The Task Force on Nature-related Financial Disclosure (TNFD) is a group of experts convened by the G20 in 2013. The task force aims to provide recommendations on how to improve the disclosure of climate-related information by companies. It is chaired by Michael R. Bloomberg, United Nations Secretary-General’s Special Envoy for Cities and Climate Change, and Mark Carney, Governor of the Bank of England.
Who is part of the TNFD and what is their focus?
This task force includes representatives from business, finance, investors, accounting and law, as well as representatives from civil society. It operates independently, and voluntary contributions finance its work. Their work is supported by Technical Working Groups consisting of experts in specific fields, such as disaster risk, carbon valuation and reporting standards.
The focus of the Task Force is on providing practical recommendations for voluntary reporting of climate-related financial information by companies. The recommendations are not binding but they provide a template that companies can use when disclosing climate-related information to investors and other stakeholders. The recommendations aim to improve the quality, comparability and consistency of climate-related financial disclosures.
How does the TNFD help your business?
The recommendations of the Task Force were published in June 2017 and set out a framework for voluntary disclosure of climate-related financial information by companies. In practice, this framework helps businesses identify and unlock trapped value from within, bringing into focus opportunities to reduce energy costs, waste and materials inputs. The framework consists of four main components:
- Governance: disclosing how an organization’s board of directors or equivalent overriding authority oversees climate-related risks and opportunities. Examples could include the description of the oversight of the Board of Directors (e.g. audit or sustainability committees), processes for regular updates on climate risks and opportunities, etc.;
- Strategy: describing how an organization’s strategic planning takes into account material climate-related risks and opportunities encountered or expected by the organization;
- Risk Management: discussing how an organization identifies, assesses, manages and monitors material climate-related risks;
- Metrics & Targets: reporting on greenhouse gas emissions reduction targets, consistent with keeping global temperature increase below 2°C above preindustrial levels, as well as other key performance indicators identified as being material to assessing progress towards reducing impacts from climate change.
Each component contains several recommended disclosure topics that companies can choose to publish, depending on what is material to their business. For example, under the component “Governance”, companies may disclose their organizational structure for managing climate-related risks and opportunities (e.g., sustainability steering committees). Alternatively, companies could describe training programs for employees on climate-related risks and opportunities.
The Task Force on Nature-related Financial Disclosure (TNFD) is an important set of guidelines for every business to be aware of. Transparency around an organization’s exposure to climate-related risks & opportunities helps markets function more efficiently by pricing in these considerations to a greater extent. In particular, improved disclosure can help reduce information asymmetries between those who manage risks & opportunities related to climate change within firms (i.e., management) versus those who must rely relatively heavily on public information when making investment decisions (i.e., investors). Better risk pricing should lead to better investment decision-making & ultimately a more efficient allocation of capital globally – leading to improved economic outcomes & increased resilience to severe weather events & other impacts associated with climate change.”
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