The new draft Taskforce for Nature-Related Financial Disclosure framework: is biodiversity next in corporate ESG reporting?

By Jillian Button, Emily Turnbull, Heidi Ruckert
Climate Change Environment, Social, Governance

A natural progression 7 min read

The Taskforce for Nature-Related Financial Disclosures (the TNFD) recently released the first beta version of its reporting framework. Modelled on the Taskforce for Climate-Related Financial Disclosures (the TCFD), the framework seeks to establish a method for companies to identify, assess and report on material nature-related risks and opportunities.

Key takeaways

  • On 15 March 2022, the TNFD released the first beta version of its new framework, providing recommendations and guidance on the disclosure of nature-related risks and opportunities. It is now open for public comment, with numerous versions expected until the final release, currently planned for September 2023.
  • Biodiversity and ecosystem degradation is occurring at an unprecedented rate and presents physical, transitional and systemic risks for businesses. The TNFD encourages companies to identify these risks and factor them into decision making, while simultaneously considering nature-related opportunities.
  • As it is modelled on the TCFD, the TNFD framework should feel familiar to businesses. With TCFD-aligned reporting becoming mandatory in certain countries (and increasingly adopted worldwide), companies should consider the framework and how best to plan and prepare for nature-related risks and opportunities.
  • The release of the draft framework is a reminder for companies to consider whether biodiversity-related risks are material to business prospects and warrant disclosure to shareholders under the Corporations Act 2001 (Cth) (the Corporations Act).
  • Boards and senior executives should also expect near-term scrutiny of how they are discharging their statutory duties regarding material biodiversity and nature-related risks and opportunities.

Why is biodiversity loss relevant to companies?

Alarmingly, the earth is currently undergoing one of the most severe mass extinctions of all time, approximately 1000 times higher than the expected extinction rate. Australia has seen a decline in federally listed threatened species by around 60% since 2000, which is significant given our unique biodiversity represents 7-10% of the earth's animal species and 85% of plant species.

Biodiversity is considered integral to businesses and the broader economy. According to the TNFD, over half of the global gross domestic product is dependent on nature, and the World Economic Forum predicts biodiversity will have the second biggest impact on businesses over the next decade, following climate change.

A decline in biodiversity presents financial risks. The Australian Council of Superannuation Investors has estimated Australia's natural capital value at A$6.4 trillion1. According to a recent assessment, under a 'business as usual' scenario, Australia stands to lose US$20 billion from the national economy every year by 2050 from nature loss. This makes us one of the most biodiversity risk-exposed countries.

This is not just a macro-economic issue, as individual companies may also be materially affected. For example, agricultural companies could be negatively impacted by the loss of native vegetation, with a decline in native pollinators impacting produce yields.2 Similarly, mining operations may be directly affected by changing regulations.

Despite this, a recent survey of 2,500 companies in high or medium-risk sectors found only 23% disclosed biodiversity risk in their corporate reporting. This suggests that current reporting on biodiversity loss risk does not reflect the severity of the physical, transitional and systemic risks associated with nature degradation and biodiversity loss.3

What is the Taskforce for Nature-Related Financial Disclosures?

The TNFD is a global, market-led initiative, established to provide businesses with an integrated methodology for quantifying and disclosing nature-related risks and opportunities. It aims for consistency with existing initiatives, frameworks and standards, including the emerging global baseline for sustainability reporting being developed by the International Sustainability Standards Board (the ISSB).

The beta version of the TNFD framework, released on 15 March 2022, consists of three core components:

  1. foundational guidance on concepts and definitions to aid understanding of nature-based risks and opportunities;
  2. the TNFD's draft disclosure recommendations; and
  3. an introduction to the 'Locate, Evaluate, Assess and Prepare' (LEAP) assessment process for assessing nature-related risks and opportunities.

LEAP was developed in response to the call for accessible guidance on how to understand and determine nature-related risks and opportunities. This includes:

  • locate interfaces with nature;
  • evaluate dependencies on nature;
  • assess risks and opportunities; and
  • prepare to respond and report nature-related risks and opportunities.

What are the key classes of risk?

The TNFD outlines three categories for businesses to assess, manage and disclose nature-related risks.

Classes of risk in the draft TNFD
Physical risks

Physical risks are direct risks from an organisation's dependence on nature. These include:

  • changes to the balance of ecosystems flowing from land degradation, biodiversity loss, climate change and diseases;
  • supply chain disruptions and price volatility as resources become scarcer; and
  • destruction or devaluation of real assets due to natural disasters or land erosion.
Transition risks

Transition risks result from misalignment between a business's management and the surrounding landscape. These fall under four categories:

  1. Policy and legal changes, including new regulations, and legal requirements such as reporting, land and resource access, licensing and permits.
  2. Market shifts from pressure to report and manage ESG risks, including biodiversity.
  3. Poor management of new technology and innovation, such as genetically modified organisms, that leads to adverse biological impacts.

