TNFD – Aligning benefits for nature and business

TNFD – Aligning benefits for nature and business 752 564 Greengage Environmental

TNFD – Aligning benefits for nature and business

The Taskforce on Nature-related Financial Disclosures (TNFD) Beta Framework sets out the first international standard for alignment of financial sector activities with nature-related risk. This is a ground-breaking concept which could have major global implications, shifting how we think about nature conservation in a business context.

In this piece we dig into the TNFD, discuss what this may mean for businesses, and present a model for how real estate developers and asset managers can apply existing models for biodiversity-linked ESG standards to future TNFD compliant disclosures.

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Environmental economists have long conceptualised a way to effectively account for nature within financial and operational decision-making. Traditionally, nature has been framed as an externality; an indirect cost or benefit that occurs within both consumer and producer market transactions.[i] Externalities can be positive, such as the health and wellbeing benefits derived from a living roof or wall, or negative, such as agriculture-driven deforestation. Either way, externalities have been largely unpriced to date.

The overarching ambition of the Taskforce on Nature-related Financial Disclosures (TNFD) is to internalise these externalities by developing a set of disclosure recommendations to account for both nature-related risks and opportunities.[ii] This action recognises the dependency of business and market functions on nature, positioning it against the unsustainability of current economic activities.

More than half of the world’s economic output – US$44 trillion of economic value generation – is highly or moderately dependent on nature.[iii] Despite this, one fifth of these services are on the brink of collapse.[iv] Left unabated, the degradation of nature will instigate unprecedented economic and societal crises, further exacerbated by intensifying climatic changes.

The TNFD therefore recognises the mutually reinforcing nature of ecosystem loss and climate change. When considering this ‘climate-nature nexus,’ the TNFD acknowledges our inability to mitigate – or adapt to – the impacts of climate change without protecting, restoring, and enhancing our global stocks of nature. As such, nature is central to ensuring climate resilience and must command the same level of consideration within corporate and financial decision-making as climate terminology does. The glossary of terms and context-specific definitions provided within the TNFD’s Beta Framework provides the first step towards embedding nature-related risks and opportunities within a global business lexicon (see Appendix 1).

To further support the adoption of its guidance, the TNFD aligns closely with the approach defined by the Taskforce on Climate-related Financial Disclosures (TCFD). In the UK, the first mandatory TCFD-aligned reporting requirements for the private sector came into effect on 6th April 2022.[1] The TNFD follows in these footsteps, recommending disclosures across the Governance, Strategy, Risk Management, and Metrics and Targets themes first defined by the TCFD.[2], [v] Crucially, the TNFD introduces a novel nature-related risk and opportunity assessment process for businesses to support nature-related disclosures. The ‘LEAP’ process recommends that businesses:

  • Locate their interface with nature;
  • Evaluate their dependencies and impacts;
  • Assess their risks and opportunities; and
  • Prepare to respond to identified nature-related risks and opportunities, and report to investors.

LEAP is not a disclosure recommendation or mandated requirement for disclosure. Instead, it is intended to provide much-needed guidance for organisations to include the requisite information intended in disclosures. Considering the materiality of nature-related risks and opportunities in full will be entirely novel for most organisations. The dependencies and impacts of their own operations, as well as their upstream and downstream value chains are expected to be included. This double-materiality approach requires organisations to not only disclose how nature may impact the organisation’s immediate financial performance (so-called ‘outside-in’), but also how the organisation impacts nature (‘inside out’). The TNFD recommends that such considerations of materiality are incorporated within an ‘enterprise value’ approach, as recognised by the International Sustainability Standards Board (ISSB).[3]

Value chain transparency and traceability are therefore central to the TNFD’s recommended disclosures. Understanding the dependencies and impacts of organisations, their operations, and their supply chains will require a location-based assessment of actual, rather than potential, nature-related risks and opportunities. Whilst a ‘full set’ of material disclosures are recommended by the TNFD, a key challenge for some organisations will be defining what is appropriate to include. With regards to nature, certain industries and organisations have much more clear and direct impacts and dependencies, such as those in development, agriculture or raw mineral extraction. By comparison, asset owners and managers will have more indirect or cumulative impacts upon nature. However, these organisations, along with lenders and financiers, have a catalytic role to play in influencing the organisations they invest in to provide disclosures and strengthen their management of risks and opportunities.

