TNFD launch beta version of Framework

The global economy depends on nature to the tune of $44 trillion annually, but nature-related risks and opportunities have traditionally been overlooked in financial decision-making. However, this area of focus is developing at pace, riding in the slipstream of climate and making up for lost time.

Yesterday saw the Taskforce on Nature-Related Financial Disclosures launch its beta Framework. The full framework will launch in September 2023, with comments on the beta version open until 1 June 2023. The framework is designed to help organizations report and act on evolving nature-related risks and opportunities, and promote more sustainable business practices.

The beta framework includes a full and final draft of the framework, recommended draft disclosures, updates to the LEAP process, additional guidance for four sectors and four biomes, and cross-sector guidance on risk management, scenario analysis, target setting, and stakeholder engagement.

Framework categories & recommended disclosures

Biodiversity

The use of natural resources, the impacts of land use and infrastructure development, and the risks and opportunities associated with biodiversity conservation and restoration. Recommended disclosures include information on the company’s use of biodiversity, the potential impacts of its activities on biodiversity, and any measures it is taking to mitigate these impacts.

Land use

Recommended disclosures include information on the company’s land use practices, its impacts on land use change, and its efforts to manage these impacts, including the use of agricultural land, forestry, and other natural resources.

Water

Recommended disclosures include information on the company’s water use, its impact on water quality and availability, and its efforts to manage and reduce these impacts.

Greenhouse gas emissions

Recommended disclosures include information on the company’s greenhouse gas emissions, its efforts to reduce these emissions, and any risks and opportunities associated with the transition to a low-carbon economy.

Other disclosures

In addition to the four main categories, the Framework also includes a set of general disclosures such as the company’s governance structure and policies related to nature, as well as its engagement with stakeholders and efforts to integrate nature-related considerations into its decision-making processes.

Toolkit

The TNFD Framework is accompanied by a toolkit which provides guidance to companies and financial institutions on how to use the Framework to assess and report their nature-related dependencies and impacts.

  1. Guidance Document on how to use the Framework, including instructions on how to conduct a nature-related risk assessment and how to prepare a nature-related financial disclosure
  2. Technical Supplement on specific issues related to the Framework, such as how to measure and report on biodiversity impacts and dependencies
  3. Case Studies on how companies and financial institutions have used the Framework to assess and report on their nature-related dependencies and impacts
  4. Data and Metrics to measure and report on their nature-related dependencies and impacts.
  5. Implementation Support for companies and financial institutions that are using the Framework, including training and capacity building, technical assistance, and stakeholder engagement.

The release of the TNFD’s full and final beta framework is an important milestone towards developing a standardized approach to nature-related financial disclosures. To provide feedback on the draft framework, visit the TNFD website. By integrating nature-related considerations into decision-making processes, organizations can better understand the risks and opportunities associated with nature, and work towards a more sustainable future for all.

To learn more about how to integrate nature finance into your organisation, get in touch at info@globalethicalfinance.org

by Sam

Finance Day at COP15

Today is Finance Day at COP15, the nature summit taking place in Montréal.

The core goal of COP15 is "30x30", the mission to protect at least 30% of the world's land and sea by 2030, but midway into the summit fears are growing of a lack of binding commitments. Read WWF's explainer for the summit.

Over half of global GDP depends on nature, making clear the need to finance its protection and restoration. Click below for some of the key finance-focused events taking place later today:

To learn more about nature financing, click the links below for a selection of videos and reports on nature finance:

by Sam

Financing a Shared Future for All Life on Earth: the role of TNFD in a Global Biodiversity Framework - Biodiversity Day interview with Elizabeth Mrema, UN CPD & Lorna Slater MSP

Last week would have seen the crucial biodiversity summit COP15 take place, before it was delayed due to the pandemic. To mark both Biodiversity Day and the original date, and build moment before the rescheduled summit this Autumn, we hosted a discussion on Financing a Shared Future for All Life on Earth: the role of TNFD in a Global Biodiversity Framework.

We were joined by UN Convention on Biodiversity Executive Secretary & Taskforce for Nature-Related Financial Disclosures (TNFD) Co-chair Elizabeth Mrema and Scottish Minister for Green Skills, Circular Economy and Biodiversity Lorna Slater MSP, to discuss why we need to finance nature, the Global Biodiversity Framework, how governments can help and what the Scottish Government is doing in this space.

