ISSB Proposes TNFD-Based Nature Disclosures, Opens Consultation Until February 2027

The International Sustainability Standards Board (ISSB) has published proposed requirements for nature-related financial disclosures, seeking public feedback until 19 February 2027. The proposals aim to improve how companies report material risks and opportunities arising from their dependencies and impacts on nature, including potential effects on cash flows, access to finance and the cost of capital. Developed with extensive reference to the Taskforce on Nature-related Financial Disclosures (TNFD), the initiative could establish a more consistent global approach to reporting nature-related financial information.

The proposals are contained in an Exposure Draft of IFRS Sustainability Disclosure Practice Statement 1, Nature-related Disclosures, designed to complement IFRS S1 and IFRS S2. The document introduces more detailed expectations for assessing nature-related risks, considering the location of business activities, engaging with affected communities and reporting financial exposure. The ISSB is proposing a Practice Statement rather than an additional mandatory Standard to avoid disrupting ongoing implementation of its existing sustainability disclosure requirements.

 

Practice Statement Builds on Existing IFRS Sustainability Standards

 

IFRS S1 already requires companies applying the Standard to disclose material information about sustainability-related risks and opportunities that could reasonably affect their prospects, including those associated with nature. The proposed Practice Statement would provide additional requirements for identifying, assessing and communicating those risks in a manner useful to investors. Its scope includes physical risks arising from the deterioration of environmental resources and transition risks associated with changes in environmental policies, technologies and markets.

Unlike IFRS S1 and IFRS S2, companies would not be required to apply the Practice Statement to claim compliance with ISSB Standards. However, companies choosing to apply it would need to meet its requirements in full to claim compliance with the Practice Statement. Individual jurisdictions could also decide to make its application mandatory. ISSB Vice-Chair Sue Lloyd highlighted the need to balance investor expectations with implementation capacity, stating, "We recognise that companies are deeply engaged with applying IFRS S1 and IFRS S2 for the first time."

 

Read more: USGBC Launches TRUE v2 Zero-Waste Certification With Streamlined Global Criteria

 

Location and Indigenous Communities Become Central to Nature Reporting

 

A major feature of the proposals is greater emphasis on the geographical location of business operations and supply chains. Companies would need to consider how environmental conditions, including water availability, biodiversity, soil quality and ecosystem integrity, affect their exposure to material nature-related risks. This reflects the location-specific character of nature dependencies, where similar economic activities may face different risks depending on the condition of surrounding ecosystems.

The Exposure Draft also proposes requirements concerning companies' interactions with Indigenous Peoples, Local Communities and affected stakeholders. Businesses would need to consider these relationships when identifying material nature-related risks and explain relevant engagement across governance, strategy and risk management disclosures. This could include reporting how community rights, local knowledge and engagement outcomes influence business decisions. The requirements would focus on interactions relevant to financial risks and opportunities rather than establishing a separate, comprehensive social impact reporting framework.

 

Nature-Related Scenario Analysis and New Metrics Proposed

 

The ISSB proposes requiring companies applying the Practice Statement to use nature-related scenario analysis to assess the resilience of their business models and strategies. This would help investors understand how changes in environmental resources, ecosystem services and relevant regulations could affect future operations. Recognising that nature-related scenario analysis is less developed than climate scenario analysis, the proposals allow approaches proportionate to a company's circumstances, including qualitative analysis where appropriate.

Another significant proposal involves disclosing the amount and percentage of assets or business activities vulnerable to nature-related risks and those aligned with nature-related opportunities. Companies would consider whether these figures should be presented by location or other relevant characteristics. The ISSB also proposes more detailed information about nature-related targets, including their geographical coverage and connection to legal requirements. These additions could help investors assess the financial significance of nature-related exposure rather than relying solely on general descriptions of environmental risks.

 

Explore OneStop ESG Marketplace: ESG reporting & disclosure

 

TNFD Framework Supports Global Reporting Alignment

 

The ISSB has drawn extensively from the TNFD framework, including its recommendations, metrics and Locate, Evaluate, Assess and Prepare (LEAP) approach. Companies may use the LEAP approach to identify nature-related dependencies, impacts, risks and opportunities, although its use would not be mandatory under the proposed Practice Statement. The Exposure Draft would also permit companies to consider TNFD disclosure metrics where relevant and consistent with ISSB requirements, rather than automatically requiring every TNFD metric.

The proposals emphasise connections between nature-related and climate-related risks, allowing companies to explain how both affect their strategies and financial performance without duplicating disclosures. The ISSB has also considered interoperability with the Global Reporting Initiative (GRI) Standards and European Sustainability Reporting Standards (ESRS). TNFD Co-Chair David Craig welcomed the proposals and confirmed that TNFD would continue supporting the ISSB's work and providing capacity-building assistance as the new requirements are developed.

 

Consultation Will Determine the Future of Nature Disclosure Requirements

 

The ISSB is seeking feedback on the proposed requirements and their practical implementation, including the feasibility of scenario analysis, the usefulness of nature-related metrics, disclosure costs and compatibility with other reporting frameworks. A central consultation question concerns whether the proposals should be finalised as a Practice Statement or introduced through another form of standard-setting, potentially including a standalone Standard or amendments to existing ISSB Standards.

ISSB Chair Emmanuel Faber emphasised that businesses depend on environmental resources such as water, rivers and pollination, and that disruptions to these resources can affect their financial prospects. The proposed framework seeks to make those financial relationships more visible to investors. The consultation closes on 19 February 2027, after which the ISSB will consider responses before deciding how to finalise the requirements. For companies and financial institutions, the proposals signal growing expectations for more consistent, location-specific and financially relevant nature disclosures.

 

Source: The International Sustainability Standards Board (ISSB)