Sustainability Community

Hi Salvador

I was impressed with the work TNFD Taskforce have done and think their approach is very sound and will lead companies to understand their relationship with Natural Capital.  It also then leads to putting them in a position to communicate their impact, the risks to their business and the opportunities both for business but also to make a more positive impact.   The Taskforce are also clear and crystal clear in their public discussion that there is a need to bring TCFD and TNFD together for both a more holistic reporting but also so businesses can address the systemic impacts and not just consider simple linear impacts.  For now the most impactful things about the recommendations are they encourage knowledge seeking, better systemic understanding and encourage a wider sense of responsibility by shining a light on negative impacts and the potential dire consequences unsustainable activities can lead too.  It also introduces double materiality as something to consider which was missing sadly from a very financial risk focused TCFD framework.

However as regard practical application through data the nature of Nature is complex, lots of intersependencies and local features and context.  It is impossible to boil it down to a universally applicable number in the way GHG can be represented.   This is a serious problem for investors that want to invest on common data sets and are not comfortable with making qualitative judgements.  Having said that if you are willing to engage with the TNFD disclosure and use qualitative judgement as to wheather the investment understands its impact and has a positive or negative impact and crucially has an intent to improve its contribution to Natural Capital it should be able to qualitatively assign degrees of Natural Capital friendliness on anindividual investment.  Making relative judgements and compiling portfolio level impact will inevitably reflect this combination of qualitative judgements and likely have a level of absolute convictionin the investment impact but be difficult to compare in relative terms to the market with a consistant qualitative framework.

The metrics and understanding for bodiversity is still evolving.  Personally I think its a question of judging the pressure placed on nature and the sustainability of the natural capital being used as a resource, very local context nuanced.  So for example water consumption is relative to local availability and to waste or reuse practices and competing demands locally and downstream in a watershed,  Anyone trying to do sustainable investment by running numbers without decent due diligence and intelligent qualitative challenge of data sources, a qualitative assessment of corporate effort and intent is in my opinion going to have a poor quality investment product.

To deal with the complexity and high degree of uncertainty associated with our often limited understanding of systemic effects requires being comfortable with uncertainty, being imprecise even wrong often, and adjusting your approach and focus as knowledge improves.  The focus should be on the things we know to be most material and where most impact can be made by positive improvement.  Consider but don't over invest time and effort in measuring unmeasurables or things that are not material. 

Engaging with TCFD and TNFD should lead to better understanding and better management of businesses like and new lens to look at a business it will open the door to new insights, innovation and better self (corporate) awareness.  Companies should definitely carry out both processes in an integrated way.  They will get more from it and I suspect it will be needed to do both in time so why not put in a system that embraces both and not require a later integration.  For SMEs understand the issues and approach but be sensible about the effort benefit your business and be open and pragmatic about reporting there is a risk in all this that investors and regulators create negative outcomes by demanding the perfect over the possible and the practical.. 

The crucial question for me selecting an investment is does a company understand the negative externalities it is dependant on and does it then seek to mitigate or avoid those impacts or does it seek to maximise the opportunity to free ride exploiting the cost saving and ignoring the damaging external impacts be they to nature (life and planetary systems), society or humans (employees and customers).  Sustainability is a mindset even more than a set of numbers.

Hi David Manuel, 

Thank you for your message. I agree with the majority of your points, especially that focus should be placed on qualitative aspects. What bothers me, in fact, is that the framework proposes a very long list of indicators to report on. I'm concerned that big companies will divert their focus here, especially considering the CSRD requirements, and expend a lot of effort on a battery of indicators that will fill pages in their reports but ultimately be useful to no one.

However, I do believe that indicators are crucial for setting and achieving targets in the corporate and financial world. I disagree with the notion that it's impossible to establish a universally applicable metric, such as tCO2eq. In fact, this has already been accomplished. (e.g., ReCiPe 2016). Of course, approaches like these will never fully capture the real impacts on biodiversity, but they are useful for assessing overall corporate or investment impact and prioritizing action, answering questions like "Is water consumption more important, or is it NOx pollution in my activities?"

I agree that sustainability is not simply a set of numbers but rather a set of qualitative assessments. However, in my opinion, executives in the corporate offices of multinational companies or banks need tools to make decisions and drive top-down action.

