The next step in fisheries sustainability seen through the use of TNFD

1. What is TNFD and what does it mean?

The Task Force on Nature-related Financial Disclosures (TNFD) is one of many initiatives needed across public, private and civil society. TNFD was established to catalyze a shift in thinking and behavior among companies and financial institutions, with the aim of mainstreaming nature-related disclosures in corporate and portfolio risk management and corporate reporting. Through the development of disclosure recommendations, TNFD's ultimate mission is to support a shift in global financial and capital flows from negative to positive for nature (nature positive).

Building on market experience with climate-related reporting over the past decade and the work of the Task Force on Climate-related Financial Disclosures (TCFD), the TNFD aims to encourage companies to disclose clear, comparable and consistent information to investors and other capital providers. It also recommends 10 disclosure items (Figure 14) and provides a set of metrics and a set of guidance to help companies embark on their nature-related assessments and disclosures.

Since 2018, there has been a rapid rise in the movement and the expression of a sense of crisis regarding the loss of nature around the world, particularly among financial institutions, companies, and governments in Europe, and in July 2020, an initiative calling for the establishment of the TNFD was announced. With the support of founding partners Global Canopy, UNDP (United Nations Development Programme), UNEP FI (United Nations Environment Programme Finance Initiative), and WWF (World Wide Fund for Nature), an informal working group for preparation was held from September 7 to June 2020. Then, in June 9, the TNFD was officially launched with the broad support of financial institutions, companies, governments, and civil society. The G2021 and G6 also supported the establishment of the TNFD.

The TNFD Task Force is composed of 2 senior executives from financial institutions, companies, stock exchanges, auditing firms, rating agencies and other market service providers, under the two co-chairs of Elizabeth Maruma Mulema and David Craig. Mr. Hirotaka Hideshima of The Norinchukin Bank and myself were selected from Japan. The Task Force began its substantive activities in October 40, and after two years of development, the formal version of the disclosure recommendations was published on September 2021, 10 at the New York Stock Exchange, the center of global finance.

TNFD is a globally accepted "common language" that incorporates a variety of results, such as frameworks, models, and indicators, developed by various organizations to visualize the relationship between nature, business, and finance. It is not just a tool for dialogue between large corporations and international financial capital, but can also be used for dialogue with all related stakeholders, such as primary producers, local businesses, local residents, nature conservation groups, academic institutions, and local governments. In Japan, relevant government ministries and agencies have already begun discussions on a nature-positive economy strategy that is conscious of collaboration with TNFD.

2. Four pillars: "Governance," "Strategy," "Risk and Impact Management," and "Metrics and Targets"

The structure of the TNFD disclosure recommendations follows the TCFD structure, following the four pillars of governance, strategy, risk and impact management (TCFD calls it risk management), measurement indicators and targets. While making use of the TCFD's 4 disclosure recommendations, it adds necessary matters related to nature, resulting in 11 disclosure recommendations. In particular, the disclosure of "priority regions" in Strategy D (see diagram below) shows the idea of ​​the TNFD location approach, and asks companies to explore whether their business is conducted in areas that require attention, such as areas where the nature related to the business is an important ecosystem, or areas where the business has significant dependence, impact, risk, or opportunity on nature, and to make those areas the priority regions and subject to risk assessment. This is a fundamental difference from climate-related issues, where the place where greenhouse gases (GHGs) are emitted does not match the place where they are impacted through climate change. Addressing nature-related issues needs to be carried out in each region while understanding the diverse ecosystems of the world, and a different approach is essential from responding to climate-related issues.

Figure 1. TNFD Disclosure Recommendations (Source:Executive Summary of the TNFD Recommendations Version 1.0 (TNFD, 2023)

3. Fisheries companies need to thoroughly visualize their dependence on and impact on nature.

Organizations have "dependence" and "impacts" on nature. These give rise to nature-related "risks" and "opportunities." Collectively, these four concepts are called nature-related issues in the TNFD. In order to evaluate the risks and opportunities for an organization, it is essential to diagnose the dependence and impacts on nature.

Business activities depend on ecosystem services that provide economic benefits to the organization. Organizations also have impacts on ecosystems and the provision of ecosystem services. These impacts can be positive or negative. Dependencies and impacts interact and compound over time, as negative impacts reduce the availability of ecosystem services on which the organization also depends.

The impact pathways in Figure 2 show how specific impact drivers can lead to changes in the flows of natural capital (the stock of environmental assets) and ecosystem services as a result of specific business activities, and how these changes affect different stakeholders.

Figure 2023. Dependency and impact pathways (Source: TNFD, XNUMX)

An impact driver is a measurable amount of natural resource input into production or a measurable amount of non-manufactured output from a business activity that affects nature. Impact drivers are categorized into five drivers of change in nature (Figure 3). Impacts can be positive or negative. A single impact driver may be associated with multiple effects (changes made to the state of nature). For example, greenhouse gas emissions affect multiple ecosystems.

Figure 2023. Positive and negative impacts of natural change drivers (Source: TNFD, XNUMX)

My knowledge of the seafood industry is limited to the extent that I am interested in it as a consumer. What I felt after participating in the Tokyo Sustainable Seafood Summit 2023 was that when looking at the seafood industry through the TNFD framework, it was not providing high-resolution, data-based information that consumers could understand. Therefore, I think that we are allowing the situation where those who do not support the promotion of sustainable seafood ignore the negative impact they are having and reject change by citing external factors of change (changes in seawater temperature due to global warming, illegal fishing by fishing boats from third countries, etc.).

Adopt TNFD and start visualizing. TNFD recognizes the importance of organizing nature-related data and supports the use and evolution of remote sensing, environmental DNA, AI, etc. At first, your perspective may be narrow and the resolution may be blurred, but as you continue, you will be able to see the risks clearly and many stakeholders will be able to understand the benefits of transforming the fisheries industry into a nature-positive one.

Makoto Haraguchi
He is SVP of TNFD, Sustainability Promotion Department, MS&AD Insurance Group Holdings, and a Group Fellow in the Basic Research Department, Basic Research Department, MS&AD InterRisk Research Institute & Consulting. He will also be speaking at the Tokyo Sustainable Seafood Summit 2023.

The session where Makoto Haraguchi appeared can be found here: