Hong Kong-listed Swire Properties, Towngas and Vitasoy volunteer to pilot test imminent global biodiversity disclosure framework

Three Hong Kong companies - Swire Properties, Hong Kong and China Gas (Towngas) and Vitasoy International - have taken the lead in pilot testing the framework of the Taskforce on Nature-related Financial Disclosures (TNFD), which helps firms report on the ecological risks that could impact their businesses, as biodiversity gains importance among investors and countries around the world.

The TNFD global initiative, which was announced in July 2020 to enable organisations to report and act on evolving ecological risks, released the final draft of its nature-related risk management and disclosure framework on March 28. The framework will be launched for market adoption in September after a two-month consultation process that ends on June 1.

"The TNFD framework provides a systematic and scientific approach that helps us better understand our risk exposure to nature and biodiversity loss, and also offers valuable insights into business opportunities and making business decisions," said Patrick Ho, the deputy head of sustainable development at Swire Properties.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

The developer began pilot testing the framework late last year, after Ho was named one of the 40 task force members of the TNFD.

Swire Properties said that the TNFD framework has helped the company better understand its risk exposure to nature and biodiversity loss. Photo: Reuters alt=Swire Properties said that the TNFD framework has helped the company better understand its risk exposure to nature and biodiversity loss. Photo: Reuters>

Biodiversity has assumed great importance of late. At the 15th United Nations Biodiversity Conference (COP15) in Montreal in December, a historic agreement was reached by more than 190 countries to protect 30 per cent of land and water considered important for biodiversity by 2030. Around 17 per cent of terrestrial and 10 per cent of marine areas are currently protected.

Swire Properties has started using the Locate-Evaluate-Assess-Prepare (Leap) approach, as recommended by TNFD, to assess its dependencies and impact on nature.

"We're conducting a screening of our portfolios in Hong Kong and Chinese mainland to define priority locations where we can make concrete improvements to biodiversity," said Ho. "As a pilot company and TNFD task force member, we provide direct feedback to TNFD, and contribute learnings and insights to help the framework evolve."

Input from Swire Properties will be used to help develop guidelines for the infrastructure and real estate category of the framework, which will also be released by the time the framework is launched in September, said Emily McKenzie, the technical director at the TNFD.

She was in Hong Kong last week to meet bourse operator Hong Kong Exchanges and Clearing (HKEX) and the non-profit Business Environment Council to give an overview and update on the TNFD framework's development.

More than 200 organisations globally are pilot testing the framework, she added.

"We're currently a voluntary reporting framework, so organisations don't have to cover all the disclosures," said McKenzie. "We are there to enable people to get started."

Towngas's said in its TNFD disclosure that 11 of its 117 projects assessed were close to key biodiversity areas. Photo: Reuters alt=Towngas's said in its TNFD disclosure that 11 of its 117 projects assessed were close to key biodiversity areas. Photo: Reuters>

Gas distributor Towngas published a disclosure in response to the TNFD framework in November, which found that 11 of its 117 projects assessed were in proximity to key biodiversity areas.

"Responding to TNFD can help listed companies like Towngas meet the growing expectations of stakeholders, enhance reputation, attract investment through green financing tools, identify and mitigate risks, and stay ahead of potential regulatory changes," said Isaac Yeung, the head of corporate ESG.

Towngas has conducted pilot Leap assessments on core business sites, and biodiversity is a key material topic in environmental impact assessment studies for new projects, said Yeung.

Vitasoy declined to discuss their experience and progress regarding the pilot testing of the TNFD, saying they were "at the very beginning of this work".

Investors may increasingly adopt the TNFD's framework after the final version is released in September, which could lead to greater pressure on companies to enhance biodiversity-related reporting from 2024, Goldman Sachs analysts led by Madeline Meyer wrote in a report on April 4.

Companies should take the time to better understand the TNFD framework and prepare for relevant reporting in the future, said Swire Properties' Ho.

"With the risks associated with climate change becoming more imminent, investors are expected to question how businesses will assess their nature-related risks and their transition plans to contribute to nature-positive outcomes after the official launch of TNFD in September," said Ho.

The TNFD framework is also aligned with guidance by the Task Force on Climate-related Financial Disclosures (TCFD), set up by the Basel-based Financial Stability Board in 2015, to develop guidelines for voluntary climate-related financial disclosures across industries.

In 2020, the HKEX included core elements of the internationally adopted TCFD reporting framework as part of mandatory requirements in Hong Kong.

"While TCFD reporting took around five years to become widely adopted, we expect the timeline for nature-related disclosures could be accelerated, given sustainability infrastructure is already in place," Goldman Sachs analysts wrote.

"While the TNFD's framework is not included in regulations and legislation today, we expect the path forward could follow a similar trend to the TCFD."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.