The background to the TNFD

For investors, the risks and opportunities associated with the use of natural capital (the world’s natural resources, which underpin our economy and society) are becoming increasingly financially material. However, company reporting on these issues, and how they are managed, has historically been poor and difficult to compare.

To address this, the Taskforce on Nature-related Financial Disclosures (TNFD) has recently published its final nature disclosure framework. This sets out a clear roadmap and recommended metrics for companies to report on their nature-related impacts and dependencies. For asset managers, it should help provide comparable data to better assess investee companies.

Why does the TNFD matter for investors?

The TNFD’s recommendations are expected to become the global framework for companies to report on financially material nature-related risks and opportunities. Although disclosure to the TNFD is voluntary for now, it is likely to become mandatory within some regions. (1) The TNFD’s recommended core disclosure metrics are organised around 14 core global indicators relating to:

  • Dependencies and impacts on nature (recommended disclosure Metrics and Targets B); and 
  • Nature-related risks and opportunities to the organisation (recommended disclosure Metrics and Targets A). Metrics were added to the final version of the framework, including those for sustainably managed land, supply chains and plastic pollution. As well as 2 provisional metrics, acknowledged as important but where more work is still required before reporting can be done. 

The clear focus on the disclosure of risks and opportunities, including the financial implications (see Figure 1). This is a positive and, for asset managers, closely aligns with reporting needs. 

Companies are now being encouraged, where possible, to report these metrics.

Figure 1 –The TNFD’s core global disclosure indicators and metrics for nature-related risks and opportunities

Category Metric
 Risk  The value of assets, liabilities, revenue, and expenses that are assessed as being vulnerable to nature-related transition risks (the total and proportion of the total).
 The value of assets, liabilities, revenue, and expenses that are assessed as being vulnerable to nature-related physical risks (the total and proportion of the total).
 A description of, and the value of, significant fines/penalties received/litigation action in the year due to negative nature-related impacts.
 Opportunity  The amount of capital expenditure, financing or investment deployed towards nature-related opportunities, by type of opportunity, with reference to a government or regulator’s green investment taxonomy, or that of a third-party industry or non-governmental organisation, where relevant.
 The increase in, and proportion of revenue from, products and services that produce demonstrable positive impacts on nature, with a description of the impacts.


Improved disclosures should help support abrdn’s analysis of nature-related financially material risks and opportunities. Clients are increasingly asking us about how we consider these in our portfolios.

The TNFD has published additional guidance for financial institutions, helping asset managers to begin reporting. Financial institutions are now being asked to identify their exposure to a) sectors that have material nature-related dependencies and impacts and b) sensitive locations.

Our clients are also interested in the development of investment products focusing on companies that offer solutions to address nature degradation. Adoption of the TNFD’s recommendations will provide useful data in this regard.

What actions is abrdn taking to prepare for the TNFD?

In 2022, we published Preserving natural capital - our approach for investments.

We have also assessed the data and solutions available to meet the TNFD’s requirements and collaborated on both an industry-wide and client-specific basis.

In addition, we have participated in investor engagement initiatives. We are proud to be members of the Nature 100+ collaborative engagement initiative and Finance for Biodiversity which support the TNFD’s efforts.

What did we find when assessing data providers?

There are a range of data solutions available from third-party providers:

  • ESG data providers offer tools that primarily use company disclosures. These tools can be used for screening and to inform engagement.
  • Biodiversity-footprinting providers offer tools that use a life-cycle analysis approach. These tools are mostly based on modelled data and calculate the impact of and/or dependencies on biodiversity for corporates.
  • Geospatial tools help corporates understand what issues are most material in specific locations. For asset managers, accurate data on the location of facilities and the activities taking place is important.

In addition, there is ENCORE. ENCORE is an open-source online tool developed and maintained by Global Canopy, UNEP FI and UNEP-WCMC. It can be used to understand the key impacts and dependencies for sectors that the TNFD has identified.

However, these tools have considerable limitations.

Firstly, nature-related corporate disclosures are still extremely limited. For now, solution providers must depend on proxy or modelled data.

Secondly, biodiversity footprinting inevitably relies on significant impact modelling. A single score has shortcomings, especially when it is based on proxy data or is for important location-specific nature-related risks.

Thirdly, heatmapping using ENCORE also has weaknesses. This is because the database does not provide company- or location-specific information. Therefore, further research is then needed.

Lastly, financial and intensity metrics are gaining traction. While these are useful from a portfolio construction and benchmarking perspective, accurately measuring and interpreting such data is essential.

At abrdn, we need to source data from various providers to meet both our needs and those of our clients. Using such data at scale is difficult, however. Hence, we must avoid disclosing mainly modelled data or setting nature-related targets on that basis.

The way forward

There is now enough information for us to start assessing the key nature-related risks and opportunities, using a staged approach (see Figure 2).

Figure 2 – abrdn’s phased approach to identifying nature-related risks and opportunities

Phase 1 – 2023 Phase 2 – 2024 Phase 3 – 2025

Understand risks – use tools like ENCORE to conduct heat mapping of holdings with potentially high impacts and/or dependencies on nature. 

Enhance – enhance company-specific information, especially around location, using existing data and research.
Engage – to enhance our company-specific understanding, especially with holdings in sectors highlighted as priorities from our mapping. 

Continue to review additional data – review evolving solutions and provide feedback to support the development of tools for the TNFD’s reporting.  TNFD reporting – publish the first annual TNFD report, outlining the most material nature-related dependencies and impacts across our portfolios.
Baseline – develop a baseline for target setting in line with our Finance for Biodiversity commitment.
Engagement progress – provide transparency on engagement priorities identified in 2023.

Key takeaways

After assessing our future requirements against current data solutions and providers, we found a high reliance on modelled data. Therefore, disclosure levels need to improve. While the TNFD sets the framework, initiatives around engagement and influence, like Nature Action 100, will also be important.

Although location data is still lacking, there is now enough information available to create an initial heat map of potential risk exposure. This should be the focus on, rather than basing any analysis on heavily modelled data that might not yet fully cover any complex or location-specific nature-related risks. 

We recommend a phased approach, in line with the TNFD’s final version. This allows room for quickly changing reporting and solutions and helps prevent a rush into either disclosing metrics or setting targets based on modelled data.

  1. It has already been endorsed by G7 finance ministers and included in the G20 Sustainable Finance Roadmap.