Since 2022, EFRAG (European Financial Reporting Advisory Group) and TNFD (Task Force on Nature-related Financial Disclosures) have collaborated in the development of the European Sustainability Reporting Standard (ESRS) environmental standard and TNFD recommendations and guidance In December 2023, the two organisations signed a Memorandum of Understanding (MoU) on cooperation ( MoU) was signed, highlighting the importance of advancing corporate sustainability assessment and reporting to address nature-related issues.
This issue focuses on the Correspondence Map, a mapping table published in June 2024, which maps the correspondence between the TNFD and ESRS disclosure standards.
TNFD-ESRS correspondence mapping
About EFRAG
EFRAG is a private organisation established under the auspices of the European Commission and plays a key role in the development and endorsement of financial reporting standards in the European Union.
In its sustainability reporting activities, EFRAG supports the effective implementation of the ESRS by providing the European Commission with draft ESRSs developed under a rigorous process. For more information on the ESRS, please see our previously published article.
[Commentary] ESRS (European Sustainability Reporting Standard).
About TNFD
Published by us.articleAs mentioned in the section on the Framework, the objective of the Framework is to design and develop a global risk management and disclosure framework for reporting and acting on nature-related issues.
[Explanation] What is the TNFD? A new bridge between finance and the natural environment
The TNFD aims to identify and disclose the impact of business on the natural environment and biodiversity and, conversely, the risks to companies from changes in nature, so that they can identify their own risks and be properly assessed by investors and society.
Objectives of the correspondence map.
The published correspondence map provides a detailed mapping of the ESRS to the TNFD disclosure recommendations and indicators, and as the ESRS covers all 14 disclosures recommended by the TNFD, the mapping information can be used to start the ESRS disclosures based on the TNFD disclosures, thus reducing the burden on disclosure preparers. This reduces the burden on disclosure preparers. On the other hand, the mapping does not address indicators that are disclosure requirements in the ESRS but not in the TNFD, so separate consideration is required when making disclosures in accordance with the ESRS requirements.
Mapping overview.
| TNFD | ESRS | |
| Concepts and definitions | Disclosure of significant nature-related impacts, risks, opportunities and dependence on nature is recommended. Both approaches are based on a common understanding that the degradation of nature, ecosystems and biodiversity poses risks to stakeholders, including companies and investors. | |
| materiality approach | Not limited to either single and double materiality. | Requires disclosure based on double materiality. Recognises nature as a 'silent stakeholder'. |
| LEAP approach (see Figure 1). | Developed the LEAP approach as a method for identifying and assessing nature-related issues. Recommended the LEAP approach as clear and accessible guidance for identifying, assessing, managing and disclosing nature-related issues from stakeholders. | Pollution, water, biodiversity and ecosystems, circular economy (other than climate change) materiality assessments can be carried out using the LEAP approach The LEAP approach is mentioned as a tool to use when carrying out materiality assessments for the environment (other than climate change) in your own upstream and downstream value chains. |
| Pillars of the report (see Figure 2) | Organised according to the four disclosure pillars of the TCFD (governance, strategy, risk management and indicators and targets), which are also adopted in the ISSB's IFRS standards. | |
| Recommended disclosures and indicators | All 14 TNFD recommended disclosures are addressed in the ESRS; there is strong consistency between the TNFD's key global disclosure indicators and the relevant indicators in the ESRS. | |
| Nature and biodiversity. | Defines nature as the natural world with an emphasis on biodiversity, including people and their interactions. Covers four natural areas: land, oceans, freshwater and atmosphere. Makes a clear distinction between the concepts of 'nature' and 'biodiversity'. | Covers four natural areas: land, oceans, freshwater and atmosphere. 'Biodiversity' refers to the diversity of living organisms across the above four natural areas. |
| Influence and dependence | Understanding dependencies and impacts on nature is a prerequisite for understanding the risks and opportunities to the business. It is recommended that dependencies and impacts in the supply chain are identified and measured. Identify how the company's activities affect nature. | |
| Risks and opportunities | It distinguishes between physical risks (which can be divided into acute and chronic), transition risks (including policy, market, technology and reputational risks) and systemic risks. The significance of risks and opportunities is assessed based on a combination of the likelihood of occurrence and the magnitude of the expected financial effect on the organisation. | |
Figure 1: Correspondence between TNFD and the LEAP approach by ESRS
The four environmental application requirements of the ESRS state that materiality assessments can be carried out using the LEAP methodology.
(Source:TNFD-ESRS correspondence mapping(Prepared by aiESG based on)
Figure 2: Four pillars with TNFD and ESRS
Both the TNFD and CSRD follow the four pillars of the TCFD, while double materiality is applicable.
(Source:TNFD-ESRS correspondence mapping(Prepared by aiESG based on)
The TNFD has also published sector-specific guidance following an increase of 30% in the number of reporting companies since January 2024. This guidance includes sector-specific disclosure indicators. The sectors covered are aquaculture, biotechnology and pharmaceuticals, chemicals, power and power generation, food and agriculture, forestry and paper, metals and mining, and oil and gas. The guidelines also include sector-specific value chains and examples of ENCORE risk assessments to guide disclosure.
Figure 3: Examples of value chains in the food and agriculture sector
(Source:Additional-Sector-Guidance-Food-and-Agri(Prepared by aiESG based on)
TNFD disclosure in Japanese companies.
TNFD early adopter companies were published in January 2024.
[Commentary] TNFD early adopters and their characteristics.
TNFD disclosures are expected to be enhanced in terms of content in the future. The past aiESG looked at Kirin Holdings' environmental report for 2023, but in the latest edition for 2024, the disclosures are more comprehensive.
[Commentary] TNFD disclosure status and issues.
Kirin Group Environmental Report 2024
In the LEAP approach, a description of the scoping phase has been added to the existing analysis, and a method has been adopted to select approach targets based on the results of a comprehensive assessment of dependency and impact. In the indicators and targets, disclosure of Scope 3 and TNFD global core indicators, which are considered difficult to disclose, has also been added, indicating that the data base for measuring these figures is now in place. As more and more companies continue to enhance their disclosure, the overall disclosure level of Japanese companies will be raised and comparability between companies will increase.
aiESG can provide support from the basics of TNFD to the actual disclosure of non-financial information. aiESG is happy to assist companies that need help in complying with TNFD.
Enquiry:
https://aiesg.co.jp/contact/
*Related page*.
Report list : Regulations/standards
[Explanation] What is the TNFD? A new bridge between finance and the natural environment
[Commentary] TNFD disclosure status and issues.
[Commentary] Key points of the TNFD final recommendations and the responses required from companies.
Commentary] Nature Positive : Creating a society that can live in harmony with nature - About OECM and nature symbiosis sites.
[Commentary] TNFD early adopters and their characteristics.
[Commentary] Non-financial capital: trends in human and natural capital - domestic and international disclosure regulations and guidelines.
[Commentary] ISSB latest developments - Biodiversity and human capital are now under consideration.
[Commentary] Alphabet soup - Disorder and convergence of sustainability standards.