IFRS S2/TCFD/TNFD climate and natural risk disclosure guidance｜Startrust Information

From framework comparison to operational and financial decision-making, establishing integrated management capabilities for climate and natural risks

Climate change and natural loss are not separate issues. Extreme weather, water stress, ecosystem degradation, land use changes and raw material supply may simultaneously affect site operations, supply chains, asset values, insurance, financing, product demand and corporate reputation.

If an enterprise only regards TCFD or TNFD as a chapter in a report, it is easy to stop at a risk list and textual description; the work that is truly valuable for decision-making is to find out where the risk occurs, through which value chain it is transmitted, what operational and financial impacts it may have, and how the enterprise should respond through strategy, capital expenditure, supplier management and goal tracking.

Startrust helps companies integrate the common governance, strategy, risk management, indicator and target structures of IFRS S2, TCFD and TNFD, and introduces climate scenario analysis and TNFD LEAP methods according to the company’s applicable needs to establish a data process that is sustainably updated, can be linked to financial planning, and can support disclosure and assurance.

Inventory of existing TCFD, climate risk, carbon management and nature-related information
Connect with the disclosure requirements of IFRS S2 to avoid following the incomplete practices of the old version
Identify natural dependencies, shocks, risks and opportunities and their priority locations
Establish scenarios, timescales, scores, financial impacts and management actions
Complete disclosure draft, indicators and targets, division of responsibilities and internal control evidence

Reservation consultation

Why do companies need to integrate climate and nature risk disclosures?

TCFD results have entered the global benchmark of IFRS S2

The four pillars and eleven recommendations of TCFD help companies establish climate-related financial disclosures in the long term. After TCFD completes its tasks in 2023, the IFRS Foundation will take over tracking the progress of enterprise adoption from 2024; this does not mean that the system established by enterprises in the past based on TCFD has expired, but that it should further compare with the more complete requirements of IFRS S2, including industry indicators, greenhouse gas emissions, climate resilience, and current and expected financial impacts.

Natural issues are entering investment, customer and supply chain decisions

Businesses may rely on water, soil, ecosystem services, natural raw materials and stable climate conditions, or they may cause natural shocks through pollution, land use, resource extraction or supply chain activities. These dependencies and impacts will translate into physical, transformational and systemic risks, and may also bring about product, technology, market and financing opportunities.

Location information is an important basis for judging risks

The same amount of water withdrawal, land area or raw material usage may have completely different risks in different river basins, ecologically sensitive areas and supplying countries. Natural risk analysis cannot just look at company-level totals, but also needs to link operating locations, supply sources and value chain activities to geographic locations.

Disclosures require entry into risk management and financial planning

Investors care not just about the name of the risk, but whether the risk may affect revenue, costs, assets, liabilities, capital expenditures, financing or cost of funds, and what resources the company devotes to improving resilience. If assessments are not linked to budgeting, investment decisions and enterprise risk management, it will be difficult to produce credible financial disclosures.

Integration in advance can reduce cross-framework rework

IFRS S2, TCFD and TNFD all use the four pillars of governance, strategy, risk management, indicators and targets. Companies can share governance responsibilities, risk processes, data control and reporting mechanisms, and then add proprietary methods for climate and natural issues to avoid repeated interviews, reporting and writing by different teams.

How to connect TCFD, IFRS S2 and TNFD?

TCFD recommends four pillars: governance, strategy, risk management, indicators and targets, requiring organizations to explain how climate risk opportunities are monitored, how they affect strategy, how they are managed, and what indicators and targets are used. The TCFD governance and scenario analysis results accumulated by the company in the past are an important basis for connecting to IFRS S2.

IFRS S2 follows the TCFD structure and further requires companies to disclose climate-related risks and opportunities that can reasonably be expected to affect the company’s prospects. The content includes physical risks, transition risks, climate resilience, scenario analysis, Scope 1, Scope 2 and Scope 3 emissions, cross-industry indicators, industry indicators and climate targets, and is applicable together with the general disclosure requirements of IFRS S1.

