Ernst & Young LLP (EY US) released its inaugural EY US Nature Risk Barometer (the “Barometer”) analysis in its report, When will transparency drive action to protect and restore nature. To create the Barometer, 111 S&P 500 companies were scored on the breadth and depth of their reporting on nature-related dependencies, impacts, risks and opportunities based on the recommendations of the Taskforce on Nature-related Financial Disclosures’ (TNFD) beta draft V0.4 framework.
The Barometer showed that most companies (87%) in the analysis are already disclosing some information against at least one of the 14 TNFD recommendations. However, these baseline results show the extent to which companies reported in alignment with the TNFD recommendations was limited.
According to the Barometer, companies earned on average a coverage score of 51%, meaning they disclosed some information for just over half of the TNFD recommendations.
The quality or depth of that reporting was still limited. Companies earned on average an alignment score of 13%, meaning they were not reporting the depth of information detailed in the TNFD recommendations.
“This analysis comes at a pivotal time, with new regulations bolstering the stakeholder focus on nature-related risks and opportunities” said Veli Ivanova, EY Americas Chief Sustainability Officer and Climate Change and Sustainability Services Leader. “Our inaugural EY US Nature Risk Barometer provides an overview of the nature-related reporting landscape and details steps corporations can take to mitigate risks and reap the benefits of nature-related reporting.”
The Barometer evaluated the companies’ disclosures against the four pillars in the TNFD framework (governance, strategy, risk and impact management, and metrics and targets) and found the greatest coverage and alignment in the strategy pillar.
The sectors scoring the highest included food and beverage, consumer goods, and infrastructure, while health care, financials and transportation scored lowest.
“Although we’re starting to see companies track and report on nature-related risks, there is more to be done,” said Lucy Godshall, EY US Climate Change and Sustainability Services Principal. “With a formal framework such as TNFD, companies will have a clear guide for reporting that also can help them examine their progress and identify nature-related opportunities that will be good for business and society.”
Looking ahead. The Barometer called out five actions companies can take to protect and restore nature and communicate their progress and impact as they relate to nature:
- Understand and identify where the company’s value chain interfaces with nature, creating priority risks and opportunities in alignment with the TNFD framework and pinpointing the business areas that are most affected by and have an impact on nature.
- Develop an organizational nature and biodiversity strategy, including science-based targets to reduce the company’s impact on land and water and to mitigate biodiversity loss.
- Implement a strategy and institute effective governance across operations and the supply chain to establish board oversight of nature-related disclosures and designate management’s role in assessing and managing nature-related topics within the company.
- Evaluate and report performance to drive accountability and continuous improvement in a company’s nature-related strategy.
- Develop nature/biodiversity capacity and knowledge and identify collaboration opportunities with other groups, such as through public-private partnerships or with Indigenous peoples and others, to identify ways to innovate, collaborate and build capacity as nature reporting gains momentum.
The Barometer provides a baseline analysis of nature-related corporate disclosures across 10 sectors based on 111 S&P 500 companies’ public disclosures on biodiversity and nature-related activities and objectives. The analysis used the TNFD’s draft beta v0.4 framework and recommendations. The alignment to nature-related disclosures and coverage of them informed the report’s findings.
The TNFD, which represents financial institutions, corporations and market service providers with over US$20t in assets, is expected to publish its final risk management and disclosure framework in September 2023 to guide corporate nature-related risk reporting and actions on the evolving risks.
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