Best regards,

Hi Salvador

I was impressed with the work TNFD Taskforce have done and think their approach is very sound and will lead companies to understand their relationship with Natural Capital.  It also then leads to putting them in a position to communicate their impact, the risks to their business and the opportunities both for business but also to make a more positive impact.   The Taskforce are also clear and crystal clear in their public discussion that there is a need to bring TCFD and TNFD together for both a more holistic reporting but also so businesses can address the systemic impacts and not just consider simple linear impacts.  For now the most impactful things about the recommendations are they encourage knowledge seeking, better systemic understanding and encourage a wider sense of responsibility by shining a light on negative impacts and the potential dire consequences unsustainable activities can lead too.  It also introduces double materiality as something to consider which was missing sadly from a very financial risk focused TCFD framework.

However as regard practical application through data the nature of Nature is complex, lots of intersependencies and local features and context.  It is impossible to boil it down to a universally applicable number in the way GHG can be represented.   This is a serious problem for investors that want to invest on common data sets and are not comfortable with making qualitative judgements.  Having said that if you are willing to engage with the TNFD disclosure and use qualitative judgement as to wheather the investment understands its impact and has a positive or negative impact and crucially has an intent to improve its contribution to Natural Capital it should be able to qualitatively assign degrees of Natural Capital friendliness on anindividual investment.  Making relative judgements and compiling portfolio level impact will inevitably reflect this combination of qualitative judgements and likely have a level of absolute convictionin the investment impact but be difficult to compare in relative terms to the market with a consistant qualitative framework.

The metrics and understanding for bodiversity is still evolving.  Personally I think its a question of judging the pressure placed on nature and the sustainability of the natural capital being used as a resource, very local context nuanced.  So for example water consumption is relative to local availability and to waste or reuse practices and competing demands locally and downstream in a watershed,  Anyone trying to do sustainable investment by running numbers without decent due diligence and intelligent qualitative challenge of data sources, a qualitative assessment of corporate effort and intent is in my opinion going to have a poor quality investment product.

To deal with the complexity and high degree of uncertainty associated with our often limited understanding of systemic effects requires being comfortable with uncertainty, being imprecise even wrong often, and adjusting your approach and focus as knowledge improves.  The focus should be on the things we know to be most material and where most impact can be made by positive improvement.  Consider but don't over invest time and effort in measuring unmeasurables or things that are not material. 

Engaging with TCFD and TNFD should lead to better understanding and better management of businesses like and new lens to look at a business it will open the door to new insights, innovation and better self (corporate) awareness.  Companies should definitely carry out both processes in an integrated way.  They will get more from it and I suspect it will be needed to do both in time so why not put in a system that embraces both and not require a later integration.  For SMEs understand the issues and approach but be sensible about the effort benefit your business and be open and pragmatic about reporting there is a risk in all this that investors and regulators create negative outcomes by demanding the perfect over the possible and the practical.. 

The crucial question for me selecting an investment is does a company understand the negative externalities it is dependant on and does it then seek to mitigate or avoid those impacts or does it seek to maximise the opportunity to free ride exploiting the cost saving and ignoring the damaging external impacts be they to nature (life and planetary systems), society or humans (employees and customers).  Sustainability is a mindset even more than a set of numbers.

Hi Salvador, David Manuel, 

Thought I'd join in on this conversation - as I'm currently working on developing a data framework for assessing natural capital risk for listed companies. 

I think it's important to maintain both a high level - easy to understand number - while allowing full transparency and attribution of that number on a more granular level.

Similarly to how an ESG rating is a much to broad stroke in judging a companies impact or dependencies, I think the risk often lies in that we are over simplifying than that we are granular enough. Here I think TNFD came out with a better balance, offering more granularity which then in turn allows the investors to aggregate as they see fit - some might be more focused on certain issues than others for example. 

When it comes to corporates capabilities to report on this, I sure hope they do know which locations their assets are in and if not I think it's perfectly acceptable that investors require the companies to build out that capacity. Every company has a large team of finance professionals to ensure their accounts are in order, why not have the same to ensure that their sustainability metrics are in order? 

Cedric Olivares Jirsell

Sustainability Analysis Manager

Matter

Hi David Manuel, 

Thank you for your message. I agree with the majority of your points, especially that focus should be placed on qualitative aspects. What bothers me, in fact, is that the framework proposes a very long list of indicators to report on. I'm concerned that big companies will divert their focus here, especially considering the CSRD requirements, and expend a lot of effort on a battery of indicators that will fill pages in their reports but ultimately be useful to no one.

However, I do believe that indicators are crucial for setting and achieving targets in the corporate and financial world. I disagree with the notion that it's impossible to establish a universally applicable metric, such as tCO2eq. In fact, this has already been accomplished. (e.g., ReCiPe 2016). Of course, approaches like these will never fully capture the real impacts on biodiversity, but they are useful for assessing overall corporate or investment impact and prioritizing action, answering questions like "Is water consumption more important, or is it NOx pollution in my activities?"

