Data desert or data deluge? The current state of nature-related data available to market participants is widely misunderstood today.
Not surprisingly, data availability and quality are widely cited as a major reason why companies and financial institutions are reluctant to get started with nature-related assessment, target-setting and corporate reporting.
Over the past two-and-half years of developing and pilot testing nature-related assessment and corporate reporting at the Taskforce on Nature-related Financial Disclosures (TNFD), we have learned a great deal about the state of nature-related data and its use by market participants.
That early market experience busts the myth that “there is no nature data” consistently heard at industry conferences and webinars.
While nature-related data is by no means universally available or perfect in its current form, extensive pilot testing of the TNFD’s LEAP assessment approach and the emergence of first generation TNFD-aligned disclosure reports in the last few months show that companies and financial institutions are generating decision-useful insights about their businesses and their capital portfolios with the nature-related data available today.
When it comes to understanding an organisation’s interface with nature, data “gaps” are not typically the largest problem.
Leadership, internal capabilities and skills to interrogate, interpret and take action on nature-related data are more fundamental constraints. Without these, companies and financial institutions cannot reduce their impact on nature or increase their own resilience in the face of accelerating nature loss.
Business intelligence – around direct operations and value chains – is typically the biggest challenge.
That should not come as a surprise. In many respects, nature-related assessment and reporting today is akin to where most companies were five to 10 years ago on climate-related assessment and reporting.
Fundamentally, this feels hard because it is the first time for the vast majority of organisations. That’s a confidence and capability issue, not a data one.
Challenges
A number of specific challenges have emerged from the extensive market testing that has supported the development of the TNFD’s recommendations and guidance; specifically our assessment guidance known as the LEAP approach.
First, among LEAP pilot testers and those now working to meet their Corporate Sustainability Reporting Directive (CSRD) reporting requirements, the most pressing data gaps are most often inside their own organisation not outside it.
For example, knowing exactly where direct operations are located and where suppliers are interfacing with nature.
For many organisations, this asset location data is the first constraint to effective nature-related issue assessment; particularly the capacity to identify dependencies on nature along value chains. It’s those dependencies on nature that are the basis of risks to the organisation.
This underscores the criticality of understanding the different types of data and analysis required; in particular “input” data on the state of nature, versus “output” data from the company about its dependencies, impacts, risks and opportunities.
Some of this data is internal to the organisation, while other data is from external sources.
The location-specific character of nature-related issues means it is impossible to assess dependencies and impacts on nature – the land used or changed in each location; the resources extracted; or pollutants emitted for example – without the foundation of good quality corporate asset location data and access to comparable data from value chain partners.
Second, for those companies who have this business intelligence on their own operations, then external data is key.
“As with any other area of business intelligence and financial analysis, translating data into meaningful insights is a mission-critical capability”
Data on the extent and condition of ecosystems at locations of relevance to the company or capital portfolio are essential to determine what and where material issues might exist.
The TNFD’s tools catalogue signposts to the growing set of data providers and analytical tools addressing these needs.
Third, companies find it is not enough to simply have access to vast amounts of data. As with any other area of business intelligence and financial analysis, translating data into meaningful insights is a mission-critical capability.
Organisations therefore need to develop the capacity and expertise to analyse data and translate it into actionable insights about material nature-related issues.
This business intelligence – nature intelligence – is often the true gap.
Those that are moving quickly to address that gap are potentially creating a new source of competitive advantage: for minimising reputational and litigation risk by lightening their negative impacts on nature; for informing more nature-resilient site selection for physical assets; for building more resilient supply chain partnerships; and for identifying opportunities for product and service differentiation embracing new circular bioeconomy opportunities.
Addressing the gaps
To help companies and financial institutions build those capabilities, TNFD and a wide range of partner organisations are now mobilising to address the gaps and improve accessibility to decision-grade nature-related data.
Our initial focus is on “state of nature” data, which is abundant but fragmented, often sitting in different databases or files, sometimes commercial but often non-profit, scientific or governmental, and often several years old before being released for public use.
So whilst not necessarily a data “gap”, improving access and timeliness, reducing fragmentation and addressing inconsistency of definition and measurement are key priorities.
The centrepiece of our current collaborative efforts is blueprinting a possible global Nature Data Public Facility (NDPF).
Our goal is to put forward the proposed principles, rules and operating model of an NDPF for release at the CBD COP16 in Colombia later this year, building on a scoping study we released at last year’s Amazon Summit in Brazil.
In addition to addressing state of nature data challenges, we are also acutely aware of the lessons learned from emissions measurement and reporting, that there is a need to also lower the cost and complexity of collecting and sharing data across value chains.
Later this year, the TNFD with partner organisations will begin exploring and testing the feasibility of a lightweight value chain “data passport” for a small set of core nature impact indicators – such as spatial footprint, water consumption and key pollution metrics.
Based on market feedback about the pain points around value chain data sharing, we are looking to see how impact driver data could be collected, geospatially tagged and in an assurable digital format to share across value chains – between companies in supply chains, and between companies and the providers of their capital.
Globally scalable, practical and low-cost solutions like these are needed because the demand for nature-related data is set to grow quickly.
Not just because of regulatory requirements such as CSRD but because investors increasingly recognise there is nature risk in their capital portfolio and they want better information from their investees and banking and insurance clients to manage those risks.
Meaningful decisions
The TNFD has already identified and recommended the indicators for reporting – both cross-sector and sector-specific.
Now our focus is on catalysing an ecosystem of data and analytic solutions to support the information gathering, assessment and reporting needs of market participants.
The good news is that, based on the strength of the demand signals now building in the market, the nature data and analytics solutions space is already innovating and growing quickly with exciting new measurement tools and technology and analytic services being launched around the world.
“Now our focus is on catalysing an ecosystem of data and analytic solutions to support the information gathering, assessment and reporting needs of market participants”
The biggest gap is the business intelligence and knowledge to understand where to source and finance along value chains, how to align with emerging reporting requirements, and how to use and interpret these new data tools to inform and make meaningful decisions on nature-related issues that shape better corporate strategy, governance, risk management and capital allocation.
Boards or executives hiding behind the headline that data gaps prevent progress on nature-related assessment and reporting are ignoring potentially material risks to their own business.
Few boards would take the same approach to managing cyber-risk. By extension, they are also creating new transition risks for their investors and other capital providers.
What is also becoming clear is that as policy-makers and investors continue to look for ways to scale the flow of global capital into a net-zero and nature-positive transition, businesses that have built nature intelligence will not only be more resilient in the face of accelerating climate change and nature loss, but also better positioned to use their nature intelligence as a new source of competitive advantage.
David Craig is co-Chair of the Taskforce on Nature-related Financial Disclosures (TNFD). He is the former founder and CEO of Refinitiv, the financial data company acquired by the London Stock Exchange Group (LSEG) in 2021
