TNFD and ISSB: How Nature Disclosures Are Becoming Mainstream

TNFD-ISSB Memorandum of Understanding

The memorandum of understanding between the TNFD and the ISSB marks a pivotal moment in the convergence of sustainability reporting standards. The ISSB, which sits within the IFRS Foundation, has committed to building on the TNFD’s recommendations as it develops future standards addressing nature-related risks and opportunities beyond climate. This signals to companies that the TNFD framework is not a parallel or competing initiative but rather a building block for the global baseline of sustainability disclosures.

For UK businesses already grappling with IFRS S1 and S2 (the ISSB’s general and climate standards), this alignment means that early adoption of the TNFD framework will provide a head start when nature-specific ISSB standards arrive. The FCA and the UK Endorsement Board are closely monitoring ISSB developments, and nature disclosures are likely to follow a similar adoption pathway to climate disclosures under the UK SRS framework.

Why Nature Matters to Business

More than half of global GDP is moderately or highly dependent on nature and the ecosystem services it provides, according to the World Economic Forum. Pollination, water purification, soil fertility, flood regulation, and carbon sequestration are not externalities; they are inputs to economic activity. When these services degrade, the costs show up in supply chains, insurance premiums, regulatory penalties, and asset valuations.

In the UK context, nature loss is already creating tangible business risks. The decline in pollinator populations affects agricultural yields. Deteriorating water quality increases treatment costs for water utilities. Loss of natural flood defences raises insurance liabilities and infrastructure repair costs. Companies that fail to understand and disclose their nature dependencies are carrying unpriced risk on their balance sheets.

TNFD Framework: 14 Recommended Disclosures

The TNFD framework is structured around four pillars: Governance, Strategy, Risk and Impact Management, and Metrics and Targets. Across these pillars, the framework sets out 14 recommended disclosures that mirror the structure of the TCFD (now incorporated into IFRS S2). This structural alignment is intentional and designed to reduce the reporting burden for companies that have already implemented TCFD-aligned climate disclosures.

The 14 disclosures cover board-level oversight of nature-related issues, the integration of nature into business strategy and financial planning, the processes used to identify and manage nature-related risks and impacts, and the metrics and targets used to assess and monitor performance. Companies that have built robust TCFD governance and risk management processes can extend these to cover nature with incremental effort rather than starting from scratch.

The LEAP Approach

The TNFD’s LEAP approach provides a practical methodology for organisations to identify and assess nature-related issues. LEAP stands for Locate (identify the interface with nature), Evaluate (assess dependencies and impacts), Assess (identify risks and opportunities), and Prepare (develop response strategies and disclosures). This four-phase process is designed to be iterative and proportionate, allowing companies to start with a high-level screening and deepen their analysis over successive reporting cycles.

For many UK companies, the Locate phase is the most challenging starting point because it requires spatial analysis of where business activities, supply chains, and assets interact with ecologically sensitive areas. Tools such as the TNFD’s own LEAP guidance, the Integrated Biodiversity Assessment Tool (IBAT), and the ENCORE database can support this initial screening. Companies do not need to conduct primary ecological surveys from day one; desktop-based screening using existing geospatial datasets is an appropriate starting point.

UK Regulatory Context

While TNFD disclosures are currently voluntary in the UK, the regulatory trajectory is clear. The Green Finance Strategy commits the UK to becoming a global leader in nature-related financial disclosures. The FCA has signalled interest in extending sustainability disclosure requirements beyond climate to include nature, biodiversity, and ecosystem services. The Environment Act 2021 introduced biodiversity net gain (BNG) requirements for development projects in England, creating a statutory link between business activity and nature outcomes.

Additionally, the UK is a signatory to the Kunming-Montreal Global Biodiversity Framework (GBF), which includes Target 15 on corporate biodiversity disclosure. This international commitment will translate into domestic policy action, and companies that position themselves early will be better prepared when mandatory requirements arrive.

Sector Priorities for Nature Risk

Nature risk does not affect all sectors equally. UK companies should understand where their sector sits on the nature dependency and impact spectrum to prioritise their disclosure and management efforts appropriately.