I agree that sustainability is not simply a set of numbers but rather a set of qualitative assessments. However, in my opinion, executives in the corporate offices of multinational companies or banks need tools to make decisions and drive top-down action.

Best regards,

Hi Salvador

I was impressed with the work TNFD Taskforce have done and think their approach is very sound and will lead companies to understand their relationship with Natural Capital.  It also then leads to putting them in a position to communicate their impact, the risks to their business and the opportunities both for business but also to make a more positive impact.   The Taskforce are also clear and crystal clear in their public discussion that there is a need to bring TCFD and TNFD together for both a more holistic reporting but also so businesses can address the systemic impacts and not just consider simple linear impacts.  For now the most impactful things about the recommendations are they encourage knowledge seeking, better systemic understanding and encourage a wider sense of responsibility by shining a light on negative impacts and the potential dire consequences unsustainable activities can lead too.  It also introduces double materiality as something to consider which was missing sadly from a very financial risk focused TCFD framework.

However as regard practical application through data the nature of Nature is complex, lots of intersependencies and local features and context.  It is impossible to boil it down to a universally applicable number in the way GHG can be represented.   This is a serious problem for investors that want to invest on common data sets and are not comfortable with making qualitative judgements.  Having said that if you are willing to engage with the TNFD disclosure and use qualitative judgement as to wheather the investment understands its impact and has a positive or negative impact and crucially has an intent to improve its contribution to Natural Capital it should be able to qualitatively assign degrees of Natural Capital friendliness on anindividual investment.  Making relative judgements and compiling portfolio level impact will inevitably reflect this combination of qualitative judgements and likely have a level of absolute convictionin the investment impact but be difficult to compare in relative terms to the market with a consistant qualitative framework.

The metrics and understanding for bodiversity is still evolving.  Personally I think its a question of judging the pressure placed on nature and the sustainability of the natural capital being used as a resource, very local context nuanced.  So for example water consumption is relative to local availability and to waste or reuse practices and competing demands locally and downstream in a watershed,  Anyone trying to do sustainable investment by running numbers without decent due diligence and intelligent qualitative challenge of data sources, a qualitative assessment of corporate effort and intent is in my opinion going to have a poor quality investment product.

To deal with the complexity and high degree of uncertainty associated with our often limited understanding of systemic effects requires being comfortable with uncertainty, being imprecise even wrong often, and adjusting your approach and focus as knowledge improves.  The focus should be on the things we know to be most material and where most impact can be made by positive improvement.  Consider but don't over invest time and effort in measuring unmeasurables or things that are not material. 

Engaging with TCFD and TNFD should lead to better understanding and better management of businesses like and new lens to look at a business it will open the door to new insights, innovation and better self (corporate) awareness.  Companies should definitely carry out both processes in an integrated way.  They will get more from it and I suspect it will be needed to do both in time so why not put in a system that embraces both and not require a later integration.  For SMEs understand the issues and approach but be sensible about the effort benefit your business and be open and pragmatic about reporting there is a risk in all this that investors and regulators create negative outcomes by demanding the perfect over the possible and the practical.. 

The crucial question for me selecting an investment is does a company understand the negative externalities it is dependant on and does it then seek to mitigate or avoid those impacts or does it seek to maximise the opportunity to free ride exploiting the cost saving and ignoring the damaging external impacts be they to nature (life and planetary systems), society or humans (employees and customers).  Sustainability is a mindset even more than a set of numbers.

Hi David Manuel, 

Thank you for your message. I agree with the majority of your points, especially that focus should be placed on qualitative aspects. What bothers me, in fact, is that the framework proposes a very long list of indicators to report on. I'm concerned that big companies will divert their focus here, especially considering the CSRD requirements, and expend a lot of effort on a battery of indicators that will fill pages in their reports but ultimately be useful to no one.

However, I do believe that indicators are crucial for setting and achieving targets in the corporate and financial world. I disagree with the notion that it's impossible to establish a universally applicable metric, such as tCO2eq. In fact, this has already been accomplished. (e.g., ReCiPe 2016). Of course, approaches like these will never fully capture the real impacts on biodiversity, but they are useful for assessing overall corporate or investment impact and prioritizing action, answering questions like "Is water consumption more important, or is it NOx pollution in my activities?"

I agree that sustainability is not simply a set of numbers but rather a set of qualitative assessments. However, in my opinion, executives in the corporate offices of multinational companies or banks need tools to make decisions and drive top-down action.

