Myths vs. realities: Nature-related financial disclosures (TNFD) — what the evidence actually supports

More than 55% of global GDP, approximately $58 trillion, depends on nature and its services, yet fewer than 5% of listed companies in emerging markets disclosed any nature-related financial risk as of year-end 2025, according to the TNFD's own adoption tracker. The Taskforce on Nature-related Financial Disclosures released its final recommendations in September 2023, and since then the framework has attracted both enthusiastic adoption pledges and deep skepticism. For investors allocating capital across emerging markets, distinguishing genuine progress from marketing narratives is essential to pricing nature-related risks accurately.

Why It Matters

Nature loss is no longer an abstract environmental concern for financial institutions. The Paulson Institute estimated in 2025 that the annual financing gap for biodiversity conservation stands at $711 billion, while the World Economic Forum ranks biodiversity loss among the top five global risks by severity over the next decade. Central banks, including the Network for Greening the Financial System (NGFS), have begun integrating nature-related scenarios into supervisory expectations. In emerging markets, where economies depend more heavily on agriculture, fisheries, mining, and forestry, the financial materiality of nature degradation is particularly acute.

Brazil's soy and cattle sectors face potential export revenue losses of $30 billion annually if deforestation-linked commodity restrictions tighten under the EU Deforestation Regulation (Trase, 2025). Indonesian palm oil producers risk stranded plantation assets worth an estimated $18 billion if biodiversity safeguard requirements expand across buyer markets (Chain Reaction Research, 2025). Indian pharmaceutical companies sourcing active ingredients from wild-harvested medicinal plants face supply disruptions as 40% of identified source species show declining populations (TRAFFIC International, 2025).

The TNFD framework offers a structured approach to identifying, assessing, and disclosing these dependencies and impacts. But claims about its readiness, ease of implementation, and immediate value to investors vary widely. What does the evidence actually support?

Key Concepts

The TNFD framework is built around 14 recommended disclosures organized across four pillars: governance, strategy, risk and impact management, and metrics and targets. The LEAP approach (Locate, Evaluate, Assess, Prepare) provides a methodology for organizations to identify their interface with nature across operations, supply chains, and financed activities. Unlike TCFD, which deals primarily with a single variable (carbon), TNFD must address the multidimensional complexity of biodiversity, ecosystems, and ecosystem services across diverse biomes and geographies.

Key metrics recommended by TNFD include dependencies on ecosystem services, nature-related risks and opportunities in the value chain, and location-specific impact assessments. The framework is voluntary but increasingly referenced in regulatory developments across the EU, UK, Japan, and several emerging market jurisdictions.

Myth 1: TNFD Is Simply TCFD Applied to Nature

A common simplification holds that TNFD is essentially the climate disclosure framework repurposed for biodiversity, so organizations with mature TCFD processes can adopt TNFD with minimal additional effort. The reality is significantly more complex. While TNFD intentionally mirrors TCFD's four-pillar structure to reduce reporting fatigue, the underlying analytical requirements differ fundamentally.

Climate risk assessment revolves around a single metric (greenhouse gas emissions measured in CO2 equivalents) with established scenarios (1.5C, 2C, 3C warming pathways). Nature risk assessment requires location-specific analysis across multiple dimensions: water use, land-use change, pollution, invasive species, and resource exploitation, each varying by ecosystem type. A 2025 survey by PwC of 120 financial institutions found that organizations with advanced TCFD processes still required an average of 14 months and $1.2 million in additional investment to conduct a credible TNFD-aligned assessment, compared to just 3 months and $200,000 to extend existing TCFD reporting (PwC, 2025).

The LEAP approach requires geospatial analysis to locate interface points with nature, a capability most financial institutions lack internally. ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure), the most widely used dependency mapping tool, covers 167 economic sub-sectors but provides generic rather than site-specific data, creating a gap between framework requirements and available analytical capacity.

Myth 2: Emerging Market Companies Cannot Meaningfully Adopt TNFD

Skeptics argue that data gaps, limited technical capacity, and weak regulatory enforcement make TNFD adoption impractical for companies operating primarily in emerging markets. The evidence tells a more nuanced story. While challenges are real, several emerging market organizations are demonstrating credible early adoption.

Suzano, the Brazilian pulp and paper producer, published a TNFD-aligned pilot report in 2025 covering 2.4 million hectares of operations, including detailed LEAP assessments across the Atlantic Forest and Cerrado biomes. The company used satellite-derived land cover data from MapBiomas combined with ground-level biodiversity surveys to quantify both dependencies and impacts at the landscape level (Suzano, 2025). Olam Group in Singapore completed a TNFD-aligned assessment across its cocoa, coffee, and spice supply chains spanning 4.7 million smallholder farmers in West Africa, Southeast Asia, and Latin America, using a tiered approach that combined high-resolution remote sensing for deforestation monitoring with sample-based field assessments for soil health and pollinator dependency (Olam Group, 2025).

