But where the money will come from has become a contentious issue. Rich nations – which are meant to transfer US$30 billion to poor nations annually by 2030 – have increasingly passed the buck on to the private sector to raise financing through innovative schemes.
Biodiversity credits, which featured prominently – but also saw a pushback – at the COP16 summit in Cali last year, has become one of the latest mechanisms to be mooted.
“But they are only a part of the picture,” cautioned David Craig, co-chair of the Taskforce for Nature-related Financial Disclosures (TNFD), calling for countries and corporations to “stop financing things that do harm”. “I don’t think biodiversity credits on their own will solve the financing gap,” he said.
Craig sits on the International Advisory Panel for Biodiversity Credits (IAPB), which launched a new framework for “high integrity” biodiversity credits at COP16. Speaking at an event in Singapore last November to drum up support for TNFD adoption in Southeast Asia, he said the framework is helpful for companies that want to understand their nature-related dependencies and impacts, and to shift away from them.
Last year, a report by the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES) – the equivalent of the Intergovernmental Panel on Climate Change (IPCC) for biodiversity protection – found that US$5.3 trillion in private financing flows to activities that directly damage biodiversity every year.
This is in addition to the US$1.7 trillion in annual public subsidies that go into incentivising environmentally harmful practices, such as fossil fuel production, unsustainable agriculture and overfishing.
Across Southeast Asia, adoption of the TNFD guidelines which were launched in 2023 have lagged the wider Asia Pacific region. Asia has the highest TNFD adoption by region, but nearly 140 out of the 245 adopters to date are from Japan, not Singapore or elsewhere in Asean, noted Craig at the event hosted by real estate firm City Developments Limited (CDL). CDL is one of only 20 TNFD adopters in Southeast Asia.
On the sidelines of the event, Craig spoke to Eco-Business to address concerns on TNFD, including how civil society groups have questioned that its framework is being written by firms that are behind serious environmental and human rights abuses.
Craig also shared updates on TNFD’s engagement with top corporations and policymakers in Southeast Asia, and discussed a film by Oscar-winning Japanese director Ryusuke Hamaguchi – by venturing to explore the premise of the drama which depicts how a project to build a glamping site could contaminate the water of a forest town. Might it change with TNFD in the picture?
You met Singapore environment minister Grace Fu on this visit. How did your conversation with her go?
We discussed how climate and nature need to come together and how there is a market for carbon, but there isn’t one for nature. There is a possibility of using nature-based solutions to address climate mitigation while doing nature restoration.
It was a very good discussion and relevant to a lot of what I’ve been finding here – which is, how do we help people realise that climate and nature aren’t two separate projects, but the same one. And that even though people have started on the climate issue much earlier – five, six years ago – we have to use nature to address the climate challenge. We have to sequester carbon using our natural ecosystems, forests, peatlands, soil, seagrass, to get to net zero because we can’t mechanically sequester carbon quickly or cheaply enough. Carbon capture, or carbon sequestration by mechanical methods, is still evolving and not available at scale and the price needed. So we have to use the natural ecosystem.
You are also a member of the IAPB, which launched its guidelines for “high integrity” biodiversity credits at COP16. Do you think that’s one kind of nature-based solution that might have to be used?
It is. They are a financing tool, but they are only a part of the picture. The number one thing is to stop financing harmful things.
But then there are financial products that help you invest into the natural system. So debt-for-nature swaps, green bonds and nature-based solutions are very important. They are not quite there yet, but ultimately, I think nature-based solutions and biodiversity credits will converge.
The world is getting far more creative on the financing of nature, but it’s many years behind where carbon is and we shouldn’t expect a silver bullet from everything. The most important thing we’ve got to do is stop financing harm.
What do you mean by “stop financing harm”? What does that look like?
So if my business is highly dependent on land use change, overuse of water, resource consumption or pollutants, plastics, pesticides and fertilisers, I’ve got to find ways of reducing them. That is what I mean by financing harm. I either have to reduce it because I’m the business that owns that supply chain or I’m the bank investing in those businesses. Both these entities have to play a role.