Best regards,

Hi Salvador

I was impressed with the work TNFD Taskforce have done and think their approach is very sound and will lead companies to understand their relationship with Natural Capital.  It also then leads to putting them in a position to communicate their impact, the risks to their business and the opportunities both for business but also to make a more positive impact.   The Taskforce are also clear and crystal clear in their public discussion that there is a need to bring TCFD and TNFD together for both a more holistic reporting but also so businesses can address the systemic impacts and not just consider simple linear impacts.  For now the most impactful things about the recommendations are they encourage knowledge seeking, better systemic understanding and encourage a wider sense of responsibility by shining a light on negative impacts and the potential dire consequences unsustainable activities can lead too.  It also introduces double materiality as something to consider which was missing sadly from a very financial risk focused TCFD framework.

However as regard practical application through data the nature of Nature is complex, lots of intersependencies and local features and context.  It is impossible to boil it down to a universally applicable number in the way GHG can be represented.   This is a serious problem for investors that want to invest on common data sets and are not comfortable with making qualitative judgements.  Having said that if you are willing to engage with the TNFD disclosure and use qualitative judgement as to wheather the investment understands its impact and has a positive or negative impact and crucially has an intent to improve its contribution to Natural Capital it should be able to qualitatively assign degrees of Natural Capital friendliness on anindividual investment.  Making relative judgements and compiling portfolio level impact will inevitably reflect this combination of qualitative judgements and likely have a level of absolute convictionin the investment impact but be difficult to compare in relative terms to the market with a consistant qualitative framework.

The metrics and understanding for bodiversity is still evolving.  Personally I think its a question of judging the pressure placed on nature and the sustainability of the natural capital being used as a resource, very local context nuanced.  So for example water consumption is relative to local availability and to waste or reuse practices and competing demands locally and downstream in a watershed,  Anyone trying to do sustainable investment by running numbers without decent due diligence and intelligent qualitative challenge of data sources, a qualitative assessment of corporate effort and intent is in my opinion going to have a poor quality investment product.

To deal with the complexity and high degree of uncertainty associated with our often limited understanding of systemic effects requires being comfortable with uncertainty, being imprecise even wrong often, and adjusting your approach and focus as knowledge improves.  The focus should be on the things we know to be most material and where most impact can be made by positive improvement.  Consider but don't over invest time and effort in measuring unmeasurables or things that are not material. 

Engaging with TCFD and TNFD should lead to better understanding and better management of businesses like and new lens to look at a business it will open the door to new insights, innovation and better self (corporate) awareness.  Companies should definitely carry out both processes in an integrated way.  They will get more from it and I suspect it will be needed to do both in time so why not put in a system that embraces both and not require a later integration.  For SMEs understand the issues and approach but be sensible about the effort benefit your business and be open and pragmatic about reporting there is a risk in all this that investors and regulators create negative outcomes by demanding the perfect over the possible and the practical.. 

The crucial question for me selecting an investment is does a company understand the negative externalities it is dependant on and does it then seek to mitigate or avoid those impacts or does it seek to maximise the opportunity to free ride exploiting the cost saving and ignoring the damaging external impacts be they to nature (life and planetary systems), society or humans (employees and customers).  Sustainability is a mindset even more than a set of numbers.

Hi Salvador

I think we are pretty much agreed on the challenges and thanks for a good discussion.   I just wanted to caution on using numbers which make broad assumptions and ignore that qualitatively knowledgeable analysts can combine qualitative judgement with limited available data sets to arrive at a might better conclusion for individual investments. Also thanks for highlighting the https://pre-sustainability.com/legacy/download/Report_ReCiPe_2017.pdf link I wasn't aware of it as a specific methodology.  Although individual components follow scientific and robust methods some of which I know.  There are however a lot of individual data points (consolidated into a few key numbers, I saw 10 that contribute to an overall nature impact)and the approach covers the wider concept of all the known major threats to the nine planetary boundaries not just biodiversity.

Individual scores or metrics while quantitative however don't seem to adjust for the local context (biome health and innate resilience)and any potential sensitivities that should call for amplifying  the materiality of specific components.  This is my concern in getting a quantitative number that doesn't reflect local biome context but a more global average impact.  To understand the impact a given quantum of pressure has locally for all investments would need lots more work in time automated data collection which reflects on the health and resilience of the local environment may get a better result.  That said it certainly is useful at a portfolio level identifying pressure levels and is useful over a geographically diverse large population of investments being a good indicator at macro level of the environmental impact the portfolio caused as diversification would mitigate specific cases of higher and lower effect although as a data set to effectively optimise the nature impact it would be problematic as re-weighting investments would miss the local context at investment level.  Always difficult applying population statistics based averages back on potentially outlier individual cases.

