New global disclosure framework marks a turning point for nature risk governance

Building a bridge between the TNFD and IFRS S1 10 min read

The IFRS Sustainability Disclosure Practice Statement 1 Nature-related Disclosures (the Practice Statement) will, once finalised, provide a global blueprint for robust assessment and disclosure of the impact of nature-related risks and opportunities on a company's financial position, performance and prospects.

In this Insight, we look at how its release is further evidence that nature governance and disclosure is maturing—following closely behind climate governance and disclosure—and what companies should be doing now.

Key takeaways

• The Practice Statement—which the International Sustainability Standards Board (the ISSB) released on 22 October 2026—could, when finalised, facilitate Australia and other jurisdictions in mandating nature-related disclosures.
• By presenting nature topics in a format that looks and feels like the familiar International Financial Reporting Standards (IFRS) disclosure standards, it could make nature disclosures more achievable, and improve their quality, consistency and comparability.
• It remains to be seen whether Australia, or any other jurisdictions, will develop mandatory requirements based on it.
• Entities should establish a forward strategy that is responsive to the material nature-related risks and opportunities, investor expectations and evolving disclosure standards, and consider the risks and benefits of commencing disclosures under the Practice Statement on a voluntary basis.

Who in your organisation needs to know about this?

General counsel and in-house legal teams, finance and audit functions, sustainability and ESG teams, and directors across sectors from financial services, metals and mining, oil and gas, chemicals, forestry, pulp and paper, food and agriculture, and utilities to biotechnology and pharmaceuticals.

The 'climate first but not only' story

Since 196 countries signed the Paris Agreement in 2015, the target to limit climate change to 1.5°C above pre-industrial averages has been the watermark for transition to a low-carbon economy, against which companies are increasingly expected (and, in some cases, required) to plan and disclose.

As the Paris Agreement is for the climate transition, the 2022 Kunming-Montreal Global Biodiversity Framework (the GBF) is the north star for the nature transition. This is a global roadmap to halt and reverse nature loss by 2030, and live in harmony with nature by 2050. Key among the GBF's 23 short-term goals are to halt human-induced extinction of threatened species by 2030, to ensure at least 30% of degraded land and water ecosystems are under effective restoration by 2030, and at least 30% of ecosystems are under conservation by the same date. As countries pursue the GBF goals through domestic legislation, this will impact companies, leading to financially material nature transition risks and opportunities.

Australia's reforms to the Environment Protection and Biodiversity Conservation Act 1999 (Cth) are a case in point, with a new statutory requirement for proponents to achieve a 'net gain' to compensate for impacts on protected matters, and the outright prohibition on projects that have an unacceptable impact on nature. GBF-aligned reforms also produce nature-related opportunities, such as the biodiversity market the Federal Government's Nature Repair Market has created, and the price premium available to vendors of carbon credits with nature co-benefits.

Nature physical risks are also increasingly framed as a material risk to enterprise value, the economy and the financial system's stability. Globally, deforestation, water and pollinator risk are hot-button issues. In 2025, Climate COP30 put a spotlight on deforestation as a global priority, with a multilateral process now in place to develop a roadmap for halting and reversing deforestation and forest degradation by 2030. Deforestation has often served as a proxy for nature risk, with investors setting out their expectations on deforestation specifically. Yet, businesses and financial institutions are waking up to the breadth and depth of nature risks arising from the impacts and dependencies on the natural world. Too much or too little water creates risks to physical assets and supply chains, with some cities teetering on 'day zero' scenarios. Pollinator risks—eg where pesticides have a negative impact on non-target pollinators, creating reputational risks with local communities for agribusiness—have been featured in the mainstream media, with emerging evidence of falls in profitability forecasts for agribusiness.¹

At a recent keynote address at a symposium at the University of Melbourne, former Treasury Secretary Dr Ken Henry declared that over the next 40 years, the negative impact of nature degradation on gross domestic product will outweigh any positive impact of AI.² Nature-related risks have climbed up the list in the annual World Economic Forum's Global Risk Assessments, with biodiversity loss and ecosystem collapse moving this year to the number two risk over a 10-year horizon.

The 'nature follows climate' trajectory continues with directors' and officers' duties. Following the landmark 'Hutley Opinion' on climate change, in 2023, counsel Sebastian Hartford-Davis and Zoe Bush opined that directors who fail to consider nature-related risks could be found liable for breaching their duty of care and diligence under section 180(1) of the Corporations Act 2001 (Cth).³ The situation is similar with trustee duties under the Superannuation Industry (Supervision) Act 1993 (Cth),⁴ and prudential risk management requirements imposed on entities regulated by the Australian Prudential Regulatory Authority (APRA).⁵

The Practice Statement in context 

In this context, the Taskforce on Nature-related Financial Disclosures (the TNFD) exists as a framework for businesses wanting to uplift their nature risk governance and disclosure, and utilises the four disclosure pillars of the Task Force on Climate-related Financial Disclosures.