Reputational risks associated with a negative impact on nature and biodiversity.

Systemic risks

Systemic risks are risks from the breakdown of an entire system which can lead to financial instability, the collapse of ecosystems and increased risks for companies.

For example, the collapse of the Great Barrier Reef would have a significant financial impact on the Australian tourism sector.

What are the key opportunities?

Nature-related opportunities are a key element of the TNFD. They are described as positive outcomes for companies and the environment that result from either reducing impacts or contributing to natural restoration. For example, the co-benefits of investing in revegetation-focused carbon offset projects could include increasing biodiversity by promoting native vegetation and improving animal habitats. Similarly, the projected growth in green finance demonstrates new areas of opportunity for nature-positive outcomes, while at the same time providing a financial benefit.

Similar to risks, opportunities can either be physical or transitional. Physical opportunities include increasing resource availability, improving soil health, flood risk mitigation, and increased produce yields leading to decreased costs. Transitional opportunities involve regulations to establish more productive, profitable markets and increase business reputation.

Key recommended disclosures and how they compare to the TCFD

The disclosure framework in the draft TNFD is modelled closely on the TCFD. If finalised, it means businesses that already report under the TCFD can take a similar approach to TNFD disclosure. This should facilitate consistency and encourage a more integrated disclosure regime, while also recognising the interconnection between climate and nature-related risks.

For example, the disclosure frameworks under the TNFD and TCFD are based on the same four pillars of governance, strategy, risk management, and metrics and targets. In the TNFD framework, these recommend disclosure of:

  • governance: how nature-related risks and opportunities are overseen by the board and assessed by management to evaluate whether appropriate attention is given;
  • strategy: the actual and potential impacts of nature-related risks and opportunities on business, strategy and financial planning over the short, medium and long term to inform expectations of future performance;
  • risk management: how the organisation identifies, assesses and manages nature-related risks and opportunities; and
  • metrics and targets: the business's measurement and monitoring approach allowing for the assessment of potential risk-adjusted returns, exposure, adoption and financial obligations relating to nature-related risks and opportunities.

At this stage, notable differences between the TCFD and TNFD are:

  • the introduction of systemic risks arising from the failure of an entire system, rather than the individual parts;
  • the requirement to consider the organisation's interaction with low integrity ecosystems, high importance ecosystems or areas of water stress;
  • the consideration of location in identifying a company's dependencies on nature and the assessment of risks and opportunities to business longevity and profitability;
  • the introduction of the LEAP assessment process for risks and opportunities; and
  • the alignment to useful qualitative sustainability-related information identified in the ISSB Prototype and European Financial Reporting Advisory Group documentation.

Next steps

There is a growing expectation among Australian financial regulators that businesses will disclose climate-related risks, contributing to take-up of the TCFD. While Australian regulators have not yet commented at length on their expectations for nature-related disclosures, much of the discourse from ASIC, the ASX Corporate Governance Council and APRA on climate change can be readily transposed and applied to biodiversity risks and opportunities. The release of the draft TNFD provides an impetus for companies to start working in earnest to better identify, assess and disclose nature-related risks and opportunities alongside those for the climate.

Companies should consider whether to disclose biodiversity risks in their standard corporate reporting, including Operating and Financial Reviews under section 299A(1) and company prospectuses under s710 of the Corporations Act. Now is also a good time for boards and senior executives to explore whether existing governance and risk management arrangements for biodiversity and nature-related matters are suitable for discharging their duties to shareholders. 

Looking ahead, in addition to monitoring the evolution of the TNFD, we recommend businesses actively monitor for broader policy, industry and stakeholder changes concerning biodiversity risk, which we expect to be rapid. For example, the Australian Sustainable Finance Institute has signalled biodiversity as one of its four strategic priorities in 2022, and the Federal Government has launched the new Carbon + Biodiversity Pilot and signalled an intention to launch a national biodiversity offset trading scheme. The state of knowledge will also develop on how biodiversity loss can impact industries and businesses, which will inform regulator expectations.

Please contact a member of our team if you would like to discuss how to plan and prepare for the new TNFD framework, understand corporate disclosure requirements and enhance biodiversity aspects within your ESG strategy.


  1. Australian Council of Superannuation Investors (ASCI), Biodiversity: Unlocking Natural Capital Value for Australian Investors (November 2021) <ACSI-Biodiversity-Research-Report.Nov21.pdf>

  2. Australian Council of Superannuation Investors (ASCI), Biodiversity: Unlocking Natural Capital Value for Australian Investors (November 2021) <ACSI-Biodiversity-Research-Report.Nov21.pdf>

  3. Australian Council of Superannuation Investors (ASCI), Biodiversity: Unlocking Natural Capital Value for Australian Investors (November 2021) <ACSI-Biodiversity-Research-Report.Nov21.pdf>

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