The TNFD framework seeks to shift financial investments towards sustainability, in order to protect the world’s biodiversity. File Picture: Frans Lanting
Safeguarding nature and biodiversity requires a fundamental change in business models, transparency in disclosure, and substantial shifts in financial investment.
This is the driving message behind the Taskforce on Nature-related Financial Disclosures (TNFD), a market-led and science-based initiative supported by governments, businesses, and financial institutions globally.
The TNFD framework aims to realign financial flows from nature-negative to nature-positive outcomes. This initiative aligns with Target 15 of the Global Biodiversity Framework (GBF), which mandates reporting on and disclosing nature-related risks, impacts, and dependencies.
In South Africa, financial institutions such as banks and investment firms are being encouraged to adopt the framework to identify nature-related investment opportunities.
This is crucial for meeting GBF Target 3, also known as "30x30," which commits to conserving 30% of the Earth by 2030. This target is one of the most significant that South Africa has undertaken.
The World Wide Fund for Nature (WWF), a founding member of the TNFD, has committed to supporting financial institutions and businesses on their journey to integrate nature-related risks into their investment and finance strategies.
In September, 2023, the TNFD partnered with various organisations to launch its framework in South Africa, including the Banking Association of South Africa (BASA), Johannesburg Stock Exchange (JSE), National Business Initiative (NBI), FSD Africa, and WWF South Africa.
Financial services institution, Sanlam, has already signalled its intention to adopt the TNFD recommendations, setting a precedent for others in the sector to follow.
WWF South Africa conducted a survey to gauge the readiness of South African financial institutions to disclose and reduce nature-related risks. The results highlighted a growing recognition of the importance of preventing nature loss and biodiversity-related risks.
However, the survey also revealed that significant efforts are needed to build the capacity necessary for meaningful action. Key findings from the survey include:
● 83% of respondents acknowledged that South African financial institutions have both direct and indirect impacts on nature loss.
● Over 50% of respondents recognised the sector’s need to integrate nature-related risks into their decisions.
● 92% identified climate change as the most prominent driver of nature loss, with land-use change, resource use and exploitation, and pollution also significant concerns.
● While more than 70% acknowledged the financial risks related to their impacts and dependencies on nature, less than a third (27%) had established nature-related targets.
Those with such targets ensured that high-impact companies they engaged with implemented biodiversity management plans.
● Less than 30% of respondents had the expertise to implement strategies to address nature loss positively.
The substantial financial requirements for South Africa to meet its "30x30" conservation target cannot be met solely by the public sector. Thus, the private finance sector has a crucial role to play.
WWF's assessment underlines the need for financial institutions to develop company-wide pilot programmes, enhance their awareness and capacity to address nature-based risks, and evaluate these risks using comprehensive assessment tools.
IOL