Despite on-going efforts, biodiversity is deteriorating worldwide and this decline is projected to worsen with business-as-usual scenarios. This session, aimed at global finance practitioners, is intended to raise aware and inspire practical action in relation to the critical need to finance. It will provide an update on global and national initiatives to help drive the action required to finance a shared future for all life on earth.

With the forthcoming Global Biodiversity Framework, the Convention on Biological Diversity is setting the stage for a worldwide re-direction of financial flows away from nature-negative and towards nature-positive outcomes. Market players are speeding ahead with testing the Taskforce on Nature-related Financial Disclosures (TNFD) beta framework, to make it ready to inform and respond to these new international norms around nature, nature-based solutions and finance. As part of the Scottish Government’s National Strategy for Economic Transformation, we have committed to establishing a values-led, high-integrity market for responsible investment in natural capital.

GEFI has a long history of supporting finance for nature, from a programme of collaboration between UNDP, GEFI and the Scottish Government, to the COP26 launch of an exclusive, commercial platform showcasing financial products that are directly aligned to the SDGs, and nature-focused sessions at our annual summits and COP26.

by GEFI

The Path from COP26: Implementing the Glasgow Climate Pact | Ethical Finance Round Table

We heard from a varied panel during this Ethical Finance Round Table who delivered their thoughts on COP26, COP27, finance for nature and more, with a series of interesting presentations followed by a lively panel discussion. Click here to watch a recording of the full session now, or click on the names of each of the presenters - Hakima El-Haité, Ashley Hamilton Claxton, Sefton Laing & Jamie Ervin - to see their opening remarks.

Hakima El-Haité, President of Liberal International kicked off by asking how COP26 has succeeded in meeting the hopes of the global south. She emphasised the need to ask ourselves what we achieved and what is next. This COP26 was meant to show progress in CO2 emissions reductions and ambitions for next 5 years and show trust. The developed world was expected to fulfil its promises, and we missed an opportunity to be on the correct side of history, said Hakima.

Ashley Hamilton Claxton, Head of Responsible Investment at Royal London Asset Management followed, and explained that getting commitments from financial sector is easy; action is the hard part. COP26 has inspired more conversations with clients about climate in the past 3 months than RLAM have had in the prior 8 years. Ashley suggested that we need a bottom-up approach (carbon metrics, bonds etc.) but need to develop a high level plan as to how we are going to achieve NZ and the terms of the Glasgow Climate Pact. She cautioned that there is a risk that finance can become a distraction for policy makers - a panacaea for all of our problems around the environment. Finally, she explained that perfect data is a distraction; data will never going to paint a full picture or be complete and can tell a skewed side of a story but is vital for building tools and systems needed post COP and beyond.

Sefton Laing, Senior Climate and Environment Specialist at Baillie Gifford pointed out that COP26 was the first COP at which Big Finance truly arrived. The commitment to trillion dollar funds is a massive step forward, however there is a gap between allocated finance and practical action on the ground - money is not always regulated or properly allocated if you listen to NGOs. He echoed Ashley’s point about the need for strong governance and shifts towards policy to support the individual commitments we have seen particularly from financial services.

Finally, Jamison Ervin of UNDP highlighted 7 trends from the past year on financing nature and 7 predictions for the coming year, looking at how nature has contuined to shoot up the agenda on both climate and finance, and predicting that it will continue to do so.

by GEFI

Finance for Nature in Nature at COP26

FINANCE FOR NATURE AND COP26

As the exhibition tents, plenary rooms and coffee stalls are being dismantled, and Glasgow returns to a form of normality, one of the overwhelming takeaways from the COP26 Climate Conference was just how important finance and financing nature will be for the journey to net zero.

Research by the World Economic Forum (WEF) has estimated that $44 trillion of economic value generation – more than half of the world’s total GDP – is moderately or highly dependent on nature and its services and is therefore exposed to nature loss1. Whether you are talking about algae carbon sequestration, women’s empowerment, indigenous land rights or how to create a green jet fuel, much of the conversation was focused on the topic of finance.

The key question is how can we change the financial system to better include nature?

While new public funding pledges were made, in the context of the undelivered $100bn climate finance for poorer countries and the covid pandemic, it is easy to remain sceptical. John Kerry (US Special Presidential Envoy for Climate) highlighted the role of private finance on the first day of the conference. Speaking at the American pavilion he stated that “no government in the world has enough money to fuel this transition as rapidly as we need it but the private sector does.”