Hi David Manuel, 

Thank you for your message. I agree with the majority of your points, especially that focus should be placed on qualitative aspects. What bothers me, in fact, is that the framework proposes a very long list of indicators to report on. I'm concerned that big companies will divert their focus here, especially considering the CSRD requirements, and expend a lot of effort on a battery of indicators that will fill pages in their reports but ultimately be useful to no one.

However, I do believe that indicators are crucial for setting and achieving targets in the corporate and financial world. I disagree with the notion that it's impossible to establish a universally applicable metric, such as tCO2eq. In fact, this has already been accomplished. (e.g., ReCiPe 2016). Of course, approaches like these will never fully capture the real impacts on biodiversity, but they are useful for assessing overall corporate or investment impact and prioritizing action, answering questions like "Is water consumption more important, or is it NOx pollution in my activities?"

I agree that sustainability is not simply a set of numbers but rather a set of qualitative assessments. However, in my opinion, executives in the corporate offices of multinational companies or banks need tools to make decisions and drive top-down action.

Best regards,

Hi Salvador

I was impressed with the work TNFD Taskforce have done and think their approach is very sound and will lead companies to understand their relationship with Natural Capital.  It also then leads to putting them in a position to communicate their impact, the risks to their business and the opportunities both for business but also to make a more positive impact.   The Taskforce are also clear and crystal clear in their public discussion that there is a need to bring TCFD and TNFD together for both a more holistic reporting but also so businesses can address the systemic impacts and not just consider simple linear impacts.  For now the most impactful things about the recommendations are they encourage knowledge seeking, better systemic understanding and encourage a wider sense of responsibility by shining a light on negative impacts and the potential dire consequences unsustainable activities can lead too.  It also introduces double materiality as something to consider which was missing sadly from a very financial risk focused TCFD framework.

However as regard practical application through data the nature of Nature is complex, lots of intersependencies and local features and context.  It is impossible to boil it down to a universally applicable number in the way GHG can be represented.   This is a serious problem for investors that want to invest on common data sets and are not comfortable with making qualitative judgements.  Having said that if you are willing to engage with the TNFD disclosure and use qualitative judgement as to wheather the investment understands its impact and has a positive or negative impact and crucially has an intent to improve its contribution to Natural Capital it should be able to qualitatively assign degrees of Natural Capital friendliness on anindividual investment.  Making relative judgements and compiling portfolio level impact will inevitably reflect this combination of qualitative judgements and likely have a level of absolute convictionin the investment impact but be difficult to compare in relative terms to the market with a consistant qualitative framework.

The metrics and understanding for bodiversity is still evolving.  Personally I think its a question of judging the pressure placed on nature and the sustainability of the natural capital being used as a resource, very local context nuanced.  So for example water consumption is relative to local availability and to waste or reuse practices and competing demands locally and downstream in a watershed,  Anyone trying to do sustainable investment by running numbers without decent due diligence and intelligent qualitative challenge of data sources, a qualitative assessment of corporate effort and intent is in my opinion going to have a poor quality investment product.

To deal with the complexity and high degree of uncertainty associated with our often limited understanding of systemic effects requires being comfortable with uncertainty, being imprecise even wrong often, and adjusting your approach and focus as knowledge improves.  The focus should be on the things we know to be most material and where most impact can be made by positive improvement.  Consider but don't over invest time and effort in measuring unmeasurables or things that are not material. 

Engaging with TCFD and TNFD should lead to better understanding and better management of businesses like and new lens to look at a business it will open the door to new insights, innovation and better self (corporate) awareness.  Companies should definitely carry out both processes in an integrated way.  They will get more from it and I suspect it will be needed to do both in time so why not put in a system that embraces both and not require a later integration.  For SMEs understand the issues and approach but be sensible about the effort benefit your business and be open and pragmatic about reporting there is a risk in all this that investors and regulators create negative outcomes by demanding the perfect over the possible and the practical.. 

The crucial question for me selecting an investment is does a company understand the negative externalities it is dependant on and does it then seek to mitigate or avoid those impacts or does it seek to maximise the opportunity to free ride exploiting the cost saving and ignoring the damaging external impacts be they to nature (life and planetary systems), society or humans (employees and customers).  Sustainability is a mindset even more than a set of numbers.