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TWN
Info Service on Biodiversity and Traditional Knowledge (Sept23/08) Will the TNFD address the impact of the financial sector on biodiversity loss? The final draft of the Task Force on Nature-Related Financial Disclosures (TNFD) was launched on September 18th during Climate Week NYC. Taskforce members comprise senior executives from financial institutions, corporates and market service providers. While the TNFD is a market-led initiative, it is supported by national governments, large conservation organizations and financial institutions worldwide, including UN agencies and the G7. The TNFD is a voluntary reporting framework meant to identify how biodiversity loss can create financial risks for companies and investors, and to guide how businesses should self-report on their exposure to political and economic shocks caused by the degradation of nature. The framework proponents claim that this disclosure and the resulting changes in pricing will drive better-informed investment and corporate decisions, and ultimately support a shift in global financial flows away from environmentally damaging activities. A recently published paper, Risky business: Protecting nature, protecting wealth?, looks into the potential of the TNFD to manage the impact of the financial sector on biodiversity. The assessment shows that the relationship between biodiversity risk disclosure and redirecting finance away from environmental damage is unproven; therefore such a mechanism would not address the financial sector’s impacts on biodiversity. The authors find a concerning repetition of the status quo within the TNFD, characterized by a prioritization of economic growth, an evasion of strong regulatory approaches and a multiplication of market-based mechanisms. The primary objective of the TNFD is delivering better information to financial institutions, which it claims will lead to a market change disciplining firms with the most material risks. However, risk disclosure is limited in its ability to catalyze market change, and the calculations of these risks will probably not translate into biodiversity policy action since financial institutions and businesses often mitigate these risks by lobbying against regulation and other policy action. Moreover, the TNFD doesn’t recognize double materiality, meaning that it only takes into account the risks to firms, i.e. profits, posed by changes to the biosphere, and not the risks to biodiversity posed by a firm’s actions. In recent years there has been an increasing recognition of the need to put human and Indigenous Peoples’ rights at the center of biodiversity science and action, especially at the Convention on Biological Diversity (CBD). Despite this, the TNFD does not include rights in its biodiversity assessments and has failed to create meaningful pathways for rightsholders, grassroots groups, or civil society participation beyond large conservation organizations. The authors argue this is an inefficient and insufficient approach to biodiversity data collection and decision-making, and unaligned with CBD decisions. They also highlight that a risk-based approach is not well suited to address the impacts of the financial sector on biodiversity since its aim is to protect existing capital from shocks associated with environmental degradation, so it would divert assets from a crisis instead of addressing it. The world’s largest asset class, sovereign debt, would factor biodiversity risks into credit ratings. It has been projected that increased borrowing costs for countries with high “nature risk” will further limit fiscal capacity for these governments, increasing pressure on biodiversity, especially in countries in the Global South. The authors conclude that their main concern is not the fact that the TNFD exists, but that it has been embraced by so many institutions as a means to legitimize profiting on biodiversity loss. If the biodiversity risk approach is mainstreamed into international agreements and state disclosure guidance, the private sector will be the main architect of green financial regulations, putting market interests above the public good, allowing financial institutions and states to ignore the problem of regulation, and deviating attention and scarce resources from more effective and direct mechanisms. Various civil society organizations have raised serious concerns since the inception of the framework, pointing out that it will not only be ineffective, but that the TNFD will open a door to legitimize corporate greenwashing and misinformation, particularly given that some of the corporations involved have a poor record on human and environmental rights. With best wishes, Third World Network Risky business: Protecting nature, protecting wealth? Irvine-Broque, A., & Dempsey, J. (2023). Conservation Letters 16: e12969 Available at: https://doi.org/10.1111/conl.12969 Abstract Finance is a precondition for many of the activities that harm ecosystems, but how to address this underlying driver of biodiversity loss remains a topic of debate. This paper reviews the Task Force on Nature-Related Financial Disclosures (TNFD), a corporate-led effort that aims to identify how changes to biodiversity may create financial risks for companies and investors. This approach is also promoted as a strategy for managing the impact of business on biodiversity, with the assumption that risk disclosure will more effectively price biodiversity-harming activities. We assess the potential of the TNFD toward this end, and invite conservation scientists, practitioners, and policymakers to engage critically with its theory of change. We find that the relationship between disclosing biodiversity risk and redirecting finance away from environmental degradation is tenuous and unproven, making this mechanism insufficient for addressing the impact of the financial sector on nature. We question the embrace of another industry-led mechanism that implies that a lack of information is the greatest barrier to stopping biodiversity loss. Further, there are risks that this financial sector approach to biodiversity will reinforce the highly unequal concentration of power and wealth, which is itself inimical to transformative change, as called for by the Intergovernmental Science–Policy Platform on Biodiversity and Ecosystem Services.
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