One of the most encouraging things about the visit to Singapore is seeing how investors are now really working with portfolio companies and starting to assess their nature-related dependencies and impacts.
Asia is now home to the most adopters of TNFD. But why is there such a disparity between Japan – which makes up over half of them – and other companies in the region?
It’s cultural. Japanese culture has in many ways associated life, health and nature through their way of life and their businesses. Actually, when we started three years ago, Japan already had the highest level of nature disclosure in the world. So it already told us that Japan is reasonably well advanced on this.
We’ve also had very good taskforce members from Japan who have become advocates for us. [Note: Japan’s Norinchukin Bank and MS&AD Insurance Group sit on the taskforce; while CDL’s chief sustainability officer Esther An is the only Southeast Asian representative] We’ve had support from the government as well as great partners. Once a few companies started doing it and demonstrating it was possible, others followed quite quickly.
We do need, obviously, to have Singapore and other Asean countries catch up. I’m encouraged that they are starting to look at TNFD adoption now. So I expect we will see that gap close over the next couple of years. That’s my aspiration.
I’m not sure how much of a film buff you are, but speaking of Japan, have you watched the Japanese film “Evil Does Not Exist”?
No. I just watched “Bullet Train”, but I suspect it’s slightly different.
So the film is set in a small Japanese village, where a Tokyo firm plans to build a glamping site in a nearby forest. In a meeting with locals, concerns arose over a septic tank potentially contaminating the village’s water. While the company promised to minimise harm and agreed to minor requests, it refused to move the tank – the villagers’ key ask – to avoid losing profits, ironically from offering city-dwellers an escape to nature. It’s fictional, but if you could humour me – how would the calculus change with TNFD in the picture? Would the project still have gone ahead?
TNFD would ask who is accountable for the decision, what governance they are putting in place and who owns the trade-offs. They will have to look at the location and ask: Is this the best location, or is there a better location that’s less sensitive? Are there certain endangered species that are there?” Location-based analysis will need to be carried out.
TNFD would also require the parties accountable to demonstrate that they have consulted with local communities and involved them in the process. So if they are looking to put a septic tank in the forest, what are the policies in place to ensure that it’s emptied regularly and doesn’t leak into the area?
It would raise the bar on the decisions taken. They would have to compare the risks with the social benefits of people enjoying nature and benefits to local communities like jobs in the area. It’s not rocket science. It’s formulaic and it’s a methodology.
TNFD would also force the parties to report on pollutants annually. They would have to be transparent. It there is a leak in the septic tank, for example, they would have to report that. It would improve trust and would really help.
While TNFD has seen great support from the market, it has also been criticised for excluding scientists, environmental defenders and Indigenous peoples from its decision body. These groups have called for stronger laws to make corporations meaningfully pay for their destruction of nature. What is your response to that?
Firstly, there is misunderstanding about how we operate in this criticism. We have always been very clear that we are market-led. We are not changing that. The taskforce is chaired by myself, Razan [Al Mubarak] and its market members, but our stewardship group has representatives from government, mainly the environment agencies, who hold us accountable to meeting the original seven principles of TNFD, which includes being open, inclusive and scientifically based. The group ensures that we follow these principles. Our advisory group involves representatives of Indigenous communities. We’ve had consultation with Indigenous communities through the International Indigenous Forum for Biodiversity (IIFB), which is led by Lucy [Mulenkei].
Secondly, TNFD can’t solve every problem and every grievance. Obviously we attract a lot of attention with our success, but there are a lot of grievances and issues out there that, frankly, TNFD will not solve, like land ownership rights and Indigenous peoples’ rights. Those are recognised in the TNFD approach, but we can’t solve all the grievances and issues. So we’ve just got to be careful of how much people expect TNFD to do.