TNFD takeup has been limited, owing to data and methodology challenges, and mandatory climate reporting impacting financial resources and management. Just 27 Australian organisations are listed as adopters,⁶ and only 2% of US companies in the Russell 1000 apply the TNFD framework.⁷

The Federal Government has sent a clear signal that it is interested in supercharging this kind of disclosure. In its 2024 Sustainable Finance Roadmap, it set a 'climate first but not only' approach, signalling an intention to integrate nature-related risks and opportunities into financial market disclosures. And, indeed, Australia's mandatory climate-related reporting regime is structured so that it can be applied to other sustainability risks, including nature.

The ISSB's IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (and its Australian equivalent, AASB S1), while general in nature, already provide a framework for disclosure of material nature-related risks and opportunities that could reasonably be expected to affect an entity's prospects. The draft Practice Statement gives specificity on how to go about doing so. It sets out what nature-related information to disclose, as well as how to consider aspects specific to nature in preparing material information on nature-related financial risks and opportunities. A central idea in the Practice Statement is that '[c]hanges in the quality, availability or affordability of environmental resources and associated benefits, as well as efforts to mitigate and adapt to those changes—including efforts to conserve, restore or regenerate those resources and associated benefits—can give rise to nature-related risks and opportunities that could reasonably be expected to affect an entity’s prospects' (paragraph 9 of the Practice Statement).

Key aspects of the Practice Statement

The draft Practice Statement incorporates concepts and definitions such as 'ecosystem services' from the TNFD, as well as illustrative examples. It also draws on the TNFD's 'locate, evaluate, assess, and prepare' (LEAP) (recently updated to LEAP 2.0) approach to identifying and assessing impacts and dependencies on nature.

For reporting entities familiar with IFRS S1 and S2 (equivalent to AASB S1 and S2), the key questions are what the Practice Statement retains, and what is new or expanded. An overview of the main areas is below:

• Focus on location: The physical location of an entity's assets and activities along its value chain, as well as the associated social, legal and regulatory factors, means that location characteristics have increased prominence in assessments of nature-related risks and opportunities, compared with climate. Judgments on which location information to use for assessments and what to disclose will be some of the most critical an entity will make under the Practice Statement; for this reason, it provides illustrative guidance on determining the appropriate geographical scale for information on water-related risk.
• Focus on stakeholder engagement: The Practice Statement recognises that the social characteristics of location, such as an entity's interactions with Indigenous Peoples, Local Communities and affected stakeholders, can support the identification of nature-related risks and opportunities, and engagement may be crucial to managing them.
• Nature-related scenario analysis: It introduces the concept of nature-related scenario analysis, and provides guidance on how it can inform the assessment of an entity's resilience to nature-related risks. While drawing on concepts familiar from climate-related scenario analysis—eg an entity should use an approach commensurate with its circumstances, considering its skills, capabilities and resources—for many entities, this will be a new practice, with fewer resources available than for climate scenario analysis. There is an expectation that it will be more focused on location and particular assets, or parts, of the business than climate scenario analysis. It is likely that this will spur the publication of new nature scenarios, and more scenarios that integrate climate and nature analysis.
• Nature-related transition disclosures: Regardless of whether an entity has a formal nature transition plan, it should disclose its adaptation activities and resources allocated to responding to nature-related risks and opportunities in its strategy and decision-making.
• Nature-related metrics: Two new nature metrics are introduced. Entities applying the Practice Statement must disclose the amount and percentage of assets or business activities (a) vulnerable to nature-related risks and (b) aligned with nature-related opportunities. Additionally, entities may refer to TNFD disclosure metrics, European Sustainability Reporting Standards (ESRS), Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) frameworks to identify other material nature metrics they wish to disclose, helping those that already apply one or other of the 'alphabet soup' of existing reporting frameworks.
• Nature-climate nexus: The Practice Statement recognises that nature and climate are closely connected, with varying implications for disclosure. Entities should provide information on the synergies and trade-offs relevant to managing nature- and climate-related risks. Trade-offs—eg where investment in onsite renewable generation mitigates climate-related transition risk, but could give rise to nature-related physical risks—are a significant issue for many entities. Additionally, entities may choose to undertake integrated nature and climate scenario analysis.
• Connected information: The Practice Statement requires entities to connect the dots between nature disclosures and with those in financial statements. However, it takes the next step (albeit a natural one) requiring information on connections between nature- and climate-related risks and opportunities, and how those connections are taken into account in oversight, strategy and risk management. In jurisdictions such as Australia where IFRS S1 is voluntary, entities may be more willing to disclose these nature-climate connections in a voluntary nature report than in the mandatory climate report.
• Proportionality mechanisms: As flagged with the approach to nature-related scenario analysis, the Practice Statement retains the proportionality mechanisms of IFRS S1 and S2, as well as extending them to the new requirements for nature-related scenario analysis and metrics described above.
• Transition relief: First-year transition reliefs for comparative information will be available, although there is no equivalent to relief for scope 3 emissions, as the two new metrics will apply from year one.

