Silvia Pavoni new teaser

The alphabet soup of sustainability is ever expanding, with the newly created Taskforce on Nature-related Financial Disclosures now being thrown in the mix. But its co-chair insists its creation will eventually lead to a simplified space.

The former CEO of data provider Refinitiv, David Craig, has now joined the newly created Taskforce on Nature-related Financial Disclosures (TNFD), which has recently published its prototype framework with updates planned for June and October this year, and a final structure by the third quarter of 2023. The TNFD was established in June 2021 with a mandate from the G7 and now counts on 34 members to help design its framework. Its members represent more than $18tn in assets or assets under management, notes Mr Craig, including the Norwegian pension fund, BlackRock, UBS, BNP Paribas and the Singapore Exchange. Mr Craig spoke to Silvia Pavoni ahead of the framework release.

Q: Why do we need nature-related financial disclosures in addition to the existing Task Force on Climate-related Financial Disclosures (TCFD)?

A: If we wound back the clock, an ideal solution would be tackling nature and climate together. If you look at what’s happening as a result of climate change — rising sea levels, fires, floods and temperature rises — this relates to nature.

The dependencies that we have on nature for our economic systems, traversing not just food and agriculture but many other sectors, are well published and well understood. A lot of the specifics of climate risk are actually nature risks, but climate change is accelerating those risks.

A second really important point is that as companies strive for net-zero targets, many of them are learning that the energy system, and the logistics and transportation systems, cannot be decarbonised as fast as they may have wished for or thought [possible], particularly now with what’s happening with global fuel supplies. They’re going to rely on offsets. And natural-based systems are the most efficient and effective way of absorbing carbon, particularly if you don’t destroy rainforests.

We’re not a standards body; we’re trying to influence the standards bodies, like the International Sustainability Standards Board, the European Financial Reporting Advisory Group, and other standards bodies in Asia and around the world. 

Q: How concerned are you about greenwashing?

A: Everyone should be concerned about greenwashing. I’ll give an example of a concern I’ve been very public about: if $200bn or $300bn goes into the offset market, those offsets will not be mechanical. They’ll be mainly nature-based, because mechanical offsets [using machines to suck carbon dioxide off the air] are quite inefficient and expensive, and don’t scale yet. 

Everyone should be concerned about greenwashing

Potentially, they will be better in years to come, but it’s quite hard to find artificial offsets that work at a price point that is acceptable, and therefore natural offsets will be used. In fact, some research found that many artificial carbon offsets actually create more carbon than they absorb.

You need to look at offsets’ integrity, not just financial and carbon integrity, but their natural system integrity too. If you only plant one type of forest, it may absorb carbon and may do it really well but it’s not necessarily very good for biodiversity. If you cut down a forest and then replant it, that is quite ridiculous. It is much better to have incentives to preserve the forest in the first place. This applies to seagrass, savannahs and other areas; there are many natural-based solutions being created for offsets. We just need to make sure that there is full transparency and understanding of the natural system impacts.

You also need to look at companies that are making some efforts in one part of their organisation to reduce carbon. If you’re investing in that company, you have to be aware of all of the activities that it’s doing; you should be careful not to assume that the entire company’s activities are nature-positive. 

Q: Will TNFD replace TCFD?

A: It’s not about replacing TCFD; it’s about getting to a position where the frameworks that have been developed by TCFD and TNFD are both incorporated in the work of accounting standards bodies. Our goal is to create an integrated framework because you have to look at nature and climate together. The way that we’ve designed our taxonomy and definition of nature includes atmospheric pollution, be it by nitrogen dioxide, carbon dioxide or methane — it is part of that nature problem. You have to look at these things together. It just so happens that TCFD is a few years ahead of where TNFD is. So, we have to recognise that we are building on that but, ultimately, companies will have to look at these together. That’s the goal. 

Silvia Pavoni is the editor of Sustainable Views, a prototype platform by the Financial Times that gives readers insights into how environmental, social and governance principles are reshaping capital, and into the emerging sets of policy and regulations driving this change.


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