The Taskforce on Nature-related Financial Disclosures (TNFD) is a global initiative to create a standardised framework for businesses to assess and disclose their impact on nature and nature's impact on them. It holds holds significant implications for the real estate sector.
What is TNFD?
It is very similar to the TCFD (Task Force on Climate-related Financial Disclosures) which mandated firms to report on their carbon emissions and focus on reducing those emissions, but TNFD will focus on nature. The initiative provides a framework for companies to report on their dependence on natural capital, risks associated with biodiversity loss, and opportunities for green investments. It also seeks to direct global financial flows away from activities that have a negative impact on nature, and towards nature-positive outcomes.
The framework has been developed by 40 senior executives from companies across many of the world’s largest financial institutions, corporates, and market service providers, with over US$20 trillion in collective assets in 180 countries. The final recommendations were released in September 2023, with sector- specific guidance, including real estate, expected soon.
Why does TNFD matter?
Nature-related risks are becoming increasingly prominent. According to the WWF, Europe and Central Asia has experienced 24% biodiversity loss since 1970. That figure increases to 65% in Africa and an incredible 98% in Latin America and the Caribbean. Extreme weather events, declining water resources, and biodiversity loss can significantly impact property values, construction costs, and tenant demand. This is causing investors to demand more transparency on nature-related risks and opportunities, and so TNFD disclosures will be crucial for securing financing and attracting sustainability-conscious investors.
It can also help real estate firms stay ahead of the curve as regulation evolves. Countries like the UK have already mandated biodiversity net gain for new developments, and others are likely to follow suit.
What should real estate firms do next?
The starting point is getting familiar with the TNFD framework and recommendations. ‘TNFD in a box’ is a great one-stop shop of all the information you need to get started. Once you’ve done this, there are three follow-on steps we guide investors and developers to follow:
- Conduct a preliminary assessment of your nature-related risks and opportunities. Analyse your dependencies on natural capital (e.g., water, green spaces), potential impact of climate change and biodiversity loss, and any green initiatives you've implemented.
- Integrate nature considerations into your business strategy and risk management frameworks. Develop policies and procedures to manage nature-related risks and identify opportunities for positive impact.
- Prepare for TNFD reporting. Start gathering data and developing reporting procedures in line with the framework's requirements.
Real estate reporting - likely categories
| TNFD THEME | CORE GLOBAL METRICS | POTENTIAL REAL ESTATE METRICS |
|---|
| CLIMATE CHANGE | Scope 1, 2 and 3 GHG emissions – refer to TCFD | |
|---|
LAND
/FRESHWATER
/OCEAN-USE CHANGE
| Extent of change by type of ecosystem and business activity
Extent of change by type of ecosystem and business activity for prioritised ecosystems | Newly disturbed/restored/rehabilitated area
Soil erosion
As above, by prioritised locations, potentially also sediment status of rivers |
|---|
| POLLUTION /POLLUTION REMOVAL | Total pollutants released into soil split by type | Volume of spills to soil
Aggregate waste to landfill
Fertilisers and pesticides used in agriculture |
|---|
| Volume of water discharged and concentrations of key pollutants in the wastewater discharged by type | Volume by destination
pH, suspended solids, dissolved solids, mercury, petroleum hydrocarbons, biological oxygen demand, temperature, environmentally persistent pharmaceutical pollutants
Volume of spills of diesel, paints, solvents and toxic chemicals |
| Total amount of hazardous waste generated by type | As defined by the applicable legal jurisdiction |
| Total non-GHG air pollutants by type – particulate matter, nitrogen oxides, volatile organic compounds, sulphur oxides, ammonia | Carbon monoxide, dioxins/furans, heavy metals |
RESOURCE USE
/REPLENISHMENT
| Total water withdrawal and consumption from areas of water stress | Freshwater withdrawn from natural open sources, groundwater, municipal, third parties, quarry dewatering
Non-freshwater withdrawal such as greywater, blackwater, treated wastewater, desalination plants
Harvested rainwater
Assets and portfolios – share of total floor area for which water withdrawal data has been obtained |
|---|
| Quantity of high-risk natural commodities sourced from land/ocean/freshwater split into types | Limestone chalk, marl, silica, correctives, alumina, ferrous, natural gypsum, pozzolane, primary aggregates, sand, coal, lead, timber, brick, cement, concrete, carpet, glass, insulation, rubber, steel
Share of timber from threatened species
Land – nitrogen and phosphorus fertilisers |
| Quantity and share of natural commodities sourced from priority ecosystems split into types | As above, by prioritised locations |
| OTHER | |
Average night sky light pollution levels
Occurrences of noise above a 55 decibel threshold
Total land footprint of construction
Change in habitat fragmentation or connectivity as a result of new developments |
|---|
| NATURE-RELATED RISKS | Proportion and total annual revenue exposed to physical and transition risks
Proportion and value of assets exposed to nature-related physical and transition risks
Proportion and value of assets/total annual revenue exposed to risks by risk rating
Proportion and total annual revenue/value of assets with substantial dependence on ecosystem services or with a high impact on nature
| |
|---|
| NATURE-RELATED OPPORTUNITIES | Value of capital allocated to nature-related opportunities, by type of opportunity, with reference to a jurisdictional green taxonomy | |
|---|
