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TNFD in Australia: Nature-Related Financial Disclosures for Australian Businesses

TNFD in Australia: Nature-Related Financial Disclosures for Australian Businesses

The Taskforce on Nature-related Financial Disclosures (TNFD) has published a framework for disclosing nature-related risks and opportunities. While not yet mandatory in Australia, nature-related financial disclosure is increasingly relevant for Australian organisations—particularly those in agriculture, mining, resource-heavy industries, or with significant supply chain environmental impacts. This guide explains the TNFD framework and its application in Australia.

For comprehensive ESG strategy context, see our complete ESG guide for Australian businesses.

What Is TNFD?

Background and Purpose

The Taskforce on Nature-related Financial Disclosures, established in 2021 by financial leaders and environment experts, published its recommendations in September 2023. TNFD addresses the gap left by climate-focused disclosure frameworks—while TCFD and AASB S2 focus on climate, TNFD extends to broader nature and biodiversity risks.

TNFD recognises that businesses depend on nature (natural capital) and that nature degradation creates material financial risks. Common nature-related risks affecting financial performance include:

  • Water scarcity affecting production and costs
  • Soil degradation reducing agricultural productivity
  • Biodiversity loss affecting ecosystem services and supply chains
  • Regulatory risk from strengthening environmental regulations
  • Reputational risk from environmental impacts

Alignment with Climate Disclosure

TNFD is explicitly designed to complement climate disclosure frameworks (TCFD, AASB S2). Both address sustainability risks affecting financial performance. TNFD fills the gap by comprehensively addressing nature risks beyond climate.

The TNFD Framework: LEAP Approach

LEAP Overview

TNFD recommends the LEAP process for nature risk assessment:

  • Locate: Map where and how the organisation’s activities interact with nature
  • Evaluate: Assess nature-related risks and opportunities
  • Assess: Analyse materiality and financial impact
  • Prepare: Develop disclosure and action plans

Step 1: Locate

Understanding where your organisation interacts with nature is foundational:

  • Geographic mapping: Identify all locations where the organisation operates or sources materials
  • Ecosystem assessment: Identify ecosystems and biodiversity in operational areas (forests, wetlands, grasslands, freshwater, marine)
  • Nature dependencies: What natural resources does the organisation depend on? (water, soil, pollinators, minerals, timber)
  • Nature impacts: What impacts does the organisation have on nature? (water use, habitat conversion, pollution, waste)

Use tools like Global Biodiversity Information Facility, Natural Capital Project, or environmental databases to assess biodiversity significance of operational areas.

Step 2: Evaluate

Assess the nature-related risks and opportunities:

  • Physical risks: Direct dependence on nature (water scarcity, soil health, biodiversity affecting operations)
  • Transition risks: Regulatory changes toward environmental protection; market shifts; stakeholder pressure
  • Opportunities: Nature-positive business strategies; cost savings from resource efficiency; market access from environmental stewardship

Step 3: Assess

Determine materiality of nature risks and financial impact:

  • Quantify potential financial impact (cost increases, revenue loss, capex requirements) from nature degradation
  • Assess likelihood of nature risks affecting financial performance
  • Identify which risks are material to investors and stakeholders

Step 4: Prepare

Develop response strategies and disclosure:

  • Set nature-related targets (e.g., water reduction, biodiversity conservation goals)
  • Develop management strategies to reduce material nature risks
  • Prepare disclosure addressing governance, strategy, risk management, metrics

Nature-Related Risks in Australian Context

Key Risks for Australian Organisations

Water Risk

  • Severe water stress in agricultural regions (Murray-Darling Basin, inland Australia)
  • Competition for water from other users (mining, urban); regulatory water allocations
  • Climate change intensifying water scarcity

Soil and Land Health

  • Soil degradation from agriculture, mining, infrastructure development
  • Salinity, erosion, compaction affecting agricultural productivity
  • Indigenous land rights and consultation obligations

Biodiversity and Habitat

  • Habitat loss and fragmentation affecting ecosystems and species
  • Australia’s high endemic species diversity creating conservation significance
  • Regulatory requirements to protect listed species and habitats

Climate-Biodiversity Interaction

  • Climate change altering species distributions and ecosystem function
  • Compound risks where climate and nature degradation interact

Nature Disclosure and AASB Reporting

Current Status

As of 2024, nature disclosure is not explicitly required under AASB S1 or S2. However:

  • If nature-related risks are material to financial performance, AASB S1 requires disclosure
  • Organisations in nature-dependent industries (agriculture, mining, fishing) should consider whether nature risks are material and require AASB S1 disclosure
  • TNFD framework provides a structured approach for organisations voluntarily reporting on nature

Future Regulatory Direction

Regulators globally are considering making nature disclosure mandatory. Australia may eventually require nature-related disclosures for certain industries or entity sizes. Early adoption of TNFD positions organisations well for potential future requirements.

Implementing TNFD Assessment

For Agriculture and Food Production

  • Assess water availability and competition (critical in Australia)
  • Evaluate soil health and productivity trends
  • Map biodiversity impacts and conservation opportunities
  • Set targets for sustainable land management

For Mining and Extractive Industries

  • Assess habitat impacts and biodiversity offsetting requirements
  • Evaluate water impacts (depletion, contamination)
  • Consider rehabilitation and closure planning with nature recovery
  • Engage with indigenous communities on land management

For Supply Chain-Heavy Businesses

  • Assess supplier impacts on nature (deforestation, water use, pollution)
  • Identify geographic risks in supply chains (forest products, agriculture, mining inputs)
  • Develop supplier engagement on nature-related risks

Frequently Asked Questions

Is TNFD mandatory in Australia?

Not yet. However, if nature-related risks are material to financial performance, organisations may be required to disclose under AASB S1. Early adoption of TNFD assessment is recommended for nature-dependent industries.

How does TNFD relate to AASB S1?

TNFD provides a framework for identifying and assessing nature-related risks. Where material, these risks should be disclosed under AASB S1 as material sustainability-related financial information.

What industries should prioritise TNFD?

Agriculture, mining, fishing, forestry, food production, tourism, and water-intensive industries should prioritise nature risk assessment. Supply chain-intensive businesses should assess nature risks in their value chains.

Moving Forward with Nature-Related Disclosure

While TNFD is currently voluntary, nature-related financial risks are increasingly material for many Australian organisations. Early adoption demonstrates environmental leadership and positions organisations well for potential future mandatory requirements. The LEAP process provides a structured approach to assess and manage nature risks.

Ready to assess nature-related risks for your organisation? Book a Free ESG Strategy Session to evaluate whether TNFD assessment is relevant to your business and plan implementation.