While there is disagreement on whether The Glasgow Climate Pact was a success or not, COP26 has left exhibitors, delegates, attendees, protesters, the press and the world at large with the impression that it will matter more than ever now, where we put our money. Money will be our vote as private citizens, as businesses and as countries. It is the driver. It is the tool we can use to put pressure on moving things into a higher gear. Or indeed the thing that will hold us back.

The debate is now one of innovation and transition – namely to the way we include (or continue to exclude) nature from our accounts as Prof Dasgupta discusses, and whether our traditional investment models can accommodate new parameters such as nature, biodiversity loss (upstream or downstream) and social impact.

During the GEFI Finance for Nature in Nature COP26 programme we heard from business and financial leaders, regulators, multilaterals, NGOs and others who discussed frameworks and impact measurements around nature. Despite the recognisable complexity of practical implementation and the interdependency of climate and nature, momentum is building around the critical need for markets to better align to a net zero world.

The development of the TNFD (Taskforce on Nature-related Financial Disclosures) was acknowledged as a very useful tool that will help to facilitate reporting on the risks in relation to nature. Andrew Mitchell, (founder of Global Canopy) reflected that “we cannot ignore nature and only focus on climate or carbon. Covid-19 is the perfect example of this. The pandemic is an environmental problem”. Tony Goldner, (Executive Director of TNFD) noted in the same high-level TNFD panel that it is not if but when nature related risk disclosure is coming, however, we still need to create a language around this. Edward Lockhart Mummery (Convenor at the Broadway Initiative) called for the need to “create a new financial architecture for nature investment”. There was also an acknowledgement that there was currently insufficient pricing of externalities in respect of nature and that natural assets needs to be viewed as assets rather than liabilities.

Although GEFI has been looking at financing nature since 2018, regular COP participants expressed their delight that nature has finally being catapulted up the formal agenda. This was noted as being a step change in comparison to previous COPs. Hosting the GEFI nature programme within a beautiful national park provided an inspiring backdrop for participants to move from talk to action. It was also evident that the nature conversation has moved beyond a collection of environmentalists, scientists and policy professionals with financial institutions and corporates willing not to only listen and learn but consider the practical steps they must take to address climate change and protect nature and biodiversity.

Another common theme, despite the criticism that this COP had been too exclusive and elitist, was that young and indigenous communities are key to solving this crisis and their voices must be heard. Indeed, some argue that, as those most impacted by climate change today and in the future, they should be leading the conversations. They should not just be in possession of just a seat at the table, but rather the entire table.

Usha Rao-Monari (Under-Secretary-General and Associate Administrator of the United Nations Development Programme) made this point at GEFI’s opening session for Finance for Nature in Nature where she questioned whether young and indigenous communities are being provided with an appropriate platform and, on the occasions when they, are she expressed concern that their voices have been drowned out by the noise. This was echoed throughout the conference noticeably by Elizabeth Mrema (Acting Executive Secretary of the UN Convention on Biological Diversity Secretariat) and Patricia Espinosa (Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC)) to mention a few.

The GEFI COP26 programme presented several examples of how financing nature and nature-based solutions (NbS) (including community-led project), is not only possible but profitable. So, if financing NbS is key to solving the climate crisis, including financing indigenous peoples, where are we now? Mrs Mrema noted that only 3% of global finance is being spent on NbS - this figure is too low if we are to keep 1.5C alive. The wholly unequal distribution of these resources is a further hindrance.

The question that echoed around the GEFI HQ during COP26 was: is it all too late?

Having explored the halls of the Blue Zone and Green Zone, as well as hosted an array of events throughout the two weeks, there is a dichotomy between those who contend that solving the nature crisis is complex and others convinced that it is pretty simple! Seeing practical examples of how it can be done provide hope but challenges remain around transferability and scale. The confidence boosted by speaking to sustainable finance leader is quickly tempered when the next conversation it with a finance leader who just doesn’t get it.

However, on reflection, the prevailing sentiment is that this is doable. In the words of Professor Stern (leading climate economist) “we have to invest to get there, but we will get tremendous returns. Just look at renewable power”. Despite some media spin the majority of people involved in COP26, and across the GEFI programme, are far from ready to give up. We need to learn from what works, what has not worked and collaborate to ensure that finance flows to the right places, at the right levels and at the right time. This required existing investment models and measurement and reporting frameworks to be redesigned.

