TNFD, King Charles' A4S launch new guide on nature-related issues

King Charles' Accounting for Sustainability (A4S) and the Taskforce on Nature-related Financial Disclosures (TNFD) have joined forces to release a new guide to help executives make better financial decisions when it comes to nature-related impacts, risks and opportunities.

The third guide in the series, Asking Better Questions on Nature, targets chief financial officers, providing a practical framework to assess how dependencies on nature could materially impact the financial performance, valuation and long-term strategy of their companies.

In using the guide, CFOs can integrate nature-related considerations across risk management, capital allocation, financial planning and performance management.

It helps CFOs keep in mind that business activities do contribute to nature loss, degrades nature's capacity to provide the inputs businesses across sectors need from it.

The guide also highlights the risks arising from a company's impacts and dependencies on nature can include stranded assets, disruption to operations, higher production costs, increased insurance premiums and reduced asset values.

TNFD chief executive Tony Goldner said nature has quickly moved from a corporate social responsibility and compliance issue to a strategic risk and opportunity management imperative.

He added that CFOs must now understand how the resilience of cash flows of their business depend on nature's flow of essential inputs into their operations and business model.

A4S executive chair Jessica Fries pointed to research indicating that 85% of companies in the S&P Global 1200 have significant dependencies on nature within their direct operations.

"[Therefore], gaining a better understanding of nature-related risks and opportunities, impacts and dependencies, is critical," she said.

The guide presents 11 questions for CFOs to consider on how nature-related information and insights can be integrated into financial and risk management processes. It also outlines the information they should look for in materials and recommendations prepared by their teams, helping them prepare for increasing scrutiny from boards, investors and other stakeholders.

Last year, the TNFD released similar guides for board directors and asset owner investment committees.

King Charles established A4S in 2004 with the aim of helping finance leaders adopt sustainable and resilient business models by giving them the tools to embed environmental and social risks directly into economic decision-making.