
Sector guidance: Additional guidance for financial institutions
This document provides proposed additional guidance for financial institutions on the TNFD’s recommended disclosures.
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OVERVIEW
Introduction
The Taskforce on Nature-related Financial Disclosures (TNFD) published this guidance to complement its core recommendations. It focuses on nature-related financial disclosures for banks, insurers, asset managers, and development financial institutions. Key areas addressed include governance, strategy, risk management, and metrics. Stakeholders are encouraged to pilot and provide feedback to refine future updates.
Additional guidance on the recommended disclosures
Governance
Financial institutions should ensure the board oversees nature-related dependencies, risks, and opportunities. Management must be involved in assessing and mitigating these impacts. Institutions must detail their human rights policies and engagement efforts, particularly concerning Indigenous Peoples and Local Communities. Collaboration with investees and clients is crucial to addressing nature-related risks.
Strategy
Organisations should identify nature-related risks and opportunities over various time horizons, assess impacts on their business models, and outline strategies for resilience. Financial institutions must consider sector-specific standards (e.g., forestry, fisheries) and provide insights into their due diligence and risk assessments. Scenario analysis is recommended to evaluate strategic resilience, and disclosures on priority geographic locations are essential.
Risk and impact management
Processes for identifying, assessing, and monitoring nature-related risks should integrate with broader risk management frameworks. Institutions should focus on downstream value chains—encompassing investments, lending, and insurance. Metrics for risk evaluation may include exposure to physical and transition risks, biodiversity impacts, and engagement effectiveness.
Metrics and targets
Disclosures should include metrics on nature-related risks, dependencies, and impacts at the appropriate operational level (e.g., geographic or portfolio-wide). Institutions should use both core global metrics and additional sector-specific indicators. Performance against nature-related targets should align with broader global frameworks, such as the Kunming-Montreal Global Biodiversity Framework.
Additional guidance on metrics, targets, and transition plans
Risks and opportunities
Metrics for risk assessment include financial exposure to nature-related risks, often calculated using heatmaps and scenario analyses. Examples include Value at Risk models tailored to nature-related concerns.
Dependencies and impacts
Core metrics address material dependencies on ecosystems and biodiversity. Data limitations mean initial assessments may rely on proxies or aggregated estimates, but disclosures should progress toward detailed dependency and impact evaluations.
Core sector disclosure metrics
Two key metrics are recommended:
- Exposure to high-impact sectors: Institutions should quantify financial exposure to sectors with significant nature-related dependencies (e.g., agriculture, mining).
- Exposure to sensitive locations: Disclosure of financial exposure to activities in biodiversity-rich or ecologically sensitive areas is essential.
Additional disclosure metrics
Institutions are encouraged to disclose additional metrics aligned with drivers of nature change, such as deforestation and water use. Aggregated metrics, like biodiversity footprints, may simplify disclosure but require transparency about underlying assumptions.
Data limitations and future developments
Institutions face challenges due to limited nature-related data availability. Collaboration with investees and use of evolving tools and methodologies can address this gap. Disclosures should reflect these limitations while striving for transparency and accuracy.