TNFD (Taskforce on Nature-related Financial Disclosures) published its final recommendations (v1.0) in September 2023. It is a framework for integrating risks and opportunities related to biodiversity, water, land, and marine environments — four natural domains — into corporate financial reporting. Just as TCFD established the practice of disclosing climate change risks, TNFD aims to make the risks of natural capital degradation visible as financial information. Since 2024, major institutional investors and European companies have been stepping up their collection of nature-related risk information, and leading disclosures have begun among Japanese companies as well.
Structural Similarities and Differences Between TNFD and TCFD
TCFD and TNFD share the four-pillar structure of "governance, strategy, risk management, and metrics and targets," and the design is such that companies that have established TCFD reporting frameworks can reduce the transition cost to TNFD. However, the nature of nature-related risks means there are aspects that are fundamentally different from TCFD.
Location dependence — significance varies by site
Climate change risks have a globally uniform impact, but nature-related risks vary greatly in magnitude depending on the rarity and vulnerability of the ecosystem at the location. Even within the same industry, the assessment differs entirely between a factory adjacent to a tropical rainforest and one in an urban suburb.
Value chain dependence — upstream natural resource use determines the risk
Climate risks arise primarily from energy use (Scope 1 and 2), but nature-related risks depend heavily on land use, water use, and chemical use in agriculture, mining, and forestry in the upstream supply chain. In many cases, the land use of suppliers — rather than the company's own operations — is the primary driver of nature risk.
Diversity of quantitative indicators — no single metric like GHG
Climate risk is unified under a single metric of GHG emissions in tCO2e, but nature-related risks involve multiple different indicators such as biodiversity loss, water consumption, and land use change, making cross-sector comparison more difficult than with TCFD. TNFD is still in the process of advancing international standardization of metrics.
Three Ways TNFD Differs from TCFD
Although TNFD adopts the same four-pillar structure of "governance, strategy, risk management, and metrics and targets" as TCFD, the nature of nature-related risks means certain aspects require a different approach.
The first is "location dependence." While climate change risks have a globally uniform impact, nature-related risks vary greatly depending on the rarity and vulnerability of ecosystems at each location. Identifying the overlap between the biomes (tropical rainforests, wetlands, coastal zones, etc.) and water-stressed areas where company factories and procurement sources are located is the starting point for risk assessment. TNFD has adopted the "LEAP (Locate-Evaluate-Assess-Prepare)" approach as an analytical tool for this purpose.
The second is "value chain dependence." Nature-related risks depend not only on company sites but strongly on land use, water use, and chemical use by raw material procurement sources. Manufacturers that use agricultural products, timber, and mineral resources face a direct link between land use changes and biodiversity impacts in the upstream supply chain and the company's own raw material procurement risk (price and supply stability).
The third is "difficulty of data development." While climate-related risks have a quantitative metric in GHG emissions, nature-related risks involve diverse metrics such as biodiversity loss area, water consumption, and pollutant discharge volume, making cross-sector comparison more difficult than with TCFD. In the early stages of TNFD adoption, qualitative risk assessment is a more practical starting point than quantitative indicators.
L: Locate (Identify the locations)
Identify where the company's business activities and value chain have interfaces with nature. Use GIS mapping to check the overlap between the locations of factories, farms, and mining sites and biodiversity-important areas (WDPA, KBAs, etc.) and water-stressed regions (WRI Aqueduct data).
E: Evaluate (Assess nature dependence and impact)
Evaluate the degree of dependence on and impact to nature at the identified locations. Water withdrawal volumes, land use area, pollutant discharge volumes, and habitat conversion area are the primary evaluation metrics. Science-based assessment tools provided by SBTN can be utilized.
A: Assess (Evaluate significant risks and opportunities)
Based on the evaluation results, identify financially significant risks (raw material procurement risk, regulatory risk, and reputational risk from natural capital degradation) and opportunities (leveraging natural capital services, improving business continuity through ecosystem restoration).
