Climate change has been recognised as a significant threat to the survival of humanity as a species. As such, efforts have been underway to ensure that economic development occurs in a sustainable way.
Efforts have ranged from getting logging companies to replant trees, imposing a carbon tax in order to reduce carbon emissions, and many others. First came ideas on Corporate Social Responsibility (CSR), which eventually evolved into concerns about Environmental, Social and Governance (ESG).
So far, almost all efforts are judged on a single metric for success: carbon emissions. A carbon tax is considered successful if carbon emissions are reduced; logging is considered sustainable if the carbon sink is maintained.
However, the Taskforce on Nature-related Financial Disclosures (TNFD) suggests that such metrics are not sufficient. While carbon emission is an important aspect of climate change, they believe that it should not be the only metric by which CSR and ESG efforts are measured by.
Instead, the TNFD is proposing a different framework for organisations to report and act on nature-related risks.
Last Thursday evening (April 7), members of the TNFD were invited to speak at Singapore Fintech Festival’s (SFF) Green Shoots Series webinar, discussing on how to build nature-positive outcomes.
What is the TNFD?
The TNFD is a group dedicated to developing a risk management and disclosure framework for organisations to report and act on nature-related risks, supporting a shift in global financing away from nature-negative outcomes towards nature-positive outcomes.
Founded in 2021, the taskforce is supported by multiple institutions, including businesses, governments, and financial institutions. It is also supported by the United Nations Development Programme, the Global Environment Facility, and the Children’s Investment Fund Foundation, among others.
But what makes the TNFD different from other climate change organisations?
Unlike many organisations that push for climate change initiatives, the TNFD is hoping to work with the market, rather than against it.
Fundamentally, they believe that while investors and companies are both focused on profit, they also strive to be socially responsible — this means trying to maximise profits and minimise environmental damage at the same.
Additionally, the TNFD is taking a closer look at climate change, and focusing on quality of climate change protections as well as its quantity.
Professor Koh Lian Pin, Director at the NUS Centre for Nature-based Climate Solutions, stated that it was important, especially for Southeast Asia, to consider the wider effects of climate change and how they should be measured beyond greenhouse gas emissions and their effects on the atmosphere.
He notes that Southeast Asia has the highest number of endemic species, and that there are communities in the region that depend on biodiversity for their livelihoods.
What has TNFD done so far?
The TNFD has already released a beta version of its financial disclosures framework, including recommendations on what companies should be disclosing on nature-related risks.
I think the really big question on our minds right now, having got the basic framework out with the basic elements, is ‘what’s the right architecture for measurement?’ Ultimately, what is it that we want to measure? What does that look like, and then, how are we going to scale up globally? (We need to have) the metrics, the target and the data to support that.– Tony Goldner, executive director of TNFD
Goldner also expressed hope that companies would take a look at the framework that the TNFD has put up, and provide some feedback, particularly on what needs to be measured.
Herry Cho, Managing Director and Head of Sustainability and Sustainable Finance at the Singapore Exchange concurred, and added that the time was ripe for such an approach.
“There will be a point where investors ask about ESG, so sustainability disclosures will become increasingly important… Singapore is especially important because it’s such an investment hotspot,” she said.
“SGX will be able to help the TNFD because exchanges are marketplaces where financial actors come together, and exchanges deal with investors so they are more aware of what information investors ask for when it comes to ESG.”
Tech is the way forward for environmental causes
The TNFD hopes to find a solution for two concepts that have thus far seemed mutually exclusive: financial profits and environmental protection. The framework that they will provide is just the beginning, and they believe that technology will help them significantly in their goals.
Professor Koh argued that in the modern world, we cannot keep relying on traditional ways of studying biodiversity and nature, especially when effects on nature are localised.
“We must find more scalable ways of collecting data, with remote sensing, machine learning and other technologies.”
At the same time, he also cautioned that the spotlight on environmental causes is simultaneously an opportunity and a threat — capital inflows would provide the necessary resources to protect what ecosystems remain, but at the same time, it could also do harm if data collections and objective optimisations are not done properly.
When queried on the role of technology in their cause, the panellists agreed that tech was the way forward for environmental causes.
Dr Koh specifically called for the the co-operation of the fintech industry in working with the TNFD to figure out what nature-related financial disclosures might mean financially for businesses, and other panellists noted that considering the confluence between finance, insurance, and technology would greatly help to shift businesses towards nature-positive outcomes.
For the TNFD, tech is the way forward, towards a greener future where profits do not come at the expense of the environment. The environment is not merely the atmosphere and a measure of carbon emissions, and there is much more to consider and measure.
At the end of the day, quality and quantity must both be considered.
Featured Image Credit: Screenshot by Vulcan Post