In the wake of the widespread influence of the Taskforce for Climate-related Financial Disclosures (TCFD) in 2017, a group of governments, financial institutions, companies and organisations teamed up to initiate a Taskforce on Nature-related Financial Disclosures (TNFD), the final framework for which will be published in September. The taskforce will guide disclosures of “nature-related dependencies, impacts, risks and opportunities,” and may inform a future standard from the International Sustainability Standards Board, which is currently consulting on proposed research projects (open for comment until the end this month)  including one that would focus on sustainability-related risks and opportunities associated biodiversity, ecosystems and ecosystem services, “to lay the groundwork for potential future standard-setting.”

There are illuminating parallels between efforts to scale down the science, principles and goal-making of multilateral responses to climate change into the decision-making frameworks of individual governments, companies and banks and efforts now to do the same for biodiversity. For its metrics, the TNFD draws on the Kunming-Montreal Global Biodiversity Framework, adopted at the 15th Conference of the Parties of the Convention on Biological Diversity in December 2022. This is a hugely ambitious document and the actions of corporations and financial institutions will be crucial to achieving its goals and targets. The equivalent of the IPCC in the arena of biodiversity is the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), created in 2012. If you read the IPCC’s Sixth Assessment Report, or the IPBES’s work, you get a complex and comprehensive picture of the dire state of the planetary systems that underpin our existence and the cultural, social and economic overhaul needed to fix these problems.

It’s a daunting task to accommodate the breadth and depth of what these assessments reveal about our world into the language and forms of financial disclosures.

The logic behind the TNFD is that disclosure is a path to enlightenment: “Corporates are failing to consider how their supply chains, operations and enterprise values depend on, and impact, nature. In turn, lenders and investors are not assessing nature-related risks and opportunities across their loan books and investment portfolios.” Once they begin to consider this, unsustainable practices will be revealed to be financially risky and will change. According to the Network for Greening the Financial System, “A systematic understanding of the economic importance of biodiversity requires an assessment of the unique role of natural capital as the fundamental enabler of economic activity” and is crucial to reversing the rapidly deteriorating trajectory of that capital. This makes sense, but as we have seen in the practice of physical climate risk disclosure, it will be important for such disclosures to acknowledge what is unknown and unquantified.

The IPBES Assessment Report says that transformative change, “a fundamental, system-wide reorganization across technological, economic and social factors, including paradigms, goals and values” is the only way now to achieve sustainability – to stop borrowing from the future and accruing ever greater ecological debt. The developers of the TNFD appreciate this, but whether quantifying isolated elements of nature dependencies, counting trees and species, tonnes of soil and megalitres of water, will add up to that paradigm change depends on what companies and financial institutions do with that information – whether they connect the dots.

As our company knows well, calculating the impacts of change in complex systems where human activity interacts with the world around us is no small task. Turning these into the financial metrics that drive corporate decision making is even harder. Incomplete calculation has the perverse effect of downplaying those impacts if the limits and uncertainties of modelling are not conveyed, if we price nature without re-valuing it.

So where do we start?  Perhaps a good place is by reading  the summary reports of the IPCC’s and the IPBES’s Global Assessment Report on Biodiversity and Ecosystem Services. At least then some of the unknown unknowns will be known.