Release of the Taskforce on Nature-related Financial Disclosures (TNFD) final framework

This month’s newsletter focuses on the global launch of the Taskforce on Nature-related Financial Disclosures (TNFD) final framework following two years of development, including pilot testing by over 200 institutions. The 14 disclosure recommendations have been designed to be consistent with the language and structure of both the Task Force on Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB) Sustainability Disclosure Standards.

We also highlight this month’s key climate governance developments including:

 

• The Network for Greening the Financial System (NGFS) report on climate-related litigation trends and developments;
• Australia’s leading involvement at COP28 climate adaptation talks; and
• ASIC putting super funds on notice about active investment ‘greenwashing.’

TNFD framework release

During New York Climate Week, on 19 September 2023, the TNFD published its final recommendations and guidance (the Framework) to help organisations get started on nature-related assessment and disclosure, building on existing climate reporting practice. TNFD Co-Chair, David Craig said, “Many are seeing the advantages of taking an integrated approach to nature and climate assessment.” TNFD Consultation Group Convenor for Australia and Aotearoa New Zealand, the Responsible Investment Association Australasia (RIAA) encouraged companies to rapidly adopt the new nature reporting framework.

The TNFD recommendations retain the four pillars of the TCFD (governance, strategy, risk management, and metrics and targets) and the ISSB’s IFRS Sustainability Disclosure Standards. The TNFD is comprised of 14 recommendations for nature-related issues, 11 of which replicate the TCFD’s recommended disclosures. The three additional recommendations relate to disclosures on an organisation’s human rights policies and engagement with First Nations peoples, local communities and affected stakeholders, priority locations of assets and activities, and value chain disclosures – upstream and downstream (this is analogous to scope 3 disclosures for climate reporting in the TCFD).

On the key area of double materiality, Geoff Summerhayes, a senior advisor at Pollination, and former executive board member of the Australian Prudential Regulation Authority (APRA) said, “unlike climate, risk managers will need to establish and disclose both their impacts and dependencies on nature, and associated risks.”

For those interested in understanding more, an upcoming launch webinar is being held this Friday, 22 September. The next AICD Membership Update will include an article outlining the recommendations and what it means for Australian directors.

The AICD recognises the need for guidance to support proactive board action in addressing biodiversity risk. In July, AICD and MinterEllison, as part of CGI Australia, released the Biodiversity as a material financial risk: What board directors need to know resource (see extract below for key questions for directors). The topic will continue to be a growing focus for AICD going forward.

Network for Greening the Financial System (NGFS) report on climate-related litigation: trends and developments

The NGFS (whose global membership of 125 banks including the RBA and APRA) released its 2023 report on climate-related litigation. It highlighted that 253 new cases were filed in 2021, 223 cases were filed in 2022, and 84 cases were filed between January and July 2023.

In an complementary report on micro-prudential supervision of climate-related litigation risks, the NGFS noted the jurisdiction with the highest overall volume of cases continues to be the US (between 1,590-1,595 cases), followed by Australia (between 130-135 cases), the UK (between 100-105 cases), and the EU.

The reports highlight the following trends:

• Litigation against states and public entities – Between 2021-2022, more than 70% of cases were brought against governments and public actors, including central banks and supervisors.
• Litigation against non-financial institutions – Cases against fossil fuel and energy companies have continued to grow, and strategic cases are increasingly being filed against a range of corporate entities in areas such as agriculture, transport, plastics and, finance.
• Variety of legal arguments – Increases in claims of greenwashing (for example, Volkswagen v ACCC), breaches of director’s duties (for example, McVeigh v Retail Employees Superannuation Trust), and violation of corporate due diligence laws.

Looking forward, the NGFS expects climate-related litigation will continue to increase in volume, and expand in nature, scope, and addressees of legal actions. This is linked to the development of climate-related legislation, especially greenwashing, climate disclosures and corporate due diligence.

For more detail on managing litigation risks, see the AICD and MinterEllison Climate Risk Governance Guide.

Government and regulatory updates

“Lead role for Australia at COP28 climate adaptation talks” (Media Release)

Minister for Climate Change and Energy, Chris Bowen recently announced the Australian Government will play a leading role in international negotiations on climate adaptation in the lead-up to the 28th UN Climate Conference in Dubai, United Arab Emirates, in December 2023. Assistant Minister for Climate Change and Energy, Senator Jenny McAllister has accepted an invitation by the Conference of the Parties to the UN Framework Convention on Climate Change (COP28) President-Designate, Dr Sultan Al Jaber, to facilitate consultations on the development of a framework to advance the Global Goal on Adaptation.

Climate adaptation is a critical part of the first Global Stocktake at COP28 when the world will track its progress toward the goals of the Paris Agreement and help advance efforts on climate action. Senator McAllister said the appointment “complements the Albanese Government’s domestic work on adaption, including Australia’s first National Climate Risk Assessment and development of a National Adaptation Plan.”

“Sydney to host world's first Global Nature Positive Summit” (Joint Media Release)

Minister for the Environment and Water, Tanya Plibersek has announced Sydney will be the host for the first Global Nature Positive Summit (Summit) in early October 2024. Minister Plibersek first announced Australia would host the Summit whilst attending COP15 (UN Biodiversity Conference) last year. The Summit will bring together delegates from around the world including government, business and scientific experts, to consider how to boost investment in projects that repair nature.

The Kunming-Montreal Global Biodiversity Framework (also described as the 'Paris Agreement for nature)’ was adopted at COP15 and received agreement from 196 countries at the UN biodiversity conference last year. The framework includes four goals by 2050 and 23 targets by 2030 including a target of US$200 billion per year of funding to be spent on nature repair. The Summit will focus on three key themes: transparency and reporting, investment in nature, and partnerships and capacity development. The Summit will highlight how clear and consistent rules will enable businesses to invest in and measure projects that repair nature.

“ASIC Annual Forum 2023” (Program Schedule)

The full program for the ASIC Annual Forum, 21-22 November 2023, has been released. This year includes a session on Responding to Climate Disruption, which covers the Government’s forthcoming mandatory climate reporting regime, and ASIC’s key priorities of sustainable finance and deterring greenwashing. The session panel will also feature AICD, Managing Director and CEO, Mark Rigotti.

Other climate governance updates:

“ASIC puts super funds on notice about active investment ‘greenwashing’“ (Australian Financial Review)

ASIC Deputy Chair, Sarah Court warned that “where a fund makes statements that it is electing to invest in fossil fuel companies for the purposes of using its seat at the table to influence an environmental transition or other ESG decision of the company, and the evidence or the fund’s voting record suggests this not to have been the case ... then this could amount to greenwashing under the current laws”. According to activist shareholder group Market Forces’ latest report, at least six super funds boosted their investments in energy giants Woodside and Santos in 2023, whilst the companies having expansion plans.

To access free director-focused Climate Governance Initiative Australia webinars, videos, and resources, click here.