Transition Pathway Initiative (TPI) chair, David Russell, has argued that it may be too early for most pension funds to be reporting in line with Taskforce on Nature-related Financial Disclosures (TNFD) due to complexity and lack of data.

Speaking at the Pensions and Lifetime Savings Association’s Investment Conference 2024, Russell said that a “relatively small number” of pension schemes had got to grips with Taskforce on Climate-related Financial Disclosures (TCFD) reporting, and to then “pile on” TNFD reporting would be too early, as schemes rely on data from companies and asset managers before they can make ‘sensible’ reports.

“Reporting is important, but I don’t think for many pension funds we are in a position to do that,” he stated.

“Why reinvent the wheel, when many of us are doing stewardship reports? Why not build it up slowly through a focus on some key issues in our stewardship reporting rather than going through a full TNFD/TCFD type framework, which I think would be beyond what most people could do.”

Russell said that following the same process that was developed for TCFD as TNFD was “sensible” and would make it easier for those who wanted to report on nature-related risks.

However, he warned that the challenge was that the data was significantly worse for biodiversity than it is for climate change.

“TPI analyses 13 sectors on how they are transitioning on climate change,” Russell continued.

“The worst sector is the food processing industry. Food and agriculture have a significant biodiversity impact, and the reason they are the worst scoring is that TPI relies on publicly available data, and they are just not providing it.

“If it’s not providing on climate, it’s highly unlikely to be providing on nature. The building blocks to be able to report sensibly, from the companies through the asset managers to you as pension funds just aren’t there.

“There are so many different measures [for biodiversity] that it is going to be highly complex for us as a pension fund community.”

However, fellow panelist and Brunel Pension Partnership chief responsible investment officer, Faith Ward, disagreed that schemes should not be looking to report on biodiversity in line with TNFD.

“I did engage quite extensively with the TNFD before we made this decision, and I think you can comply or explain,” she stated.

“They totally acknowledge, particularly if you are a pension fund or asset owner, there are some challenges, but it’s about getting started and explaining what you can and can’t do, and they are open to that criticism.

“Whilst I totally take your point, they are being very pragmatic. What they have provided is a sensible toolkit to make a start.”

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