The TNFD:
Supporting Corporate
Action for Nature

Understanding Nature

Nature refers to the natural world, emphasising the diversity of living organisms, including people, and their interactions with each other and their environment. It is made up of four realms: land, ocean, freshwater and atmosphere.  These are major components of the natural world that differ fundamentally in their organisation and function. The four realms provide an entry point for understanding how organisations and people depend, and have impacts, on nature.

The TNFD’s biome guidance is organised around the four realms.

Natural capital is the stock of renewable and non-renewable resources (e.g. plants, animals, air, water, soils, minerals) that support economic activity just as physical and human capital do. 

Natural capital consists of stocks of environmental assets – naturally occurring living and non-living components of the earth, such as forests, wetlands, coral reefs and agricultural areas.

Ecosystem services are the benefits that people derive from nature, such as air and water purification or pollination. 

Biodiversity is the variety of life that underpins the flow of benefits. 

Different forms of nature-related risk are closely interrelated

Nature-related risks arise from organisation dependencies and impacts on nature. Throughout the TNFD there is talk of identifying, assessing and managing an organisations nature-related risks, so what exactly are they?  

Nature-related Physical Risks: Short-term, specific events that impact nature such as forest fires, pests and oil spills form acute physical risks to organisations. Gradual changes to nature caused by factors such as long-term use of pesticides or continuous climate change are classed as chronic physical risks. 

Nature-related Transition Risks: Caused by changes in regulation and policy, markets, technologies, investor sentiment and consumer preferences. These risks arise from misalignment of economic actors with actions aimed at protecting, restoring and/or reducing negative impacts on nature.  

Nature-related Systemic Risks: Risks to organisations that arise from the breakdown of entire systems. Ecosystem stability systemic risks are generated when a critical natural system is destabilised and no longer performs ecosystem services. A financial stability systemic risk occurs when a materialisation and compounding of a physical and/or transition risk may lead to destabilisation of an entire financial system. Systemic risks have the potential to disrupt societies, economies and financial markets.  

Physical and transition risks can stem from non-systemic or systemic forms of nature-related risks.

Each nature-related risk has financial impacts on an organisation, risks can change: revenue, expenses and capital expenditure, access to and cost of capital e.g. by effecting insurance premiums and the carrying amount of assets and liabilities on the balance sheet. On the other hand, nature-related opportunities can positively impact credit, operational, market, liquidity, liability, reputational and strategic risk.

Nature-related Opportunities

The TNFD defines nature-related opportunities as activities that generate positive outcomes for organisations and nature through positive impacts or mitigation of negative impacts on nature are regarded as nature-related opportunities. The TNFD has two categories of opportunity, one related to business performance and the other to sustainability performance. 

  • Business performance: Opportunities directly relating to the organisation's financial and strategic performance.

  • Sustainability performance: Opportunities relating to the sustainable use of natural resources and ecosystem protection, restoration and regeneration.

These opportunities arise when organisations avoid, reduce, mitigate or manage nature-related risks, these may be connected to the loss of nature and associated ecosystem services that the organisation and society depend on. Opportunities also involve strategic transformation of business models, products, services, markets and investments that actively work to halt or reverse nature loss.