Month: October 2023

Climate change and environmental degradation require more transparency in corporate sustainability reporting. Leading this conversation, we have The Task Force on Nature-related Financial Disclosures which incorporates nature-related risks and opportunities, much like its predecessor, the TCFD. Read on to find out more about this new and upcoming approach! 

Understanding TNFD

In June 2021, TCFD created the Task Force on Nature-related Financial Disclosures. Nature plays a critical role in economic stability, as recognized by the TNFD initiative, which has the support of numerous organizations and financial institutions. Organizations are encouraged to report on their nature-related risks and opportunities in a standardized and consistent manner as part of the task force in an effort to bridge the gap between environmental and financial issues.

Why does TNFD Matter?

1. Ecosystem Dependency: Ecosystems provide a variety of resources to businesses, including clean water, pollination, and timber. In addition to quantifying and communicating these dependencies, TNFD disclosures raise awareness about environmental conservation.
2. Risk Assessment: TNFD provides a structured framework for assessing nature-related risks. As a result of supply chain disruptions, regulatory changes, or reputational damage, companies can identify vulnerabilities.
3. Market Resilience: Investors increasingly factor environmental and social governance (ESG) criteria into their decision-making processes. Information provided by TNFD disclosures is vital to assessing a company’s environmental resilience.
4. Regulatory Landscape: Companies must adapt to evolving compliance requirements as governments worldwide intensify environmental regulations. This emerging regulatory environment can be aligned with TNFD disclosures.

Key Components of TNFD Disclosures

TNFD disclosures can be divided into four main components:

1. Governance: Companies need to disclose their commitment to integrating nature-related considerations into their decision-making processes. This includes outlining the responsibilities and structures in place for addressing nature-related risks and opportunities.
2. Strategy: This section covers the company’s strategies and targets related to nature. It details how the company identifies, assesses, and manages nature-related risks and opportunities.
3. Risk Management: Businesses must disclose their processes for identifying and mitigating nature-related risks, including their methods for assessing and responding to potential biodiversity loss or ecosystem degradation.
4. Metrics and Targets: TNFD encourages the disclosure of quantitative metrics and targets that reflect the company’s impact on nature, such as carbon emissions, water usage, and land use. These metrics help investors and stakeholders gauge the company’s environmental performance.

Benefits and Challenges

TNFD offers a number of benefits as well as challenges. Through TNFD, corporate accountability can be encouraged by assessing and disclosing nature-related dependencies and impacts. By doing so, businesses are able to mitigate risks, become more resilient, and innovate in sustainability practices. As long as it is incorporated into regulations, it improves investor confidence and ensures compliance with evolving environmental standards.

However, there are challenges relating to the availability of data and subjectivity in assessing nature-related factors as well as the decision of scope and limitations in resources. It can be challenging to integrate TNFD into other reporting frameworks and quantify nature-related impacts. Overall, TNFD has the potential to drive positive change in corporate sustainability practices, but its effectiveness depends on addressing these challenges and encouraging wide adoption among organizations, which will result in more responsible and environmentally conscious business practices as a result.

Conclusion

In recognition of nature-related financial risks, the TNFD disclosures represent a significant step forward. We must take into account nature-related considerations in all financial reporting as climate change and environmental issues increasingly affect our world. This isn’t just a compliance matter; it’s a strategic imperative. Nature can enhance the resilience of organizations to environmental challenges and also contribute to a more sustainable future for everyone when they adopt TNFD guidelines and incorporate them into their business models.

Mr. Osamu Yamamoto from Unison Capital, an esteemed client and strategic partner of Rimm Sustainability participated in a webinar on 27th September 2023. Founder and CEO Ravi Chidambaram moderated the webinar, which was joined by Sasja Beslik, Senior Advisor for data analytics. Check out the key highlights below!

About the Webinar

This webinar explored how Rimm’s fund and asset manager ESG solution helps Unison Capital improve their portfolio business. The founder also engaged Sasja and Unison Capital in casual conversation in an informative and engaging manner. The discussion focused on how portfolio management can drive ESG growth in the financial services sector. Additionally, ESG reporting was discussed as an important aspect of financial institutions’ reporting.

Benefits and Challenges of ESG reporting

A discussion among the three industry experts began with everyone weighing in with their expert opinions on the benefits of ESG reporting for financial institutions. Some of the benefits highlighted were ease in obtaining government grants, tax reliefs, favourable fund-raising opportunities ease in investing etc. After that, Ravi went on to discuss some of the major challenges facing financial institutions. In Sasja’s opinion, most firms don’t care about sustainability or lack the resources or expertise to report on environmental, social and governance issues.

Advanced Analytics

The discussion then turned to technologies currently being developed to address financial institutions’ sustainability reporting challenges. Mr. Yamamoto emphasized the importance of education. Due to the lack of knowledge about sustainability reporting by many firms, interactive means should be used to educate them about such forms. Sasja spoke about his work with Rimm Sustainability on advanced analytics such as True materiality, Carbon Triangulation, Risk Approximation, and other tools designed to automate and simplify sustainability reporting to save time and resources compared to traditional approaches.

Rimm Sustainability x Unison Capital

A major highlight of Ravi’s closing remarks was how Rimm’s fund/asset manager solution enhanced Unison Capital’s ESG compliance. Rimm developed a dashboard that enables fund managers to assess their portfolio’s performance on key metrics as well as easily report the performance to their LPs. This reduced time and resources for all stakeholders while making the assessment and reporting much clearer. We can tailor the dashboard towards the key KPIs and metrics for each fund or for specific reporting and can be adapted to different management scenarios. Rimm’s flagship product myCSO was praised by Osamu Yamamoto for its unique ESG solution and its technology. “myCSO enabled Unison Capital to visualize corporate sustainability across their portfolio, and offer concrete, detailed advice towards portfolio company management for improving corporate sustainability.”

Learn all about the discussion in the webinar by clicking here.