TNFD Agrifood Guidance Offers Data Boost
Quantitative metrics provide investors with further tools for engagement efforts.
The industry has welcomed increased nature data for the agrifood sector provided by the Taskforce on Nature-related Financial Disclosures (TNFD), as it prepares to align with final guidance next month.
The TNFD released final recommendations for nature-related risk management and disclosures last September. Those were meant to serve as a key tool in meeting Target 15 of the Kunming-Montreal Global Biodiversity Framework’s (GBF), which specifically calls for corporate disclosures on nature-related issues.
The taskforce subsequently released draft sector guidance for eight priority sectors last December – including the food and agriculture sector. A final version of this is now due to be released by 30 June, with industry feedback currently being reviewed following a consultation that closed on 29 March.
SLM Partners, a sustainable asset manager investing in ecological farming and forestry, recently published its first TNFD-aligned report. Using the taskforce’s sector-specific guidance, the firm’s fourth annual impact report looked to offer quantitative impact metrics that investors can use to work towards carbon and nature targets.
“The reason why we’re aligned with the TNFD is because we like what they’ve produced,” Alessia Lenders, Head of Impact at SLM Partners, told ESG Investor. “The TNFD’s focus on quantitative metrics gives investors the tools to raise the right questions.”
SLM’s report showed a 40% growth in AUM, following a 100% growth last year – something which Lenders said illustrates the continued growth of investor interest in natural capital. SLM has been working with a number of institutional investors entering the space for the first time.
“What the TNFD framework changed in this year’s report compared to the other is the amount of quantitative metrics that we’re showing,” said Lenders, who was the lead author of the report. “The TNFD documentation allowed me to get to 30 quantitative indicators per strategy – some [of them] quite powerful I think.”
Deeper data, enhanced engagement
While agribusiness accounts for 12% of global GDP and more than 40% of jobs, agriculture drives 70% of terrestrial biodiversity losses and is the single biggest contributor to the deforestation of natural habitats.
Per TNFD’s definition, the food and agriculture sector encompasses agricultural products, meat, poultry and dairy, processed foods, food retailers and distributors, and restaurants. In March, global investor initiative Nature Action 100 also released guidance for eight sectors – including food.
However, nature data is not as readily available as climate data. The TNFD has looked to address this issue and is currently working on a public data facility similar to the Net Zero Data Public Utility.
Sajeev Mohankumar, Senior Technical Specialist on Climate and Biodiversity at FAIRR, highlighted that the initiative’s primary investor audience was keen to have a “comprehensive, robust and comparable” disclosure framework to understand nature risks and opportunities – particularly within the agrifood sector.
“It’s not only data becoming available, but also consistent and comparable across companies – that is really important for any index or benchmarking tool,” Mohankumar added. “Given how difficult it is to access nature data, this is one of the things that is going to be very important for us, our work, and for investor members.”
FAIRR is currently looking at revamping its Coller index – an assessment of the largest animal protein producers on critical environmental and ESG issues – to be more aligned with the TNFD. Mohankumar noted that the TNFD’s disclosure standards were likely to be widely adopted across the agrifood sector and could eventually become mandatory in the future.
Other organisations, such as the World Benchmarking Alliance, have been tweaking their methodologies to ensure alignment with the TNFD.
Investor-focused non-profit the Climate Bonds initiative (CBI) recently published a report on the agrifood sector, evaluating the landscape of sustainable finance and incorporating the TNFD’s locate, evaluate, assess, and prepare (LEAP) approach.
“While the work of TNFD did not have a direct influence on the content of the report, their work is very relevant and will certainly help the agrifood sector in transitioning towards sustainability and resilience,” said Sabine Laurent, Market Intelligence Transition Lead at the CBI. “One of the conclusions of the report is that there won’t be a resilient and sustainable agrifood sector without acting collaboratively at landscape level. TNFD will bring more transparency on the potential impact of investments.”
The TNFD’s sector-specific guidance should also offer support for investors’ and FAIRR members’ collaborative engagements in the form of specific questions for engagement and stewardship.
“It has been very difficult to move the needle for conversation on nature-related topics so far,” said Mohankumar. “TNFD helps you understand which material elements or disclosures are important within your portfolio, which can be used to push companies or prioritise some questions and engagement activities.”
As previously highlighted by FAIRR, Green Century Capital Management is among the investors who have filed resolutions at agrifood companies to start reporting in line with TNFD recommendations.
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