Construction and real estate. The introduction of mandatory biodiversity net gain (BNG) in England means that developers must deliver a minimum 10% net gain in biodiversity value relative to the pre-development baseline. This requires habitat surveys, metric calculations using the statutory biodiversity metric, and in many cases the purchase of biodiversity credits or establishment of off-site habitat. Construction companies that have not integrated BNG into their project planning and cost models face delays, additional costs, and planning refusal risk.

Agriculture and food. The UK food system is deeply dependent on ecosystem services including pollination (valued at over GBP 600 million annually to UK agriculture), soil health, and natural pest control. Companies in the food supply chain face exposure to declining pollinator populations, soil degradation (the UK loses approximately 2.9 million tonnes of topsoil per year to erosion), and water scarcity in key growing regions. TNFD disclosures for this sector should focus on supply chain mapping, dependency on specific ecosystem services, and regenerative agriculture practices.

Water utilities. Water companies operate at the direct interface between business activity and freshwater ecosystems. Abstraction from rivers and aquifers, discharge of treated effluent, and the management of catchment areas all create nature-related dependencies and impacts. The Water Industry National Environment Programme (WINEP) already requires nature-based solutions, and TNFD disclosures will complement existing regulatory reporting.

Extractives and mining. Companies involved in mineral extraction, quarrying, and related activities face significant land use change impacts. Restoration obligations already exist under planning conditions, but TNFD disclosures will require more systematic assessment of impacts on biodiversity, habitat connectivity, and ecosystem function beyond the site boundary.

Financial services. Banks, insurers, and asset managers face nature risk through their portfolios rather than their direct operations. A lending book concentrated in nature-dependent sectors carries embedded nature risk that may not be visible through traditional credit analysis. The TNFD framework provides guidance specifically for financial institutions on how to assess portfolio-level nature exposure, and several UK banks have already begun pilot assessments using the LEAP approach applied to their loan books.

Core Metrics: What to Measure

The TNFD has identified a set of core global metrics that all reporting organisations should disclose, regardless of sector. These metrics are designed to be universally applicable and provide a minimum baseline for comparability. Companies that begin collecting data against these metrics now will be well positioned when disclosure expectations tighten.

Land use change (hectares). The total area of land converted, restored, or managed by the organisation, including both direct operations and, where material, the supply chain. This metric captures the single largest driver of terrestrial biodiversity loss globally.

Water withdrawal (cubic metres). The total volume of water withdrawn from surface water, groundwater, and other sources, reported by source type and, where relevant, by water-stressed catchment. This metric aligns with existing CDP Water Security disclosures and GRI 303.

Pollution and emissions to water, soil, and air (tonnes). The quantity of pollutants released to the environment, covering nutrients (nitrogen, phosphorus), hazardous substances, plastics, and other contaminants. This goes beyond greenhouse gas emissions to capture the broader pollution footprint that drives ecosystem degradation.

Invasive species. Whether the organisation’s activities introduce or facilitate the spread of invasive alien species, which are identified by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) as one of the five direct drivers of nature loss.

GHG emissions from land use and land use change. Emissions and removals associated with land management activities, including deforestation, afforestation, and changes in soil carbon. This metric links nature disclosures to climate disclosures and is particularly relevant for companies with agricultural or forestry supply chains.

Beyond these core metrics, the TNFD also identifies sector-specific additional metrics. For example, financial institutions are expected to disclose the proportion of their portfolios assessed for nature-related risk, while food companies should report on the percentage of sourcing from certified sustainable or regenerative supply chains. Companies should review the TNFD’s sector guidance to identify which additional metrics are most relevant to their activities.

A pragmatic starting point is to conduct a gap analysis against the core metrics, identify which data is already collected (for example, through existing environmental management systems, CDP responses, or regulatory reporting), and develop a data collection plan for the gaps. Perfection is not required in the first year; demonstrating progress and a credible improvement trajectory is what investors and regulators expect.

What You Should Do Now

• Conduct a LEAP screening to identify where your operations and supply chains interface with nature-sensitive locations.
• Start measuring core TNFD metrics now, beginning with land use change, water withdrawal, and pollution loads.
• Assess your sector’s nature exposure using the TNFD’s sector guidance and the ENCORE dependency database.
• Extend your TCFD governance structures to cover nature-related risks and opportunities alongside climate.
• Engage your supply chain on nature data, particularly for agricultural and forest-risk commodities.
• Monitor the ISSB’s workplan for nature-specific standards and the UK Endorsement Board’s response.