Survival of the Fittest
Nature-related reporting is a largely voluntary practice, but experts believe that it can confer a competitive advantage upon companies and investors.
Advocates of nature-related reporting believe in its importance for the future of our planet, also recognising the risks that a deteriorating natural world poses for businesses.
The Taskforce on Nature-related Financial Disclosures (TNFD) identifies four nature related-issues: an organisation’s dependency on nature, its impact on nature, the risks it faces, and the opportunities nature presents. The TNFD provides a disclosure framework to help organisations report on nature, structured around governance, strategy, risk and impact management, and metrics and targets.
It follows in the footsteps of the Task Force on Climate-related Financial Disclosures, formed in 2017 to help companies and other organisations disclose climate-related risks and opportunities
Over 500 organisations have adopted the TNFD on a voluntary basis, representing more than US$17 trillion in assets.
Some organisations, however, are already subject to mandatory nature-related reporting. The European Union enshrined nature reporting in its Corporate Sustainability Reporting Directive CSRD). This year, companies will apply the rules for the first time when reporting on the 2024 financial year.
Corporates and financial institutions complying with the CSRD have to report in line with the European Sustainability Reporting Standards, which include requirements for disclosures on nature-related impacts, risks and opportunities. Policymakers, however, are currently introducing revisions that will narrow its scope and reduce its burden, in order to improve European competitiveness.
The Global Biodiversity Framework, adopted at COP15 in 2022, called for organisations to “regularly monitor, assess, and transparently disclose their risks, dependencies and impacts on biodiversity”.
But we remain years from enforcing nature reporting across different jurisdictions. Mandatory climate disclosures came into force in Australia for large businesses at the start of this year, extending to medium-sized companies in July 2026.
“Nature will certainly come after that,” says Jo Saleeba, Head of Sustainability at Australian asset manager New Forests, expecting this to be modelled on the TNFD framework.
But time is of the essence. “We can’t take a decade to sort out the reporting and reversing nature loss,” she adds.
Disclosure beyond company operations
For now, nature reporting remains a largely voluntary activity, although there are calls for it to be compulsory.
“It’s important that it be mandated,” says Georgina Thomas, Head of Impact at UK-based private equity firm Cibus Capital, adding that “there needs to be…flexibility within nature reporting mandates”.
Thomas draws an analogy with financial accounting. “If you don’t do financial accounting, you don’t really have an overview of the way that you should manage your business going forward,” she says.
Far from being viewed entirely as a burden, many businesses and investors understand the benefits of collecting this data.
Some investors, such as the Brunel Pension Partnership (£40 billion; US$ 52.7 billion AUM), currently include nature within their broader climate reporting. Brunel’s private markets exposure, for example, includes infrastructure portfolios with targets for nature-based solutions. Brunel has pledged to adopt the TNFD framework in 2025-26.
Nature-related reporting “is well-received by companies that recognise that they have significant dependence on natural ecosystem services,” says Amanda O’Toole, Portfolio Manager at asset manager Redwheel, “as well as their potential exposure to transition risk resulting from their impact on nature”.
“We would like to see disclosure focused on the specific dependencies and exposures which are material to the reporting company, and the actions management could – or have – taken to mitigate these risks,” she continues.
“Ideally this analysis should incorporate exposures up and down the value chain, beyond the company’s own operations.”
Nature reporting varies in quality
While the volume of nature reporting is growing, the quality of disclosures is currently mixed.
“We’re seeing more disclosure within company reports, but the quality is not as standardised as other topics,” says Gayaneh Shahbazian, Biodiversity Engagement Manager at data and analytics provider Morningstar Sustainalytics.
Some areas of nature are better-disclosed than others, such as waste and water use, because companies have historically reported on this data, she says. Other impacts on nature, such as land use, are less well-reported.
“Most disclosure is also coming from companies’ own operations, which is a much easier starting point,” continues Shahbazian.
“When it comes to nature, often the impacts and dependencies tend to be across the value chain, but getting that visibility is difficult.”
Don’t rush mandatory reporting
The use cases for nature-based reporting continues to evolve, with investors looking for increased transparency to inform investment decisions.
In March, the British Standards Institution introduced its Overarching Principles Standard for nature markets. Backed by the UK government, the standard aims to support investment in projects that restore habitats, building on the UK’s Biodiversity Net Gain initiative and leveraging work to develop international standards for high-integrity biodiversity credits.