India's Mahindra Group applied the LEAP framework to its agricultural equipment and hospitality divisions, identifying water stress dependencies across 38 operational sites and nature-based tourism revenue exposure across 12 resort properties (Mahindra Group, 2025). These examples demonstrate that emerging market adoption is feasible, though typically requiring phased implementation and partnerships with data providers.

Myth 3: TNFD Data Is Too Poor to Be Decision-Useful for Investors

The assertion that nature-related data quality is too low to inform investment decisions is perhaps the most persistent myth. Data quality is indeed uneven, but characterizing all nature data as unusable ignores significant recent advances. The TNFD itself has identified over 1,100 nature-related metrics and 260 indicators across existing frameworks, of which it recommends a core set of 14 disclosure metrics.

Global Forest Watch now provides deforestation alerts at 10-meter resolution with a 5-day refresh cycle, covering all tropical forests. The Integrated Biodiversity Assessment Tool (IBAT) aggregates data from IUCN Red List, World Database on Protected Areas, and Key Biodiversity Areas into a single query platform, enabling portfolio-level screening of proximity to sensitive sites. Microsoft's Planetary Computer and Google Earth Engine provide free access to petabytes of satellite imagery and environmental datasets.

A 2025 analysis by Robeco found that integrating TNFD-aligned nature risk screening into emerging market equity portfolios reduced exposure to deforestation-linked controversies by 63% while maintaining risk-adjusted returns within 15 basis points of the benchmark (Robeco, 2025). The data is not perfect, but it is increasingly decision-useful, particularly for identifying high-risk exposures and engagement priorities.

Myth 4: Voluntary Adoption Means TNFD Will Not Affect Capital Allocation

Some investors assume that because TNFD is voluntary, it will not materially affect capital flows or asset valuations in the near term. Regulatory signals suggest otherwise. France's Article 29 of the Energy-Climate Law already requires asset managers and institutional investors to disclose biodiversity impact strategies. The EU's Corporate Sustainability Reporting Directive (CSRD) incorporates nature-related disclosure requirements through the European Sustainability Reporting Standards (ESRS E4 on biodiversity). Japan's Financial Services Agency has signaled that TNFD-aligned disclosures will be incorporated into its Corporate Governance Code revisions expected in 2027.

The UK's Green Finance Strategy explicitly references TNFD as the expected framework for nature-related disclosures, with mandatory requirements under consideration for the largest financial institutions by 2028. In practice, major asset owners are not waiting for mandates. Norges Bank Investment Management, APG, and AXA Investment Managers have all integrated nature-related screening criteria into portfolio construction processes, collectively representing over $3 trillion in assets under management (TNFD, 2025).

What's Working

Location-specific screening tools are enabling portfolio-level nature risk assessment at scale. Finance for Biodiversity Foundation members, representing $19.7 trillion in assets, have committed to assessing nature-related impacts across their portfolios using TNFD-aligned methodologies. The Dutch central bank (DNB) completed a pioneering nature-related stress test in 2024, finding that 36% of assets held by Dutch financial institutions have high or very high dependencies on ecosystem services, providing a template for similar exercises in emerging market central banks.

Corporate pilot disclosures are improving in quality year over year. The TNFD reported that 320 organizations globally have committed to adopting TNFD recommendations, with 75 publishing pilot reports containing quantitative metrics by early 2026, up from just 12 pilot reporters in 2024.

Supply chain traceability technologies, including satellite monitoring, eDNA sampling, and blockchain-based commodity tracking, are closing data gaps in key sectors. Cargill's Forest Protection Program uses LiDAR and radar satellite imagery to monitor 100% of its direct soy sourcing areas in Brazil for deforestation compliance, generating nature-related data that feeds directly into TNFD-aligned reporting.

What's Not Working

Standardization of nature-related metrics remains fragmented. Despite TNFD's recommended disclosure metrics, companies are reporting using inconsistent boundaries, methodologies, and baselines, making cross-company comparison difficult for investors. A 2025 review by CDP found that among 75 pilot TNFD reports, 42 different biodiversity metrics were used, with no two reports using identical measurement approaches for the same indicator (CDP, 2025).

Scope 3 nature dependencies, the impacts embedded in supply chains, remain extremely difficult to assess. Most pilot TNFD reports focus on direct operations, covering less than 20% of total nature-related risk exposure for companies in consumer goods, food and beverage, and financial services sectors where supply chain impacts dominate.

Capacity constraints are acute. The pool of professionals with expertise in both financial analysis and ecology is small. A 2025 industry survey found that only 23% of sustainability teams at financial institutions included any staff with formal training in ecology, conservation biology, or ecosystem services valuation (Capitals Coalition, 2025).

