21/12/2023 - EFRAG and TNFD sign a cooperation agreement to further advance Nature-related Reporting
EFRAG and the Taskforce on Nature-related Financial Disclosures (TNFD) have announced the signing of a cooperation agreement, highlighting the importance of addressing nature-related issues to advance corporate sustainability and reflecting a shared commitment to enhance corporate transparency related to biodiversity and ecosystems.
EFRAG and the Taskforce on Nature-related Financial Disclosures (TNFD) have announced the signing of a cooperation agreement, highlighting the importance of addressing nature-related issues to advance corporate sustainability and reflecting a shared commitment to enhance corporate transparency related to biodiversity and ecosystems.
The cooperation agreement builds on a multi-year collaboration reflected in the European Sustainability Reporting Standards (ESRS) adopted by the European Commission in July 2023, which are aligned with the TNFD's recommended disclosures.
Both the ESRS disclosures and the TNFD Recommendations are designed to foster relevant and comparable reporting on nature-related risks and impacts by businesses and financial institutions worldwide, exhibiting a robust alignment with high potential for interoperability.
The alignment between the ESRS disclosures and the TNFD Recommendations is reflected among others through the following:
- Both the TNFD disclosure recommendations and the ESRS reporting areas are organised around the four pillars of the disclosure recommendations of the TaskForce on Climate-related Financial Disclosures (TCFD): Governance, Strategy, Risk and Impact Management and Metrics and Targets.
- Particularly, both the TNFD and ESRS put high emphasis on the need to disclose on nature-related impacts, risks and opportunities (IROs), as well as dependencies from nature to the extent they generate material risks.
- All 14 recommended disclosures of the TNFD are addressed in the ESRS.
- The ESRS require its disclosures to be based on a double materiality principle. The TNFD framework has been designed to accommodate an impact materiality perspective, facilitating alignment with the ESRS.
- The TNFD developed the LEAP approach, a suggested guidance for market participants to identify and assess nature-related issues. The ESRS state that companies can conduct their materiality assessment on the sustainability matters pollution, water, biodiversity and ecosystems and circular economy using the LEAP approach phases.
As a next step, EFRAG and the TNFD are working on the finalisation of a detailed interoperability mapping illustrating the high level of commonality achieved, to be published early 2024.
EFRAG and the TNFD stand united in their efforts to continue promoting nature-related transparency, providing needed robust data for all stakeholders to foster sustainable development.
About the TNFD disclosure recommendations
The Recommendations for Nature-Related Risk Management and Disclosure issued by the Taskforce on Nature-related Financial Disclosures (TNFD) were released in September 2023 to enable companies to assess, disclose and manage nature-related risks and impacts.
About the ESRS
The European Sustainability Reporting Standards (ESRS) adopted in July 2023 as a Delegated Act by the European Commission provide comprehensive disclosure requirements for companies subject to the Corporate Sustainability Reporting Directive (CSRD) of the European Union.
Emily McKenzie, Technical Director TNFD, stated:
"We are delighted to announce our cooperation agreement with EFRAG. This builds on our long-standing collaboration and shared commitment to support the development, market readiness and implementation at scale of nature-related financial disclosures. We note the strong consistency between the European Sustainability Reporting Standards (ESRS) and the TNFD Recommendations and Metrics, and look forward to releasing with EFRAG in early 2024 a detailed mapping illustrating the high level of interoperability achieved."
Patrick de Cambourg, EFRAG SRB Chair, stated:
"This cooperation agreement between EFRAG and TNFD crystallises our joint dedication to enhancing nature-related disclosures in sustainability reporting. By aligning the ESRS disclosures and the TNFD recommendations, we pave the way for transparent, impactful reporting that acknowledges the critical link between business practices and biodiversity conservation. We look forward to the publication of the interoperability index of disclosures which will illustrate a robust alignment and facilitate understanding and implementation in this crucial area."