In this way, the Practice Statement builds a sensible bridge between the TNFD and IFRS S1, by distilling key elements of the TNFD, and linking them to the conceptual foundations and core content disclosure requirements of IFRS S1 through a single-materiality lens. Although still complicated, by presenting nature topics in a format that looks and feels like the familiar IFRS disclosure standards, the Practice Statement could make nature disclosures more achievable for entities, and improve their quality, consistency and comparability, as sought by investors.

It remains to be seen whether Australia, or any other jurisdictions, will develop mandatory requirements based on the Practice Statement. The most likely candidates will be those in which IFRS S1 is or will become mandatory—ie Hong Kong, Malaysia, Pakistan, Sri Lanka, Bangladesh, Türkiye, Qatar, Kenya, Nigeria, Tanzania, Zambia, Zimbabwe, Chile, Costa Rica and Mexico.⁸

In the Australian context, despite the overarching signals in the Sustainable Finance Roadmap, financial regulators have, for the time being, kept their powder dry on how companies and officers should be managing nature risk under existing regulatory settings. This contrasts with the vocal and coordinated efforts by the Australian Securities and Investments Commission, APRA, the AASB and Reserve Bank of Australia over the past decade in relation to climate change.

The investor angle

In the absence of mandatory disclosure and clear regulatory expectations, advocacy efforts through shareholder resolutions and litigation are following a similar trajectory to climate. Deforestation is a coordinated focus for shareholder advocacy this Australian AGM season. A campaign by investors SIX, Australian Ethical Investment and Ethinvest, combining with the Australian Conservation Foundation, has led to shareholder resolutions at the big four banks on their agricultural lending linked to deforestation. Glass Lewis has confirmed that salmon farming activism by SIX and others has evolved into a 'vote no' campaign against the Chair of Woolworths. Early litigation, such as Rossiter v ANZ, combines climate and nature, with allegations of a failure to manage the twin risks of biodiversity loss and climate change.⁹ A recent study by the Banque de France found that 'nature-related litigation is not only an idiosyncratic legal issue for individual firms, but a growing source of market-wide contagion and sectoral repricing', while a study by RepRisk has found that misrepresentations relating to ecosystems and biodiversity have overtaken climate issues for greenwashing risk.

There are, notwithstanding, many headwinds to progress in nature risk governance and disclosure. The draft Practice Statement and uplift in investor and stakeholder expectations come within the context of an increasingly busy risk landscape. Management and resource distraction from navigating mandatory climate reporting under AASB S2 is colliding with downward pressure on ESG headcounts and budgets. Boards and organisations may be best served by an approach grounded in broader strategic foresight: how can the learnings from climate governance and disclosure, such as scenario analysis and pre-mortems, apply to the gamut of emerging risk issues (including nature) facing our organisation today? The draft Practice Statements adds to these tools.

What can companies do?

• Get started. As a first step, whether using LEAP 2.0 or otherwise, establish a baseline understanding of nature-related impacts and dependencies in your business and value chain, and the extent to which they are material.
• Fortify compliance. Test whether current approaches to nature-related risks and opportunities support the board and executive officers to comply with their corporate duties, and whether disclosures meet existing requirements—eg those that apply to operating and financial reviews and prospectuses.
• Monitor investor attitudes. Be ready to respond to investor relations queries on your organisation's readiness for a uplift in nature risk governance and disclosure.
• Engage. Keep an eye out for any submissions to the ISSB consultation on the draft Practice Statement from key investor groups, which we expect will use investor organisations to have a meaningful opportunity to influence the statements. In particular, the ISSB is interested in feedback on the balance between cost-effectiveness for reporting entities and decision-usefulness for investors.
• Set a roadmap. Establish a forward strategy that is responsive to the material nature-related risks and opportunities, investor expectations, and evolving disclosure standards. Start considering the risks and benefits of commencing disclosures under the Practice Statement on a voluntary basis.