Key Players

Established: TNFD Secretariat (framework development and adoption coordination), Finance for Biodiversity Foundation (investor collective action on biodiversity), Norges Bank Investment Management (nature risk integration in sovereign wealth management), DNB (central bank nature stress testing), Cargill (supply chain nature monitoring in agricultural commodities)

Startups: NatureMetrics (eDNA biodiversity monitoring for corporate reporting), Satelligence (satellite-based deforestation and land-use monitoring), Iceberg Data Lab (corporate biodiversity footprint analytics), OS Climate (open-source nature risk data platform)

Investors: Robeco (nature-integrated emerging market equity strategies), AXA Investment Managers (biodiversity impact investment), Mirova (nature-based solutions fund), Lombard Odier (natural capital valuation research)

Action Checklist

• Conduct a baseline assessment of portfolio exposure to nature-dependent sectors using ENCORE or equivalent dependency mapping tools
• Screen portfolio holdings for proximity to Key Biodiversity Areas, protected areas, and deforestation fronts using IBAT or Global Forest Watch
• Request TNFD-aligned disclosures from the 20 largest holdings with material nature dependencies, prioritizing agriculture, mining, and real estate sectors
• Build internal capacity by training at least two investment team members on the LEAP methodology and nature-related scenario analysis
• Engage with portfolio companies in emerging markets on phased TNFD adoption, starting with governance and strategy pillars before requiring full metrics disclosure
• Monitor regulatory developments in key jurisdictions (EU, UK, Japan, Brazil) for mandatory nature-related disclosure timelines
• Integrate nature-related risk factors into due diligence checklists for new investments in nature-dependent sectors

FAQ

Q: How does TNFD relate to other sustainability reporting frameworks like CSRD and GRI? A: TNFD is designed for interoperability with existing frameworks. The CSRD's ESRS E4 standard on biodiversity and ecosystems aligns closely with TNFD's recommended disclosures, and the TNFD Secretariat has published mapping guidance showing how TNFD disclosures satisfy approximately 70% of ESRS E4 requirements. GRI 304 (Biodiversity) covers a narrower scope but overlaps with several TNFD metrics. Organizations already reporting under CSRD or GRI can use existing data collection processes as a foundation for TNFD adoption, though additional location-specific analysis through the LEAP approach will typically be required.

Q: What is the minimum viable TNFD disclosure for an emerging market investor? A: The TNFD recommends a phased approach. At minimum, investors should disclose governance arrangements for nature-related risks, the process for identifying and assessing nature dependencies across the portfolio, and a preliminary screening of portfolio exposure to nature-sensitive sectors and locations. This baseline can be achieved using publicly available tools (ENCORE, IBAT, Global Forest Watch) without requiring primary data collection from portfolio companies. Most early-stage reporters complete this minimum disclosure within 6 to 9 months.

Q: Can nature-related risks be quantified in financial terms? A: Partially. Some nature-related risks translate directly into financial metrics: commodity price volatility from ecosystem degradation, regulatory compliance costs, stranded asset write-downs, and litigation liabilities. The Dutch central bank's stress test estimated that a severe biodiversity loss scenario could trigger losses equivalent to 2 to 5% of total financial assets held by Dutch institutions. However, many nature-related risks involve non-linear dynamics and tipping points that resist precise financial quantification, making scenario analysis and sensitivity testing more appropriate than point estimates.

Q: Should investors wait for mandatory requirements before adopting TNFD? A: No. Early adoption provides three strategic advantages: first movers build analytical capabilities and data relationships before competitors, regulatory engagement allows shaping implementation details, and portfolio companies in emerging markets benefit from longer lead times to develop disclosure capacity. The transition from voluntary to mandatory TCFD adoption took approximately five years in most jurisdictions. Current regulatory signals suggest a similar or faster timeline for TNFD, making 2026 to 2027 the optimal window for building foundational capabilities.

Sources

• TNFD. (2025). TNFD Adoption Monitor: Status of Early Adopters and Market Uptake. Geneva: Taskforce on Nature-related Financial Disclosures.
• PwC. (2025). From TCFD to TNFD: Bridging the Gap in Nature-related Financial Disclosure Readiness. London: PricewaterhouseCoopers.
• Robeco. (2025). Nature Risk Integration in Emerging Market Equity Portfolios: Methodology and Performance Analysis. Rotterdam: Robeco.
• CDP. (2025). TNFD Pilot Disclosure Review: Metrics Quality and Comparability Assessment. London: CDP Worldwide.
• Trase. (2025). Brazilian Agricultural Commodity Exports and Deforestation Risk: Financial Exposure Analysis. Stockholm: Stockholm Environment Institute.
• Chain Reaction Research. (2025). Indonesian Palm Oil Stranded Asset Risk Under Expanding Biodiversity Safeguards. Washington, DC: Chain Reaction Research.
• Capitals Coalition. (2025). Capacity Building for Nature-related Financial Disclosure: Industry Workforce Survey. The Hague: Capitals Coalition.
• De Nederlandsche Bank. (2024). Indebted to Nature: Exploring Biodiversity Risks for the Dutch Financial Sector. Amsterdam: DNB.