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Banks, insurer support task force on nature-related financial disclosures
TNFD aims to formulate new reporting mechanism on risks posed by environmental degration and biodiversity loss
The Asset 23 Jul 2020

At least ten financial institutions have endorsed a UN-backed initiative to form a Task Force on Nature-related Financial Disclosures (TNFD) as part of efforts to create a new reporting mechanism on the risks posed by environmental degradation and biodiversity loss.

The TNFD, which is expected to launch in the first quarter of 2021, will complement the Task Force on Climate-related Financial Disclosures (TCFD). It is also supported by the UK and Swiss governments along with the World Business Council for Sustainable Development.

The financial institutions that have already signed up to the TNFD are AXA, BNP Paribas, Development Bank of Southern Africa, DBS Bank, Rabobank,  FirstRand Group,  International Finance Corporation, Standard Chartered, Storebrand Asset Management, Yes Bank, and World Bank.

The initiative is being coordinated by Global Canopy, the United Nations Development Programme (UNDP), the United Nations Environment Programme Finance Initiative (UNEPFI), and the World Wide Fund for Nature (WWF), which plan to form a working group in the third quarter of this year.

According to its website, TNDF aims to redirect financial flows at scale towards “nature-positive activities to allow nature and people to flourish”.

Highlighting the extent of nature loss, the TNDF website notes that humanity has already wiped out 83% of wild mammals and half of all plants, and severely altered three-quarters of ice-free land and two-thirds of marine environments.

The raging Covid-19 pandemic can be related to illegal wildlife trade and environmental degradation, showing that nature-related risks can impact the economy faster than climate risks, according to the website.

The World Economic Forum (WEF) estimates that US$44 trillion of economic value generation, more than 50% of global GDP, is moderately or highly dependent on nature. As such, the risks of inaction are immense, but the opportunities from action are equally huge. Action for nature-positive transitions could generate up to US$10.1 trillion in annual business value and create 395 million jobs by 2030, according to the WEF.

Better understanding

The TNDF, through an informal working group, will try to resolve the reporting, metrics, and data needs of financial institutions that will enable them to better understand their risks, dependencies and impacts on nature. In collaboration with the corporate sector, the task force plans to develop frameworks in 2021 and test them early in 2022 before they are made available worldwide.

The task force will also seek to build awareness and capacity to reduce the negative impacts of the financial sector on nature and biodiversity, as well as identify new nature-positive investment and lending opportunities.

Commenting on the TNFD plan, UK International Environment Minister Lord Goldsmith says: “The new task force will complement the reporting recommendations that already exist for climate-related risks, to give investors, lenders and insurers a complete picture of their environmental risks.”

Andrew Mitchell, founder and senior advisor to Global Canopy, observes: “If we don’t change the movement of money, we will finance ourselves into extinction. That is why we need a TNFD.”

For his part, DBS Bank chief sustainability officer Mikkel Larsen notes: “The rapid loss of biodiversity and nature is among the most critical and real issues threatening the world today. Even though we are also battling the Covid-19 pandemic, we must not hit the brakes on addressing climate change and biodiversity loss, as the irreversible damage caused has been ongoing for several years and continues to show signs of acceleration.”

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