Ecosystem Assets Ecosystem Services And Benefits To Society And The Economy
Image credit: TNFD Beta Framework v0.1

How nature aligns with financial risk

Crucially, the TNFD’s disclosures are still in active development. Further guidance will emerge, providing greater clarity on the scope of disclosures and appropriate scenarios and timelines for dependency, impact, risk, and opportunity analyses. At present, there are no scenarios designed to address the resilience of corporates and financial institutions (or the wider financial system) to nature-related physical and/or transition risks. Similarly, there is no equivalent to the Scope 1, Scope 2, and Scope 3 emissions established by the Greenhouse Gas (GHG) Protocol.[i] In theory, these could relate to value chain coverage, with direct operations constituting a Scope 1 equivalent, and full value chain (upstream/downstream) covering both Scope 2 and 3. However, as the dependencies, impacts, risks, and opportunities associated with nature are more diverse than GHGs, their scope may require additional considerations. These could include specific reference to sector, geography, asset class, and the type of impacts, impact drivers, and dependencies relevant to an organisation.

The TNFD will continue to grapple with the inherent location-specificity of nature-related dependencies and impacts on nature, and the implications of this on disclosure consistency. Similarly, a lack of agreed metrics and targets for nature protection or restoration at national or international levels further complicates this desired move towards consistency. It is hoped the forthcoming CBD Global Biodiversity Framework will help bridge this gap. Ultimately, the requirements for organisations to align with the TNFD’s recommended disclosures are also no small feat. Full value chain coverage will require many organisations to retrofit complete traceability across large and complex supply chains. Though however time-consuming or costly any of the TNFD’s requirements are, they are far more affordable and equitable than inaction against nature’s continued and unabated destruction.

TNFD in Real Estate

Whilst the framework is still in development, there is a growing drive for businesses to start measuring and addressing their nature related impacts. In addition to the UK’s TCFD mandate, Article 29 of France’s Law on Energy and Climate requires that biodiversity-related risks and impacts be disclosed by financial institutions. Biodiversity-linked mortgage products, credit facilities and insurance offers are becoming increasingly mainstream, acknowledging the importance of biodiversity within the financial sphere. More broadly, there is growing impetus surrounding wider Environmental, Social, and Governance (ESG) targets and reporting amongst a diverse and widespread range of corporates.

In the UK, organisations can use emerging metrics, such as those for Biodiversity Net Gain (BNG) and Environmental Net Gain (ENG), to measure and report on their nature-related impacts, which can be captured via ESG reporting. Tools such as the Defra Metric 3.1 and the Environmental Benefits from Nature (EBN) Tool can be used to calculate levels of – or changes to – ecological value in a range of circumstances. Beyond developers, a wide range of corporates can utilise the Defra Metric 3.1 or EBN Tool to assess their impacts on nature, and potential opportunities for enhancing it, particularly where real estate or land asset management is concerned.

For example, an asset owner could use the Defra Metric 3.1 and EBN Tool to establish a baseline value for biodiversity and ecosystem services across their assets; such tools can also provide predicted outcomes of biodiversity loss through activities. Once established, this baseline can be used to set objectives for improvement, be it through management change or retrofitting Nature-based Solutions (NbS). These targets could be an absolute measure of change (e.g., biodiversity unit increase as calculated by the Defra Metric 3.1) or a percentage uplift across a portfolio (e.g., 10% across all assets based on existing portfolio unit value). Performance against such biodiversity-linked targets can then be measured and reported on through an overarching corporate ESG strategy, that aligns with the requirements of both the TNFD and TCFD. Delivering uplifts to the ecological value of assets via the implementation of NbS will simultaneously enhance the resilience of a portfolio to intensifying physical climate risks.

