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Romie Goedicke on the TNFD and biodiversity

Romie Goedicke Co-Heads the nature thematic at the UNEP Finance Initiative. She also leads the work on nature-related risk and disclosure and manages the work on mainstreaming and capacity building. In these ways, she supports the work on the alignment of financial flows with the goals of the GBF. Romie joined UNEP FI in 2021, prior to joining she led the work of financial sector and business engagement at IUCN Netherlands.

How did the TNFD originate?

For more than 30 years UNEP FI has been bringing the UN together with financial institutions worldwide to shape the sustainable finance agenda. We’ve established the world’s foremost sustainability frameworks that help the finance industry address global environmental, social and governance (ESG) challenges. And as such we found it part of our core mission to be part of establishing the TNFD, alongside UNDP, WWF and Global Canopy. And have been providing technical support to the TNFD and its development since then.

Financial institutions and companies are still missing information needed to understand how nature impacts immediate financial performance or the longer-term financial risks that may arise from the organisation’s interactions with nature. Better information will play a key role in allowing financial institutions and companies to incorporate nature-related risks and opportunities into their strategic planning, risk management and asset allocation decisions. The Taskforce on Nature-related Financial Disclosures (TNFD) is developing a risk management and disclosure framework for organisations to report and act on evolving nature-related risks, with the ultimate aim of supporting a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.

UNEP FI’s work on nature-related risk and disclosure aims to translate this new topic into actionable steps for financial institutions taking advantage of UNEP and UNEP FI´s experience in existing programs. This includes steps to identify nature-related risks, conduct resulting risk analyses, manage these risks and identify nature-related opportunities. The approach starts from a risk lens and then uses peer-to-peer learning, via the UNEP FI-led piloting program in support of TNFD, to provide a shared learning journey. This shall drive the three industry groups´ increased awareness and resulting collective commitment towards nature-positive goals.

How has UNEP FI been supporting the development of the TNFD since its inception?

UNEP FI is leading the financial sector pilots, testing the beta framework with over 50 financial institutions across geographies and sectors to ensure it meets the ambitious needs of the market. The pilots have ensured financial institutions could participate in the design of the TNFD framework, providing lessons learned, recommendations and insights for future iterations.

‘Yes, we can’. The pilot process showed that financial institutions are ready and able to apply the proposed recommendations set out by the TNFD. On the one hand, there was a good awareness of the need to address nature-related risk as an emerging material risk. In addition, organisations are building experience and expertise to apply the TNFD framework in their organisations. Although most participants marked this as a starting point of their TNFD journey, they almost all intend to continue this work with more piloting work via UNEP FI (with a second deep dive pilot starting soon) or via other processes.

With regards to the piloting process itself, one interesting outcome of the pilot was the fact that many participating FI’s see TNFD’s proposed LEAP approach as an iterative rather than linear process. As with any reporting approach the real value lies in the journey, rather than the end result, and the LEAP approach helps financial institutions to take a coherent approach to nature-related risk.

Some companies state biodiversity is not a material topic for them, is that still credible?

According to industry experts, biodiversity is “the fastest-developing ESG theme in global capital markets”. Our entire economic system and lives rely on nature – half of the world’s GDP (~$44 trillion of economic value generation) is moderately or highly dependent on nature. The WEF study mentions that the other half is also dependent on nature, but just to a lesser extent. We are of course all dependent on ecosystem services since we all need air to breathe, water to drink, food to eat, and clothes to wear. All these resources impact and depend on nature in some way or another.

Beyond nature’s intrinsic value, there is an increasing awareness of the impact of nature loss on the economy and in turn global financial stability. In 2022, the Central Banks and Supervisors Network for Greening the Financial System (NGFS) published a “Statement on Nature-related financial risks”, which acknowledges that nature-related risks, including those associated with biodiversity loss, could have significant macroeconomic implications, and that failure to account for, mitigate, and adapt to these implications is a source of risks relevant for financial stability.  At COP15, support from various initiatives in the financial sector, and individual financial institutions, to an ambitious set of commitments on finance in the GBF, alongside market-led developments such as the aforementioned TNFD, has shown that private sector actors are ready to step up on nature.

As such, nature is a material topic to each forward-looking organization, yet the pathways and metrics to measure this risk are under development. But if you embed biodiversity as a financial institution, you might not be able to deal with every sector in detail yet. This means you need to experiment, tools like ENCORE can be a useful starting point to assess portfolios and determine action points.

How does the TNFD relate to other standards and regulations?

Climate change and biodiversity are intrinsically linked. Climate change is one of the five key drivers of biodiversity loss, affecting the survival of plant and animal species as well as impacting other environmental processes. Three of the five most effective strategies for cutting greenhouse gas emissions are nature-based solutions: ecosystem protection, restoration and improved management of farmlands. Nature-based solutions can deliver around 30% of the emission reductions needed to align with the Paris Agreement. Nature also provides adaptation solutions such as flood prevention and regulating water cycles.

Many of the UNEP FI members have started their journey on the topic of climate change and in this way under mainstreaming action, climate change and nature loss are presented as two sides of the same coin. The work of the TNFD has been mirroring that of the TCFD to ensure effective market usage. If we had a time machine, we should have created one broader environmental risk and disclosure framework. However, when the TNFD was initiated the TCFD already existed for some years, so that’s why we now have different task forces for different topics.

Data availability is often mentioned as a challenge. How to deal with that?

The participants in our TNFD pilot process often highlighted the need for better data and tools and specific guidance on tools, alongside building consistency and comparability. The journey from nature-negative towards nature-positive requires an all-of-society approach. Financial institutions are often dependent on the quality of data provided by their clients. Poor and non-inclusive client-related data can make it significantly challenging for them to make informed decisions. At the same time with nature declining at unprecedented rates in human history, they don’t have the luxury to wait for better corporate data. This requires collaboration between industries.

The pilot also highlighted the need for the standardization of data and metrics is crucial. While there are currently significant variations in the data and metrics used to assess nature-related risks and dependencies across sectors and geographies, there is a growing recognition of the need for greater consistency and comparability. Data is an important part of the picture, but a lack of data should not become an excuse to do nothing. To tackle biodiversity loss, we need a whole-of-society approach, as mentioned in the GBF. However, it does remain a challenge to get sufficient quantitative and qualitative data.

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Romie Goedicke TNFD biodiversiteit UNEP FI
“According to industry experts, biodiversity is the fastest-developing ESG theme in global capital markets.”