To avoid the greenwashing claims attracted by the voluntary carbon market sector, investors have emphasised the need for biodiversity credits to be based on accurate measurements of their on-the-ground impacts.
Citing the Green Finance Institute, the Department for Environment, Food & Rural Affairs observed that-nature related risks such as water shortages and soil health reduction could lead to a 6% reduction to GDP.
Increasing evidence of nature-related risks to enterprise value is driving investors to demand more data from portfolio companies on how they are building resilience. UK-based investors are calling for mandatory disclosures by firms in the food sector to better assess their performance on sustainability and nutrition.
Last year, the International Sustainability Standards Board (ISSB) started researching nature-related issues disclosures, drawing from TNFD recommendations. It is exploring the information that investors need on nature-related risks and opportunities affecting a company’s prospects.
The TNFD, meanwhile, released a roadmap for improving market access to nature-related data at last year’s COP16 conference.
“There is a clear expectation in the market that the TNFD’s recommendations will form the basis of mandatory reporting as national governments and regulators broaden their focus beyond climate”, says Lucas Penfold, Head of Sustainability Reporting at Impax Asset Management.
“In line with the approach taken by national governments and regulators for implementing TCFD, organisations should be given the flexibility to voluntarily report on nature-related matters before becoming mandatory,” he continues.
“Policymakers should avoid the temptation to move too quickly with mandatory nature reporting, and first build in time to draw lessons from practitioner experience from voluntary initiatives such as TNFD.”
EU to align with ISSB?
Global alignment with TNFD recommendations is not inevitable, however. The ISSB could instead prove useful to European policymakers.
EFRAG, which provides technical support to the European Commission, is reviewing the ESRS, in line with commission plans to ‘streamline’ reporting. Currently, ESRS E4 sets rules for biodiversity and ecosystems.
“I think we can expect those standards to get pared down quite significantly, because the commission is looking for a significant reduction in the number of data points,” says law firm Ashurst Counsel Becky Clissmann, as well as prioritising which data points are used.
“Mandatory reporting on nature is going to streamline, it’s going to shift a bit,” she continues. “I’m hoping that as part of that activity, EFRAG will take the opportunity to more closely align with the ISSB standards.”
On 3 April, the commission told EFRAG to look to the ISSB as part of its strategic direction in a call for applications to chair EFRAG’s Sustainability Reporting Board.
“If they are serious about competitiveness, given the adoption of ISSB, it would make a lot of sense to be more joined up and standardised,” adds Ashurst Partner Ellie Reeves.
Many jurisdictions that already use financial reporting standards administered by the International Financial Reporting Standards (IFRS) Foundation have done the same for climate and sustainability reporting following its creation of the ISSB. These do not include the US.
Sustainability-related disclosure rules look set to take a backseat, at least at a federal level, during the Trump presidency. In March, the Securities and Exchange Commission voted to end its defence of its climate disclosure rules that were drafted under the Biden administration.
“We’re not expecting to see major strides in the US” on nature reporting, says Reeves.
Lack of regulation creates opportunity
In a sign of growing alignment, the IFRS Foundation and the TNFD announced in April that the ISSB would consider TNFD recommendations in its work towards meeting the needs of global capital markets.
Policymakers across the world are moving at different speeds on nature-related reporting. While some are trying to ease the general scale of reporting obligations placed on businesses, experts nevertheless believe that nature reporting can offer a competitive advantage.
“With the focus on streamlining and simplifying sustainability reporting in Europe, we shouldn’t expect a large-scale regulatory push towards very detailed nature reporting any time soon,” says Maria Nazarova-Doyle, Global Head of Sustainable Investment at IFM Investors.
This might not necessarily be a bad thing, she continues, emphasising the importance of having a global standard that includes nature disclosures and builds these into overall sustainability reporting. “My expectation is that this is a job for which ISSB is well placed for,” she says.
“In the meantime, the absence of regulations on this type of reporting opens up an opportunity for a competitive advantage for companies, asset managers and asset owners to report on a voluntary basis.”
Redwheel’s O’Toole agrees that nature reporting offers organisations a competitive advantage. She argues that it “should improve capital allocation, enhance supply chain resilience, protect brand and reputation, improve relations with local communities and ultimately lower the cost of capital for a business”.
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