Advancing Corporate Sustainability: EFRAG and TNFD Collaborate for Nature-related Financial Disclosures

EFRAG (European Financial Reporting Advisory Group) and the Taskforce on Nature-related Financial Disclosures (TNFD) have joined forces, marking a significant milestone in addressing nature-related challenges for corporate sustainability. The newly signed cooperation agreement underscores their shared dedication to enhancing transparency around biodiversity and ecosystems.

This collaboration stems from a longstanding partnership reflected in the European Sustainability Reporting Standards (ESRS), embraced by the European Commission in July 2023. Aligned with TNFD's recommended disclosures, these standards lay the foundation for fostering comprehensive and comparable reporting on nature-related risks and impacts by businesses and financial institutions worldwide. The synergies between ESRS and TNFD Recommendations demonstrate a robust alignment, promising high interoperability potential.

Key Points of Alignment:

1. Organizational Framework: Both TNFD and ESRS adopt a framework structured around the four pillars of the TaskForce on Climate-related Financial Disclosures (TCFD): Governance, Strategy, Risk and Impact Management, and Metrics and Targets.
2. Emphasis on Disclosure: TNFD and ESRS place significant importance on disclosing nature-related impacts, risks, opportunities (IROs), and dependencies from nature, especially when they generate material risks.
3. Comprehensive Coverage: All 14 recommended disclosures of TNFD find their counterpart in the ESRS, ensuring a comprehensive approach to nature-related financial disclosures.
4. Materiality Perspective: ESRS adheres to a double materiality principle for disclosures. TNFD's framework accommodates an impact materiality perspective, allowing seamless alignment with ESRS.

The TNFD's LEAP approach, designed to guide market participants in identifying and assessing nature-related issues, complements the ESRS's assertion that companies can conduct materiality assessments on sustainability matters such as pollution, water, biodiversity, ecosystems, and circular economy using LEAP approach phases.

Looking ahead, EFRAG and TNFD are collaborating on finalizing a detailed interoperability mapping, set to be published in early 2024. This mapping will vividly illustrate the substantial common ground achieved, reinforcing the commitment to transparent reporting on nature-related aspects.

United in their mission, EFRAG and TNFD aim to continue championing nature-related transparency. By providing robust data, they empower stakeholders to contribute effectively to sustainable development, marking a crucial step forward in the journey towards corporate sustainability and responsible financial practices.

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