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Challenges exist in enforcing TNFD recommendations: Pivotal

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Companies and their investors face a new disclosure regime to support global efforts to protect nature and biodiversity.

This week the Taskforce for Nature-related Financial Disclosures (TNFD) published 14 recommendations to “encourage and facilitate a shift in the mindset and behaviour of companies and financial institutions through enterprise and portfolio risk management and mainstream corporate reporting”. 

The disclosures – which are voluntary for the time being – are designed “to promote the provision of clear, comparable and consistent information by companies to investors and other providers of capital” which should drive investment towards projects with “nature-positive” outcomes.

Stakeholders across government and financial and environmental organisations have come out in support of the recommendations including Eric Usher, Head of the United Nations Environment Programme’s Finance Initiative who describes them as “an important milestone on the journey towards a nature-positive economy, providing clarity, consistency and comparability for market-uptake.”

He adds “We will continue to drive the financial sector’s action on nature through capacity building, piloting and other technical support with our members.”

Meanwhile Dr Richard Mattison, Vice Chair, S&P Global Sustainable1, says: “Eighty-five per cent of the world’s largest companies have a significant dependency on nature across their direct operations, illustrating the importance of nature to corporates and investors. The [TNFD] recommendations address a vital need as, quite simply, nature risk is financial risk.”

But according to Zoe Balmforth, ecologist and Co-founder of Pivotal a biodiversity data and analytics company, for TNFD to succeed it needs reliable, consistent and provable disclosures from companies on which to base their investment decisions. And for that to happen, companies need access to data sets that help reveal their impact on nature.

The Taskforce says it provides a set of metrics for measurement and a suite of guidance to help organisations get started on nature-related assessment and disclosure, but there are, Balmforth says, challenges in gathering that data across supply chains, particularly for large global organisations.

Speaking to IAM from Climate Week in New York this week Balmforth says: “I have conducted an impact assessment for a big food company and a rough estimate of their land footprint [in terms of impact on nature] is the size of a country, but they have no idea where most of that impact happens. They might know that they get some of their soy from Brazil but is it from a part of the country that was deforested 100 years ago or is it damaging the last remaining rainforests?”

Balmforth says that without this granular detail it is impossible for companies – and their investors to get a handle on their impact and report it accurately. 

“The risk is that companies just decide this is too difficult or there is too much risk from relying on estimates, so they choose not to report. You have to remember that TNFD is voluntary and without the imperative to disclose, maybe companies will choose not to.”

Pivotal captures biodiversity data “on the ground using a range of technologies. All the data we collect is organised and analysed first with machine learning, then quality-checked by ecosystem experts”.

Balmforth adds: “We’ve got a community of experts that log in and verify whether the machine learning is right or wrong. By using technology, the data is transparent because it’s auditable. You can see the whole process. And then we output different metrics for biodiversity for example species diversity or habitat condition, and that gives us real numbers of the state of nature. “

Returning to the voluntary nature of TNFD, Balmforth says there needs to be a requirement – be that imposed by investors or policymakers – on companies to report impact, even if those disclosures are based on estimates.

“There needs to be a need [to report] because businesses will do what they are required to do. And that need could come from investors. It doesn’t have to come from governments because they are moving pretty slowly on this.”

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