The finance sector is coming together to apply its collective commercial muscle to tackling the nature crisis. 34 financial institutions from across five continents have joined forces with the governments of UK, France, Peru and Switzerland, as well as financial regulators from Argentina and Mexico in an Informal Working Group. The group, which has 62 members in total, including the World Bank, the OECD and a number of multinational companies, will bring together a TNFD next year.
With limited company disclosure on their impacts and dependencies on nature, financial institutions struggle to assess risks. Financial institutions need standardised metrics that allow them to compare nature risk across companies. Crucially, they also need forward-looking scenarios, so that they can analyse how companies will be exposed if ecosystems degrade further or if nature-related policies change. At the moment, scenario analysis is largely non-existent for nature.
By developing an international reporting standard, the TNFD will cater to the nature-related reporting, metrics and data needs of financial institutions.
Instead of company pledges and commitments that are often ignored or difficult to verify, having a reporting standard is a real instrument that can help companies take action, and be accountable for their nature-related risks. It is a long time in coming.