Financial sector acknowledges risks and opportunities of nature, but lacks data
This fall, a new financial framework will be launched to help corporates and financial institutions fully integrate nature in their business and help make the decisions that protect people and planet. This framework is currently being finalised throughout several consultation rounds.
Last Friday the Dutch Banking Association (NVB), Deloitte, Rabobank and WWF-NL organised its first Dutch consultation on the third beta framework version of the Taskforce on Nature-related Financial Disclosures (TNFD). TNFD is an industry led disclosure framework with a taskforce of 40 senior executives from financial institutions, corporates and market service providers. Bas Rüter, Head of Global Food System Transition at Rabobank, is one of them and joined us for this event to share the current status of the TNFD’s development.
The aim of the event was to create awareness and prepare the Dutch financial sector to provide individual or joint feedback on the final draft which will be released on the 28th of March. The launch of the final version is scheduled for September this year. It was encouraging to see that over 30 representatives from Dutch banks, asset managers, insurance companies and pension funds joined us to learn and share their experiences integrating nature-related considerations in their daily invest practices.
Let’s start with the good news. More and more financial institutions are starting to look at the material risks and opportunities of nature in their portfolios. Often there is board level support to take this topic seriously. A year ago, when WWF-NL and Deloitte launched their Nature is Next report, awareness and action was mainly limited to the larger and/or green banks in the Netherlands. Within a year nature has risen in status on the agenda among all financial institutions in the Netherlands, including asset managers and pension funds, for instance the rail and public transportation pension fund.
It was also good to hear that many also consider mainstreaming nature in their portfolios as an opportunity. Recently, the World Economic Forum estimated that if businesses prioritize nature, this can unlock close to 400 million new jobs and unlock $10 trillion business opportunities. One example of turning the topic of biodiversity into an opportunity is the first of its kind Biodiversity Equities fund launched by Robeco in fall 2022. There is also a lot of enthusiasm about the recently launched biodiversity risk filter, which enables companies to map biodiversity related risks in their supply chains and financial institutions in their portfolio companies.
However, not all news is positive. In our meeting last Friday there was still a lot of talk about the lack of location specific data of assets and company supply chains. This lack of data slows and delays meaningful assessment and management of nature-related risks. Without this data available it will be hard for financial institutions to evaluate their impact and dependencies on nature, and hence assess whether nature is a material issue.
While well-known data providers such as Bloomberg, MSCI and S&P are busy collecting such data, it is not sure whether the data will be complete enough to cover full portfolios or available on time. There is also a risk that proxies, such as sector averages, will be used to assess portfolios. So my worry is that, unless data providers step up their game, actions may be taken on the basis of inaccurate data or not taken at all.
It is not about disclosure, but about action. We only have seven years left to change how public and private entities invest and bend the curve of biodiversity decline by 2030 to become Nature Positive. The challenges ahead are large and time is running out. But to quote Edmund Burke: Nobody made a greater mistake than he who did nothing because he could do only a little.
So from our side we will continue to raise awareness on nature-related disclosure and risk management in the Dutch financial sector. The next milestone will be in mid-May when we will collect the feedback from Dutch financial institutions on the final TNFD draft. I believe that the Dutch financial sector is one of the most progressive ones in the world when it comes to sustainable finance. Together we have the potential to move the needle towards Nature Positives by engaging investees, clients and regulators.
Do you want to join our next consultation session or are you curious about TNFD? We are very happy to help you out. Please get in contact with cvredenbregt@wwf.nl.