But we are making a lot of progress in all those areas. We’ve got good engagement with Indigenous peoples, and a lot of them have commended us for that work. It’s explicit in our disclosure framework, whereas it wasn’t in the Task Force on Climate-related Financial Disclosures (TCFD).
There are other platforms and forums where some of these grievances have come up. So at COP16, a member of an Indigenous community came to our presentation at a launch event, and [TNFD executive director] Tony [Goldner] allowed her to speak for 10 minutes at the beginning – completely unplanned and unscripted. And everyone in the audience said it was a very good way of recognising some of the issues.
The other thing to understand is we have at least seven scientific partners – formal partnerships with memorandums of understanding – and there is scientific validation and support for our recommendations. The criticism that we lack scientific expertise is unfair. Taskforces with 120 people in them don’t work. We don’t have the luxury of time, but what we have is a structure where we can very quickly and efficiently get input from the scientific community.
You mentioned that TCFD didn’t incorporate inputs from local communities and Indigenous peoples. Can you walk me through how TNFD has consulted these groups and how their feedback has been incorporated into the framework?
Well, it’s been months of engagements and meetings. There were things that we accepted and we improved on, and there were some things we couldn’t do. And it’s not just Indigenous peoples. It’s farmers and local communities. It’s the farmer in the Netherlands, as much as the local community in the Amazon. We sometimes forget that context with our own bias of what’s going on. So how do you help a farmer become “nature positive” while maintaining his livelihood? That’s really important.
This was a learning from TCFD. We particularly have to look at the effect of the transition on people’s livelihoods.
On a recent trip to Hong Kong, I met ex-PBOC [China’s central bank] chief economist Ma Jun, who shared that he asked you to shrink the thousands of TNFD indicators into three to enable banks to begin measuring the impact of their financed activities on nature. He said you came back with six nature-specific ones. How does the taskforce straddle this tension between simplifying the metrics for corporate disclosures while staying true to the science?
The first thing to understand is disclosures don’t solve every problem. We must not pretend that just because you’ve got disclosures and metrics, everything is fine. What they do is demonstrate transparency, comparability and accountability. And a lot of the disclosures are qualitative as well as quantitative. So I think of TNFD not just as a disclosure regime, but as a risk assessment approach. That’s important context.
There are nine core metrics, but they are actually nine groups of metrics. One of them is, what are your pollutants? You could say the amount of pollutants is one metric, but actually it’s not. When you look at the industry guidance, you go to a coffee maker and you will find there are four or five pollutants and you go to a steel producer and there are 10. With the industry guidance, it actually expands. You get specifications for the core metrics and additional metrics. So that is how we make sure we are scientifically robust, because we are dealing with things that are specific to each industry.
The other thing that’s important is that we have a placeholder for the state of nature. Now, the state of nature is very difficult to measure, but what the Nature Positive Initiative has done is come forward with a proposal. In Australia last year, Marco Lambertini [the convenor of the initiative] put a proposal out for consultation about how you measure the state of nature. We will point to that, which has many more metrics in it.
We like to communicate that it’s nine because we like the idea of simplicity, but we all know when you undo the hood, it’s a little bit more specific and complex.
You mentioned previously that TNFD’s goal is the same as TCFD – to be subsumed under International Sustainability Standards Board (ISSB). Can you share any updates about that and if there’s any timeline to reach that goal?
We are not in charge of that timeline, so you should ask ISSB instead. But our goal is as soon as possible. I think it will be a couple of years if you look at their process, which they have already started.
We are already integrated into [the European Union’s] Corporate Sustainability Reporting Directive (CSRD). So it’s not just ISSB, it’s integration into CSRD and maybe other national regulations that emerge.
Our goal is to work as closely as we can with [ISSB chair] Emmanuel [Faber], [vice chair] Sue [Lloyd] and their team. We have to respect their governance and how they operate. They have a multi-country process for it. But if TNFD gets incorporated into the ISSB, it then gets incorporated into the global baseline and then we shut down.
This interview has been edited for brevity and clarity.
