Norway SWF leads on nature disclosure framework
The world’s largest sovereign wealth fund is placing the Taskforce on Nature-related Financial Disclosures (TNFD) at the heart of its portfolio analysis of risks and opportunities posed by nature and biodiversity, according to its stewardship head.
“We have been active in creating this and applying [TNFD] to our portfolio, to better understand the opportunities and risks we are facing relating to nature and biodiversity,” said Snorre Gjerde, lead investment stewardship manager at Norges Bank Investment Management (NBIM), which is responsible for managing Norway’s $1.5 trillion sovereign wealth fund.
“To us, as a broadly diversified investor, it’s very important… to build [better]- functioning markets in terms of these issues,” Gjerde said.
He was speaking at a panel on biodiversity at the FT Moral Money Summit Asia 2024 on September 4.
TNFD, launched in 2021, is supported by governments worldwide, providing a framework for corporate and investor reporting on nature including portfolio risk management.
NBIM is one of TNFD’s 40 members, including financial institutions, corporates, and service providers, which manage $20 trillion in total assets.
Esther An, chief sustainability officer at City Developments Limited (CDL), one of Singapore’s largest developers, pointed to the challenges posed by the “alphabet soup” of acronyms signifying current climate and nature-based reporting standards.
CDL runs businesses around the world. “I want to share the pain. There are hundreds of indicators. TNFD is refreshing … It is very focused and [makes it] easier for us to link to other ratings and standards,” she said on the same panel.
Gjerde agreed that TNFD guidance had a vital role in joining up existing initiatives.
“Instead of an additional framework, [TNFD] is a tool to bring together the best or most relevant international standards in a way that can help mainstream this into corporate reporting and risk management,” he said.
NBIM’s approach to nature and biodiversity includes investing in nature-related financial instruments, such as nature-related bonds, as well as “working actively with our investments on how they are handling these risks”, he explained.
TNFD DISCLOSURE
The sovereign wealth fund published its first TNFD disclosure in 2023 as part of its responsible investment report, which is a pilot review that used TNFD recommendations.
In September 2023, TNFD published a new framework which aims to guide companies and investors in managing nature-related financial risks.
Next year, NBIM will publish its first complete TNFD report, which is part of the first tranche of TNFD signatories due to do so.
NBIM owns on average 1.5% of the world’s listed companies across 9,000 holdings. It was actively engaging with companies to understand how they are tackling their impact and dependencies on nature and biodiversity, ensuring they are adopting emerging frameworks and standards, Gjerde said.
“From our perspective as an investor, what we can do is to be engaged with our investees, to be proactive, informed, in continuous dialogue both to understand how they are thinking about and incorporating [nature] into their strategy-setting, but also how we can take this information back and adapt our portfolio to make sure it’s resilient to these developments,” he said.
Ayako Kageyama, senior expert for sustainable investments, Asia and the Pacific at the United Nations Development Program (UNDP), stressed that TNFD could help investors towards more unified standards.
UNDP is UN’s lead agency on international development.
This is an important step for investors since it ensures their nature-based credentials are accurate, protecting them from accusations of greenwashing. “The industry needs clarity to be safeguarded from green impact- or nature-wash,” she said on the same panel.
TARGETS KEY
“But reporting guidance isn’t enough; it has to be supported by target setting,” she added, pointing to the Kunming-Montreal Global Biodiversity Framework (GBF), a landmark agreement adopted during UN’s Biodiversity Conference in 2022, which set out a nature-related pathway to 2050.
“[We] need robust, ambitious targets that [are] committed [to] by banking and financial institutions and [their] clients,” she said, noting that digital start-ups, mainly in Europe, are providing data to support compliance.
UNDP's efforts to boost nature-related investments' appeal include underwriting financial initiatives in the sector and advising investors and managers on creating such products.
Kageyama said UNDP was ready to commit tens of millions as catalytic capital to design products and take first losses, aiming to attract hundreds of millions required from the private sector.
She highlighted UNDP's financial and advisory support to aid investors in allocating to the sector, helping participants structure products aligned with the UN's Sustainable Development Goals and impact investment standards.
This includes publishing standards for bond issuers, development finance institutions (DFIs) and fund investors.