TNFD’s final proposal also adopts four pillars, including 14 recommended disclosures, and uses the LEAP method to help organizations identify and assess nature-related issues. Natural analysis pays attention to location, value chain and ecosystem context. It is not appropriate to just rename carbon emissions or total water use and apply them directly.

Architecture	Core Focus	Main Objects and Purposes	Enterprises Need Special Reinforcements
TCFD	Climate-related risks and opportunities	Basics of climate governance and financial disclosure	New or more specific requirements compared to IFRS S2
IFRS S2	Climate-related financial information that affects corporate prospects	General purpose financial reporting users	Financial impacts, industry indicators, GHG and disclosure of internal controls
TNFD	Nature dependence, shocks, risks and opportunities	Investments, strategies, risks and nature disclosures	Places, value chains, ecosystems and LEAP assessments

The three can share the governance and management framework, but the materiality views, assessment methods and data granularity are not exactly the same. Companies should first confirm the requirements of regulations, investors, customers, lenders and voluntary commitments before deciding on the boundaries and depth of disclosure.

What should be included in a climate risk assessment?

Physical Risk

Physical risks can be divided into acute events such as typhoons, floods, droughts, and heat waves, and chronic risks such as long-term changes in average temperature, rainfall patterns, sea levels, or water resources conditions. The assessment should link sites, assets, supply sources, logistics and key equipment, rather than just describing it at the industry level.

Transformation Risk

Transition risks include changes in policies and regulations, carbon prices, technology, markets, customer preferences, financing conditions and reputation. Enterprises need to analyze which products, processes, energy or assets may be affected, and the differences in revenue, costs and investment when the transformation speed is different.

Opportunities may arise from energy and resource efficiency, low-carbon products, alternative materials, new markets, resilience services or improved financing conditions. Opportunity assessment also needs to describe the time frame, resource investment, assumptions and possible financial effects, and avoid just listing a vision without an execution path.

Situational Analysis and Resilience

Scenario analysis does not predict a single future, but uses reasonable and supportive scenarios to test whether strategies will remain resilient under different climate pathways. Enterprises should define the time scale, scenario sources, main assumptions, exposed assets, possible impacts, limitations and management responses, and deepen the quantification level year by year based on their capabilities.

How does the LEAP method of TNFD proceed?

Locate: Locate the contact surface with nature

Take inventory of direct operations and upstream and downstream value chain activities, identify points of contact with nature, and examine ecosystem integrity, biodiversity importance, water stress and other sensitive conditions. This stage usually requires base coordinates, supply sources and spatial data.

Evaluate: Evaluate dependencies and impacts

Identify which ecosystem services your company relies on and what positive and negative impacts its operations and value chain have on nature. Assessments can cover drivers such as land and ocean use change, resource use, climate change, pollution and alien species.

Assess: Assess risks and opportunities

Translate dependencies and shocks into physical, transitional and systemic risks and analyze possible market, product, resource efficiency, rehabilitation and financing opportunities. Then sort them according to the likelihood of occurrence, degree of impact, time scale and financial transmission path.

Prepare: Prepare for response and disclosure

Establish strategies, goals, actions, resources, responsibilities and monitoring mechanisms based on priority issues, and prepare disclosure content that is consistent with TNFD recommendations. Enterprises can design measures in order of response such as avoidance, reduction, recovery, regeneration and transformation.

LEAP is an assessment method, not a rigid linear checklist. Enterprises can adjust their iteration methods based on industry, scale, data availability, and existing risk processes, but each important judgment should still retain sources, methods, assumptions, and approval records.

Which companies are suitable for priority import?

