Defined benefit (DB) pension schemes have been warned they will lack the information needed to understand how nature- and climate-related risks impact them without an integrated approach to sustainability reporting.

In a briefing note on Taskforce on Nature-related Financial Disclosures (TNFD), Hymans Robertson highlighted key actions asset owners should take to try and ensure successful TNFD reporting.

TNFD published its final recommendations for nature-related risk management and disclosures in September.

The recommendations aim to outline the relationship between nature, business and financial capital, positioning nature risk alongside financial, operational and climate risk, and help to shift cashflows to nature-positive outcomes.

Building on the Task Force on Climate-related Disclosures (TCFD) recommendations, the TNFD framework highlighted four key elements of nature-related issues: Dependencies, impacts, risks, and opportunities.

Hymans Robertson urged DB schemes to take some initial ‘key actions’ for successful TNFD reporting, including education and engagement, whereby schemes should read TNFD’s starter guide and take training on TNFD, nature capital and biodiversity.

The consultancy said that DB schemes should take the time to engage with investment managers and portfolio companies on nature-related issues.

Secondly, DB schemes were urged to understand TNFD’s core metrics and agree on which ones to focus on first, alongside carrying out data gap analysis to understand baseline position.

It encouraged schemes to make an initial assessment of portfolio exposure to sectors and locations with significant impacts or dependencies, and set targets relating to key nature metrics.

Finally, schemes were urged to develop sustainability disclosures that incorporate TNFD guidance, alongside climate disclosures and TCFD, and consider how biodiversity and nature fit into wider sustainability reporting.

Furthermore, schemes should monitor impact related to specific themes, such as deforestation and marine life, and set policies and/or targets where needed, while taking measures to reduce exposure to nature loss, and investing in companies and sectors that support nature preservation.

“The launch of the TNFD framework is great news, as it’s designed to align with the TCFD climate framework,” said Hymans Robertson investment consultant and biodiversity lead, André Ranchin.

“We expect it will play a key role in future regulatory frameworks and is a positive step towards addressing the biodiversity crisis. Nature and climate issues are two sides of the same coin.

“As such, DB schemes will need to ensure they develop an integrated approach to their sustainability reporting. This will help them produce the consistent disclosures and understand the actions needed to achieve the long-term goal of helping to reverse nature and biodiversity loss.

“The core elements of the TNFD framework recognise that dependencies and impacts on nature are location-specific, and that risks or opportunities will also vary according to organisation type and economic sector.

“It is vital, therefore that investors assess their own needs and set out a roadmap that covers education and engagement, data and monitoring, and disclosure and strategy. These are the three areas where they can take-action now to ensure they deliver robust reports when the time comes.”

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