P: Prepare (Prepare for disclosure and target-setting)
Prepare to disclose identified risks and opportunities in reports and consider connecting to SBTN's nature-related science-based targets (Nature SBTs). In the first year, transparent disclosure of the scope and methodology of the identification and evaluation takes priority.
Priority Areas for Manufacturers in TNFD
The areas with highest priority for manufacturers assessing nature-related risks differ by industry, but three areas are broadly common.
The first is water risk. Industries with high water withdrawal in manufacturing processes (food, textiles, semiconductors, chemicals) are particularly susceptible to financial impacts from water withdrawal restriction risks and strengthened wastewater regulations associated with operations in water-stressed areas. In semiconductor manufacturing, large-scale use of ultrapure water is unavoidable, and cases are increasing where water risk is incorporated into factory location decisions from the outset.
The second is procurement risk for agricultural and timber-derived raw materials. Manufacturers using raw materials with high deforestation risk — such as palm oil, soybeans, timber, and leather — face a direct link between land use changes in the upstream supply chain and both their own procurement risk and compliance obligations under the EU Deforestation Regulation (EUDR).
The third is the environmental impact of mining for extracted raw materials. Mining of cobalt, lithium, copper, and rare earths involves significant ecosystem impacts. Companies selling products containing these materials may face requests for information as suppliers from companies subject to TNFD disclosure.
Water-intensive manufacturing (semiconductors, food, textiles, chemicals)
Confirming the overlap of factory locations with water-stressed areas and building records of actual water intake and discharge volumes is the top priority. WRI Aqueduct can be used to check water risk scores for factory locations.
Manufacturers using agricultural and forestry products as raw materials
Identify the procurement sources for raw materials linked to tropical deforestation, such as palm oil, soybeans, timber, and paper. Building supply chain traceability in conjunction with EUDR compliance is an urgent matter.
EV, battery, and electronics manufacturers
Mining of cobalt, lithium, and nickel has significant ecosystem impacts. Verifying mine certifications (IRMA, RMI, etc.) and developing supply chain information serves the dual purpose of TNFD disclosure and EU Battery Regulation compliance.
Regulatory Status of TNFD Disclosure and Trends Toward Mandating
The TNFD recommendations themselves do not have legal binding force, but coordination with international regulations and standards is advancing. Under the European Green Deal and Biodiversity Strategy, the EU mandates disclosure of nature-related information aligned with TNFD in the reporting standards of the CSRD (European Sustainability Reporting Standards ESRS E4, "Biodiversity and Ecosystems"). Companies subject to CSRD — including Japanese companies with EU subsidiaries — will need TNFD-aligned nature-related disclosure from 2026 to 2028.
In Japan, the Ministry of the Environment and the FSA published corporate guidance referencing the TNFD framework in 2024, and TNFD-based disclosure is increasing in the integrated reports of major listed companies. Currently voluntary, if SSBJ were to develop nature-related disclosure standards in the future, there is a possibility that they would be reflected in securities reports.
A Realistic Starting Point for Beginning Disclosure
In TNFD disclosure, leading European and Japanese large companies began pilot disclosure in 2024–2025, and the ripple effect to mid-size companies is anticipated from 2026 to 2028. For first-year disclosure, a phased approach is practical: disclose the results of the L and E stages of the LEAP approach (identification and assessment of high-risk sites) and present a plan for progressing to A and P.
As a concrete first step, simply using publicly available WRI Aqueduct data to check the overlap between company factories and major procurement sources and the water stress map already constitutes a first step in risk prioritization. Aqueduct is free to use and delivers water risk scores simply by entering factory coordinates.
Although TNFD, like TCFD, is a voluntary disclosure framework without legal obligation, its coordination with the EU CSRD and EU Biodiversity Strategy is advancing, and if major business partners begin disclosing, the resulting pressure on suppliers is likely to follow the same pattern that TCFD has already traced. Starting with water risk site mapping and progressively expanding the disclosure scope is the practical road map for addressing TNFD.