Listed cabinets or group companies that have disclosed in accordance with TCFD and are preparing to transition to IFRS S2
Industries that are highly dependent on nature, such as agriculture, food, beverages, textiles, chemicals, mining, forestry, construction and tourism
Enterprises with multiple factories, warehouses, stores or significant real estate assets
Companies that use large amounts of water, land, biological resources, natural raw materials or packaging materials
Companies whose supply chains span water-stressed areas, biodiversity-sensitive areas or areas of high natural risk
Enterprises facing information requests from investors, financial institutions, international customers or group headquarters
Businesses that are setting net zero, nature positive, zero deforestation, water or supply chain targets

Companies don’t have to start out with the world’s most granular quantification of all nature issues. A more pragmatic approach is to first conduct pilot projects with major sites, products or supply chains, establish methods and data responsibilities, and then gradually expand the scope.

What information needs to be collected?

Organization, Asset and Location Data

Including consolidated reporting boundaries, operating locations, asset types, addresses or coordinates, production capacity, critical equipment, insurance and major capital expenditures. Natural analyzes that lack precise locations often lead to overgeneralized conclusions.

Value chain and procurement information

Including key suppliers, raw material sources, sourcing countries or regions, logistics nodes, outsourcing activities, customer markets and product uses. When there is insufficient upstream information, you can first use expenditure, category, country and industry agent data to screen priority projects, and then gradually obtain first-hand information.

Environment and Natural Information

Including greenhouse gases, energy, water, land use, pollutants, waste, resource inputs, biological raw materials and restoration measures. Data should clearly indicate boundaries, units, periods, estimation methods and uncertainties.

Risk, Strategy and Financial Information

Including corporate risk inventory, operations continuity plan, strategy and budget, cost of revenue, assets and liabilities, capital expenditures, research and development, insurance and financing. Consultants will help establish pathways from issues to financial accounts rather than requiring disclosure of all sensitive forecasts.

Governance and Management Evidence

Includes board and management responsibilities, meeting materials, policies, goals, performance tracking, internal auditing and compensation mechanisms. Disclosure texts should be supported by systems and records.

Common import problems of enterprises

Still treat TCFD as an independent report that is replicated and updated every year

Only updating the risk table and carbon emission figures without comparing the material information, financial impact, industry indicators and reporting requirements of IFRS S2 may result in a complete form but a gap in substance.

Climate and nature issues are worked on by different teams.

The two sets of projects used different risk scales, reporting boundaries, time frames and scoring methods, which not only repeated interviews but also made it difficult to present consistent priorities to the board of directors.

Natural risks only have total amount, not location.

Only the total amount of water, waste, or raw materials used throughout the company makes it impossible to determine whether activities are located in sensitive or high-pressure areas, and it is also difficult to identify locations and supply sources that should be managed first.

Risk score has no relationship with financial impact

The report is written directly after using the high, medium, and low matrices. There is no transmission path established such as operational interruption, cost increase, demand change, or asset impairment, and the decision-maker cannot judge resource allocation.

Scenario analysis only references external reports

Listing heating scenarios or policy scenarios without incorporating assumptions about corporate assets, products, markets, and strategies cannot effectively test corporate resilience.

Commitments and goals lack benchmarks and action plans

Goals do not define scope, base year, methods, milestones, responsible persons and resources, making subsequent tracking difficult and possibly increasing the risk of false or misleading claims.

Lack of internal control evidence in data and judgment

If external data versions, scoring models, expert judgments and estimates are not retained, it will be difficult to reproduce in the next year, and it will also be detrimental to management approval and external assurance.

How does Startrust help enterprises introduce IFRS S2/TCFD/TNFD?

1. Analysis of applicable requirements and stakeholders

Confirm the corporate regulatory schedule, investor and customer needs, existing commitments and expected disclosure positions, and define the priorities for IFRS S2, TCFD transition and TNFD introduction.

2. Current situation inventory and gap analysis

Review existing TCFD reports, IFRS preparation, risk management, carbon inventory, water use, supply chain, locations and governance systems, and establish a matrix of requirements, current status, gaps, responsibilities and priorities.

3. Scope, method and data blueprint design

Define organizational and value chain boundaries, short, medium and long term, materiality thresholds, risk classifications, scoring scales, scenario sources, location levels and data quality requirements.

