EXECUTIVE SUMMARY
Climate hazards and nature-related dependencies can compound one another across operations and supply chains. Assess them together to understand how ecosystem degradation may affect water availability, production, sourcing and financial exposure. TNFD’s LEAP approach can structure that assessment and build on existing climate-risk work. Link the findings to governance, scenarios, procurement and investment decisions, using financial measures alongside dependency and impact metrics. Record assumptions and limitations, and assess applicable reporting requirements without treating LEAP as universally mandatory.
When nature is degraded, it increases climate risks by removing the natural protections that help shield operations from extreme weather. By integrating the Taskforce on Nature-related Financial Disclosures (TNFD) approach into existing climate frameworks like TCFD, companies can identify hidden risks and shift from merely meeting requirements to building real financial resilience.
Assess climate hazards alongside nature-related dependencies and impacts in sourcing regions. Use the findings to test supply assumptions, compare response options and explain the evidence to buyers. Treat any resulting price premium or contract award as a separate outcome that needs its own evidence.
The Compounding Risk of Working in Silos
In the past decade, companies have made progress by including climate risk in their strategies. Using TCFD frameworks, they have run scenarios and planned for carbon transitions. However, nature risk is still often handled separately by sustainability teams and is not linked to the financial decisions that shape the business. This separation raises a crucial question: how does overlooking nature risk align with the board's fiduciary duty to safeguard long-term value? For directors responsible for corporate oversight, integrating nature risk with climate risk is not just a matter of improved analysis—it is a governance imperative. Failing to address material nature-related risks could leave leadership vulnerable to challenges regarding their duty of care and oversight for the company's sustainable future.
This separation leads to a serious blind spot. In reality, climate and nature interact within ecosystems. Extreme weather speeds up ecosystem damage, and damaged areas like deforested watersheds or eroded soils lose their ability to protect against physical risks.
When companies look at these risks separately, they often underestimate how much they are exposed. For example, a climate model might predict drought, but it could miss that local deforestation has already weakened the watershed’s ability to hold water. This could turn a moderate drought into a major supply problem.
This is why integrating these approaches makes business sense. If TCFD is like the house, then TNFD is the foundation that supports it. Without a solid foundation, cracks can form that let problems seep in. Sooner or later, even the best-designed house is at risk of flooding or collapse. When you ignore the foundation, you end up with hidden vulnerabilities that threaten the whole structure. By strengthening your foundation with TNFD, you ensure that your climate strategy remains stable—no matter how turbulent the weather outside becomes.
TCFD set up the structure for financial disclosures, covering Governance, Strategy, Risk Management, and Metrics. It helped markets start thinking about future scenarios.
TNFD builds on this by focusing on the natural resources that keep businesses running. Its LEAP method (Locate, Evaluate, Assess, Prepare) helps identify the connections that TCFD might overlook.
Case Study: The "Soy Trap"
The risks of keeping climate and nature assessments separate are especially clear in sectors that rely on commodities. For example, think of a food and beverage company that is taking advantage of the growing demand for plant-based drinks by buying soy from South America.
Climate Models predict moderate drought risk.
Compliance team flags new EU deforestation regulations (EUDR).
And Biodiversity/Sustainability team notes high local deforestation rates.
On their own, these risks seem manageable. But when combined, they show a growing crisis in the company’s operating areas. Deforestation reduces the land’s ability to hold water and control the local climate. This makes the financial impact of climate-driven droughts worse and increases the risk of losing market access due to new deforestation-free regulations.
This creates a much bigger threat to supply and price stability than any single model would predict. The company needs to go beyond reacting to risks and develop a proactive plan for resilient sourcing and better capital decisions.
The Regulatory Push
Where applicable, CSRD/ESRS requires material sustainability information about the undertaking and its value chain using double materiality. IFRS S1 requires material information about risks and opportunities that could affect the entity’s prospects, including relevant value-chain matters. Legal adoption depends on the jurisdiction. Neither framework universally mandates the TNFD LEAP approach.
Risks to the business: How ecosystem collapse (e.g., soil erosion) affects yields and costs (like drought affecting soil fertility and crop yields).
Risks from the business: How sourcing practices drive biodiversity loss, triggering regulatory and reputational blowback.
Tools like TNFD’s LEAP method help organize this assessment. They show both how companies depend on nature and how they affect it, and they turn these insights into financial terms.
Now, How To Proceed?
There’s no need to start from scratch. Instead, build on the TCFD framework you already have in place.
1. Expand the Four Pillars
Governance: Authorize the board’s audit and risk committees to oversee and stress-test nature-related risks alongside climate issues, moving responsibility for nature beyond the sustainability committee. This positions the board to actively monitor, challenge, and integrate nature risks into core governance processes.
Strategy: Update your climate scenarios to factor in the effects of nature loss. Ask whether ecosystem decline changes the likelihood of your physical risk scenarios.
Risk Management: Develop a single system for classifying risks with a unified "value-at-risk" metric that accounts for both carbon and water effects in monetary terms. By expressing these risks in one currency, such as the financial impact on earnings or assets, you make it easier for different departments to evaluate, compare, and prioritize mitigation spending. Instead of treating carbon and water as separate priorities, focus on overall operational resilience by quantifying their combined exposure across your portfolio.
Use financial metrics alongside relevant nature-related dependency and impact metrics. Document the basis for any commodity-price, insurance-cost or capital-expenditure sensitivity. Illustrative values are assumptions, not established outcomes.
2. Deploy LEAP as a Plugin
Apply the TNFD’s LEAP method to provide better data for your current climate models. LEAP is a four-step map that turns ecosystem data into financial insight, helping busy teams quickly connect nature risk with financial decisions:
- Locate interfaces with nature. Evaluate dependencies and impacts. Assess nature-related risks and opportunities. Prepare a response and report on material issues.
Organizations have spent years developing expertise with TCFD. TNFD is not a separate task. It is the missing layer that makes this expertise truly effective.
Full integration requires linking nature dependencies, such as healthy soil and water availability, with climate hazards like drought and floods to quantify their combined impact. This approach shifts companies from backwards-looking compliance to forward-looking resilience, demonstrating to investors an understanding of the complex realities facing the planet.
At Futureproof Solutions, we help companies turn insights into action by providing integrated climate and nature risk assessments that fit their value chains.
Contact us today for a complimentary integration readiness scan. This quick assessment will help you understand exactly how prepared your organization is to combine TCFD and TNFD approaches, with no obligation. It's a straightforward first step to making your climate and nature strategy more resilient.