been working with a bank to support the development of their #TNFD report. A few lessons: 1. Start small — and start where it matters. You don’t need to assess your entire portfolio on day one. Instead, identify a priority area based on existing climate work, the scale of potential impacts, and practical considerations like data availability. For many banks, this means beginning with their agricultural loan book - a natural choice given the sector’s clear linkages to land and water use. 2. You can generate insight even with limited data. Perfect data is rare but imperfect data still has value. We combined a bank’s internal data on exposure by economic activity and region with inferred and benchmarked data from broader datasets, and still uncovered actionable findings. 3. Start by understanding your impacts and dependencies before assessing risk Our approach to impacts considers their magnitude and the state of nature in the location in question. For dependencies, we are focused on how reliant a commodity is on an ecosystem service for its continued production. The important output from this phase is to identify the material impact & dependencies by region and commodity. 4. Nature risk is real and already present. In this case, it quickly became clear that lending to agriculture brought exposure to water availability, land use pressures, and even non-GHG air pollution. These are not theoretical risks - they’re already influencing asset values, regulatory pressures, and resilience. Most banks are exposed to at least one sector with severe nature related risks. P.S - This post is proudly AI-free! #TNFD #NatureRisk #SustainableFinance #Biodiversity #ClimateRisk #FinancialInstitutions

Reporting on Biodiversity? Efraq has recently held a meeting on the interoperability of Taskforce on Nature-related Financial Disclosures (TNFD) and the ESRS in the CSRD. Following their assessment TNFD and ESRS have a shared approach to the dependencies, impacts, risks and opportunities (DIROs) assessment which includes following: ✓ Impacts on nature by an organisation can be negative or positive; potential or actual ✓ Importance of physical, transition and systemic risks (also in relation to TCFD, Task Force on Climate-related Financial Disclosures) ✓ Impacts on nature can be related or unrelated to dependencies ✓ Today’s impacts on nature can accentuate tomorrow’s dependencies ✓ Dependencies on nature are the basis of many risks to the organisation ✓ Therefore dependencies and impacts need to be assessed as the basis for understanding risks and opportunities ✓ The potential to have positive impacts on nature is a source of opportunity for organisations ✓ Positive impact on nature is different to a reduction in negative impact on nature The Taskforce on Nature-related Financial Disclosures (TNFD) advocates for the LEAP methodology, responding to market participants' calls for straightforward, actionable guidance on pinpointing, evaluating, managing, and reporting nature-related concerns. Specifically tailored for compatibility with the ESRS's impact materiality perspective and the financial materiality viewpoint shared by both the ISSB and the ESRS, the LEAP assessment framework is a recommended tool in the ESRS. Organizations are encouraged to use it for materiality assessments on environmental topics (excluding climate change) within their operations and throughout their supply and distribution chains. The LEAP methodology unfolds in four stages (refer to Figure 1), culminating in the fourth stage that deals with the process's results. Report preparers can employ the LEAP framework as an aid in identifying significant information for disclosure under the ESRS. A graphical depiction of pertinent details in the Application Requirements of ESRS E2-E5 is missing a reference source. Figure 1 (attached 04-02 draft ESRS-TNFD Interoperability mapping Part 1). The Application Requirements of four environmental ESRS state that the organisation may conduct its materiality assessment using the LEAP approach.

Another ESRS simplification proposal on the table for EFRAG, this time from Taskforce on Nature-related Financial Disclosures (TNFD). Let's take a look: What does TNFD propose? 1. Merge ESRS E2–E5 into a single integrated ‘Nature’ standard. This would reduce fragmentation and align ESRS with a structure already used by over 600 organisations globally reporting against TNFD. 2. Conduct double materiality assessments against four drivers of nature change: land and sea-use change, resource use, pollution, and invasive species. TNFD suggests promoting the structured use of their LEAP framework to avoid selective screening and ensure all relevant nature-related issues are considered. 3. Introduce dependencies into IROs, shifting towards DIROs. This means businesses would report not only on how they impact nature, but also how they depend on it. For businesses, this helps uncover hidden vulnerabilities. For investors, it makes disclosures more decision-useful. 4. To reduce the number of datapoints, TNFD suggests focusing on 14 core cross-sector indicators defined by TNFD. These include land and water use, pollution emissions, resource consumption, species extinction risk, value of assets exposed to nature-related risks, value of nature-positive revenues and others. All in all, TNFD’s suggestion is to make ESRS more aligned with the TNFD framework, which makes sense as this is the proven approach to report on nature impacts and risks with integrity. I believe this proposal is pretty rational. I also like the idea of introducing dependencies to IROs, as indeed this could shift the mindset of businesses and their stakeholders. What are your thoughts?