Willie Watt (Chair of the Scottish National Investment Bank) stated that GDP is not a sustainable measure of growth, and the sustainability of growth itself has to be reassessed, suggesting big changes are needed. Nonetheless, Abyd Karmali (Managing Director, ESG & Sustainable Finance at Bank of America) noted that ESG has helped move the financial world towards nature-based finance, signalling that change is happening and can happen quickly.

At GEFI we remain committed to raising awareness and inspiring financial institutions across the globe to recognise their role in financing nature. In 2022 we look forward to building on the progress we have made this year by supporting the Biodiversity COP15 in April and the Climate COP27 in November.

We will work to keep the conversation open, relevant and critical to support the industry’s movement towards change, so get involved where you can.

View all of the videos from our Path to COP26 programme at https://www.efx.global/cop26/.

by GEFI

What will the UK Government's 'nature positive' response to Dasgupta mean for finance?

The UK government recently committed to a 'nature positive' response to Prof. Sir Partha Dasgupta's review of the Economics of Biodiversity. At Ethical Finance 2021 last week, Prof. Dasgupta called for a 'World Bank of Biodiversity', arguing that despite the complexity of nature and biodiversity, there are ways of reducing the issues to fairly simple economic principles. The biosphere should be treated as a global public good, argued Prof. Dasgupta at the annual Ethical Finance Summit, explaining that treating it as such would justify paying penalties for its desctruction.

In the UK Government's response to Prof. Dasgupta's review, it committed toi a number of actions ahead of the crucial COP26 climate summit in November. These include:

  • Committing up to £3 million additional support to the development of the Taskforce on Nature-related Financial Disclosures framework – a market-led initiative which will support business in assessing emerging nature-related risks and opportunities
  • Working with the Office for National Statistics to improve the way nature is incorporated into our national accounts
  • Further improving Government guidance for embedding environmental considerations into policy-making processes
  • Incorporating biodiversity into the UK Government Green Financing Framework
  • Joining the OECD Paris Collaborative on green budgeting, an initiative to encourage governments to incorporate climate and environmental considerations into their financial and fiscal decisions

These are all no doubt positive developments - necessary steps on the way to creating global frameworks that protect biodiversity and the biosphere. However, given the scale of the challenges we face, are they enough? The Living Planet Report 2020 reports stark statistics regarding biodiversity, including:

  • An average 68% decrease in population sizes of mammals, birds, amphibians, reptiles and fish between 1970 and 2016
  • A 94% decline for the tropical subregions of the Americas over the same period
  • 75% of the Earth’s ice-free land surface has already been significantly altered, most of the oceans are polluted
  • More than 85% of the area of wetlands has been lost
  • Until 1970, humanity’s Ecological Footprint was smaller than the Earth’s rate of regeneration. To feed and fuel our 21st century lifestyles, we are overusing the Earth’s biocapacity by at least 56%
  • Per person, our global stock of natural capital has declined by nearly 40% since the early 1990s, while produced capital has doubled and human capital has increased by 13%

Put simply, nature is in crisis, and as this crisis depens, it will affect our economies more and more. As the Dasgupta review pointed out nature suffers from a 'Tragedy of the Commons' effect - while the benefits for its destruction are privatised, the costs are public - a classic 'Principal-Agent problem', in the economists' parlance. To address this, we desparately need global cooperation between governments, finance, business and civil society on protecting biodiversity, and we need it now. THe steps the UK Government has committed to are a crucial step on the road to protecting nature with a 'World Bank for Biodiversity', but without committments to go further - to not just report and disclose impacts, but actively work to prevent them - there is a risk that this could be too little, too late.

The finance sector needs an urgent, credible plan to make TNFD reporting mandatory, as reporting in line with TCFD is likely to become soon. While TCFD's progress from idea to (in some territories) law has been admirably fast relative to the usual pace of public policy, it has still been too slow relative to the climate crisis. To respond to the crisis of nature and biodiversity that we are seeing, TNFD must be even faster.

At COP26, we will be exploring these issues as part of our Finance for Nature programme in our Path to COP26 campaign, with a dedicated focus on nature discussions in the unique setting of Loch Lomond. Click to learn more.

by GEFI