Linking the change reported as part of ESG commitments to the financial disclosure element of TNFD is more challenging. However, the outputs of any BNG/ENG models can, through the Natural Capital Value Transfer Methodology, have attributable costs linked to the identified material factors; be it financial risk of not intervening/changing practice or benefit of intervening through NbS; meaning the model for biodiversity-linked ESG KPI setting can be extended to fit the TNFD model. Importantly, however, as stated in the Beta Framework, ‘not all nature-related risks and opportunities can be translated into ‘financial impact’ in the form that is recognised within income statements, cash flow statements or balance’. An element of qualitative judgement will therefore be necessary in some instances on how a nature related risk translates to financial materiality.

Example LEAP run-through:

Different models for disclosure will need to be developed for different sectors to suit the LEAP process. The table below shows how the LEAP process could be translated in a real estate management or development context. The below follows a tried and tested model for biodiversity-linked ESG target setting and disclosure.


Framing possible actions in this way, the overlaps between the TNFD and TCFD frameworks become clearer to see. Whilst this is an entirely novel approach within an emergent framework, it suggests how stakeholders within the built environment could respond to the TNFD’s requirements. Now more than ever before, we are reliant upon the natural world to help us mitigate and adapt to the mounting pressures of climate change.

It is time the global private sector stepped-up to the plate, took stock of its dependencies and impacts upon nature, and used the TNFD to drive the changes the planet so desperately requires.

Appendix 1. TNFD Terms and Definitions (Click image)

TNFD Terms and definitions 1
[1] These mandatory TCFD requirements currently apply to all companies required to produce an annual non-financial information statement such as companies, banks, or insurers with more than 500 employees. Also required to disclose are UK-based AIM companies with 500 or more employees; LLPs with 500 or more employees and a turnover of more than £500m, and non-listed companies with 500 employees or more and a turnover of more than £500m.
[2] Governance includes the ways in which an organisation’s oversight and decision-making functions take nature-related risk and opportunities into account. Strategy covers the integration of actual and potential effects of nature-related risks and opportunities on the organisation’s business model, strategy, and financial planning. Risk Management refers to how the organisation integrates nature-related risks into its overall risk management approach. Metrics and Targets cover the quantitative and qualitative performance indicators and aims related to nature-related risk and opportunities, based on identified nature dependencies and impacts.
[3] Enterprise value refers to the total value of an entity (organisation), which is the sum of the value of the entity’s equity (market capitalisation) and the value of the entity’s net debt. The ISSB and TNFD frame enterprise value as interdependent with value creation for both society and the environment.
[i] Dasgupta, P. (2021). The Economics of Biodiversity: The Dasgupta Review. [online] Available at:
[ii] Taskforce on Nature-related Financial Disclosures (TNFD), (2022). The TNFD Nature-related Risk & Opportunity Management and Disclosure Framework, Beta v0.1 Release. [online] Available at: The TNFD Nature-Related Risk & Opportunity Management and Disclosure Framework Beta v0.1 – TNFD
[iii] The World Economic Forum (WEF) and PwC (2020). Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy. [online] Available at: WEF_New_Nature_Economy_Report_2020.pdf (
[iv] University of Cambridge Institute for Sustainability Leadership (CISL). (2022). Integrating Nature: The case for action on nature-related financial risks. Cambridge: University of Cambridge Institute for Sustainability Leadership. Available at: cisl_nature-related_financial_risks_report_2022_v5.pdf (
[v] Taskforce on Climate-related Financial Disclosures (TCFD), (2017). Final Report: Recommendations of the Taskforce on Climate-related Financial Disclosures. [online] Available at:
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