The Taskforce on Nature-related Financial Disclosures (TNFD) and the European Financial Reporting Advisory Group (EFRAG) have jointly published a detailed mapping of the correspondence between the European Sustainability Reporting Standards (ESRS) and TNFD’s recommended disclosures and metrics.
This mapping highlights the extensive alignment achieved between the two frameworks, providing a unified approach for companies worldwide to disclose nature-related financial and sustainability information effectively.
Understanding the TNFD-ESRS Mapping
The correspondence mapping reveals a high degree of commonality between the TNFD's 14 recommended disclosures and the ESRS requirements. This initiative is designed to help companies better understand the overlap between these two frameworks, facilitating smoother compliance and more coherent reporting practices. Given the increasing global emphasis on nature and biodiversity-related disclosures, this mapping is particularly timely and relevant.
Objectives and Target Audience
The primary objective of this mapping is to support companies, especially those within the scope of the Corporate Sustainability Reporting Directive (CSRD), in aligning their nature-related disclosures with both ESRS and TNFD requirements. The target audience includes market participants, regulators, and other stakeholders involved in sustainability reporting and corporate transparency.
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Key Insights from the Correspondence Mapping
The mapping document provides a granular analysis of the correspondence between TNFD’s recommended disclosures and the ESRS requirements, organized into several key areas:
Concepts and Definitions
The TNFD and ESRS frameworks both recognize the critical importance of disclosing nature-related impacts, risks, and opportunities. Key concepts such as nature, biodiversity, and ecosystems are consistently defined across both frameworks, facilitating a shared understanding of these terms.
Nature and Biodiversity: Both TNFD and ESRS use definitions aligned with the UN Convention on Biological Diversity, ensuring that disclosures about nature and biodiversity are grounded in widely accepted international standards.
Impacts and Dependencies: The frameworks highlight the need to disclose both positive and negative impacts on nature, as well as dependencies on natural resources, to fully understand the associated risks and opportunities.
Related Article: EFRAG IG 3: Overview of ESRS Data Points
Approach to Materiality
The ESRS’s double materiality approach requires companies to report on both the financial impacts of nature-related issues and their broader environmental and social impacts. The TNFD supports this comprehensive approach, enabling organizations to tailor their materiality assessments to meet diverse regulatory and stakeholder needs.
The LEAP Approach
The LEAP approach, developed by TNFD, provides a detailed methodology for identifying and assessing nature-related issues. The ESRS recommend using the LEAP approach for materiality assessments related to various environmental topics.
This approach includes four phases:
Locate: Identifying the locations of assets and activities that interact with nature.
Evaluate: Assessing the impacts and dependencies on nature.
Assess: Determining the materiality of these impacts and dependencies.
Prepare: Developing strategies to address and disclose nature-related risks and opportunities.
Reporting Pillars
The alignment around the four TCFD pillars – Governance, Strategy, Risk Management, and Metrics and Targets – ensures that both TNFD and ESRS provide a structured approach to sustainability reporting. This structure helps organizations present their nature-related disclosures in a clear and consistent manner.
Significant Milestones and Future Collaboration
The publication of this correspondence mapping is a significant milestone in the collaboration between TNFD and EFRAG, which has been ongoing since 2022. In December 2023, both organizations signed a Memorandum of Understanding (MoU) to formalize their cooperation and continue enhancing the alignment of sustainability reporting standards. This MoU also recognized EFRAG as the twentieth knowledge partner of the TNFD.
Statements from Key Figures
Tony Goldner, Executive Director of TNFD, emphasized the global adoption of TNFD recommendations and the need for additional guidance to ensure compliance with CSRD requirements. He highlighted the mutual benefits of the collaboration with EFRAG, particularly the endorsement of the LEAP approach within the ESRS framework.
Patrick de Cambourg, EFRAG SRB Chair, underscored the achievement of high correspondence between ESRS and TNFD disclosures, marking a crucial step forward in advancing corporate transparency. He reiterated EFRAG’s commitment to supporting the implementation of nature-related disclosures and the development of further guidance and tools for market participants.
Detailed Comparison of Disclosures and Metrics
The correspondence mapping provides a comprehensive and granular comparison of the TNFD’s 14 recommended disclosures with the corresponding ESRS requirements. This detailed analysis highlights areas of strong alignment and differences in scope, terminology, and granularity.
Key areas of correspondence include:
Governance: Both frameworks emphasize the necessity of disclosing information on the board’s oversight of nature-related issues. They require details on how these issues are integrated into the governance structures, including the roles and responsibilities of the administrative, management, and supervisory bodies. ESRS requires specifics on how often these bodies are informed about material impacts, risks, and opportunities, and how sustainability performance metrics are incorporated into remuneration policies.
Strategy: Companies must disclose the nature-related dependencies, impacts, risks, and opportunities they have identified over the short, medium, and long term. Both TNFD and ESRS require companies to explain the effects of these factors on their business models, value chains, strategies, and financial planning. This includes any transition plans or resilience strategies developed to address these nature-related issues.
Risk Management: Both frameworks highlight the importance of robust processes for identifying, assessing, and managing nature-related risks and opportunities. The ESRS demands a detailed description of the processes used, including how these are integrated into the company’s overall risk management systems. The TNFD similarly focuses on the need for comprehensive risk management strategies that cover direct operations and value chains.
Metrics and Targets: There is a high level of consistency between the TNFD’s core disclosure metrics and the related metrics in the ESRS. Both frameworks require companies to disclose the metrics used to assess and manage material nature-related risks and opportunities. This includes metrics related to the company’s impacts on biodiversity, ecosystems, and other environmental factors. Additionally, both frameworks require companies to set and disclose targets and goals for managing nature-related issues and to report on their performance against these targets.
The mapping document identifies specific ESRS disclosure requirements that correspond to each TNFD recommended disclosure. For example, the TNFD’s recommendation to describe the board’s oversight of nature-related issues corresponds to several ESRS requirements, including ESRS 2 GOV-1 (Role of the administrative, management, and supervisory bodies) and ESRS 2 GOV-2 (Information provided to and sustainability matters addressed by these bodies).
Similarly, TNFD’s recommendations on strategy and risk management align with multiple ESRS requirements, such as ESRS 2 SBM-3 (Material impacts, risks, and opportunities and their interaction with strategy and business model) and ESRS 2 IRO-1 (Processes to identify and assess material impacts, risks, and opportunities).
Moreover, the mapping highlights differences in terminology and scope that may require companies to adjust their disclosures to ensure full alignment. For instance, while both frameworks cover the concept of dependencies on nature, the TNFD uses the term “dependencies” explicitly, whereas the ESRS addresses these within broader categories of impacts and opportunities.
Continuous Improvement and Support
EFRAG and TNFD are committed to ongoing collaboration to enhance the consistency and clarity of sustainability reporting. The correspondence mapping is not a static document but a part of a dynamic process aimed at responding to the evolving needs of market participants. As new challenges and opportunities arise in the realm of sustainability, both organizations will work together to develop updated guidance and tools to support high-quality, consistent reporting.
By fostering greater alignment between the ESRS and TNFD frameworks, this initiative aims to simplify the reporting process for companies, reduce duplication of efforts, and provide stakeholders with reliable and comparable information. This effort contributes significantly to the broader goal of achieving sustainable development through improved corporate transparency and accountability.
The continued collaboration between EFRAG and TNFD, supported by the Memorandum of Understanding, underscores a shared vision of a future where nature-related financial and sustainability disclosures are integral to business strategy and decision-making processes. As these standards evolve, they will play a critical role in driving the transition to a more sustainable global economy.
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