4. Climate Risks and Scenarios Workshop

Identify entities and transformation risk opportunities across departments, establish transmission paths, select reasonable scenarios and time scales, and analyze strategic resilience and management measures.

5. TNFD LEAP evaluation

Locate major locations and supply chain contacts, assess natural dependencies and impacts, identify risk opportunities and prioritize issues, and form traceable assessment drafts.

6. Financial impact and strategic link

Link priority risk opportunities to items such as revenue, costs, assets, liabilities, capital expenditures and financing, establish qualitative, interval or quantitative analysis, and record assumptions and uncertainties.

7. Indicators, goals and action plans

Take inventory of cross-industry, industry-specific and naturally-related indicators, define benchmarks, boundaries, frequency, responsibilities and evidence, and link goals to strategy, budget and execution milestones.

8. Disclosure, Internal Control and Capability Transfer

Complete IFRS S2, TCFD connection or TNFD public draft, establish data submission, review, approval, change and retention processes, and transfer methods through education, training and trial operation.

Coaching content and deliverables

The actual delivery content is confirmed based on the company’s applicable requirements, industry, scope, data maturity and project depth. Common results include:

IFRS S2/TCFD/TNFD applicability and gap analysis report
Comparison table of framework requirements, existing content, responsible departments and improvement actions
Methods for classifying, scoring and prioritizing climate and natural risk opportunities
Short, medium and long term definitions and scenario selection and assumptions document
Climate risk opportunity inventory, transmission pathways and scenario analysis draft
TNFD LEAP scope, location screening, dependency impact and risk opportunity draft
Inventory of major locations, supply chains and nature sensitive information
Current period and expected financial impact analysis table and important assumptions
Draft disclosures on governance, strategy, risk management, metrics and targets
Indicator dictionary, information form, supporting requirements and quality inspection rules
Disclosure of internal control process, RACI responsibility matrix and annual work schedule
Management briefings, cross-department workshops and education and training materials
Follow-up improvement roadmap and next year’s update suggestions

This service focuses on system, information and disclosure preparation; the final determination of legal application, financial statement processing and independent assurance opinions should still be confirmed by the enterprise and the competent authority, certified accountant or assurance agency.

What can companies get after importing?

Move from decentralized projects to a common management structure

Climate, natural, carbon, water, supply chain and finance teams use consistent governance responsibilities, timescales, risk methodologies and data rules to reduce duplication of effort.

From risk list to decision information

Each priority risk opportunity has a location, cause, transmission path, scenario, financial impact and response measures, so management can prioritize investments and actions accordingly.

Convert from text disclosure to traceable manuscript

Disclosed figures, judgments, assumptions and external information can be traced back to source, responsibility, review and approval, improving update efficiency and confidence readiness.

Move from single annual reporting to continuous monitoring

The enterprise establishes an annual update schedule and indicator mechanism that can be re-evaluated as locations, suppliers, regulations, situations and data versions change.

Extending from climate management to natural resilience

The existing TCFD and carbon management foundation can further connect water, land, biodiversity, raw materials and ecosystem services to form a more complete perspective of operational resilience.

Why choose Startrust?

Be familiar with the framework and also pay attention to the actual management process of the enterprise

We not only provide comparison of standards and provisions, but also help enterprises to apply requirements to risks, strategies, budgets, operations and data processes.

Connecting carbon management, sustainability reporting and financial disclosure

The climate and nature project can connect greenhouse gas inventories, internal carbon pricing, GRI reports and IFRS S1/S2 to reduce inconsistencies in data definitions and boundaries.

Handle data gaps with an iterative approach

Businesses do not need to wait for all primary information to be available before starting. We help differentiate between actual values, estimates and proxy data, screen high-priority projects first, and then chart an improvement path.

Pay attention to location, value chain and financial transmission

Through space, supply chain and financial perspectives, risk analysis does not stop at enterprise totals and abstract descriptions.

Build tools and capabilities that can be taken over by the team

Deliverables include methods, forms, responsibilities, audits and training, allowing businesses to update themselves rather than start over every year.

FAQ

TCFD has completed its mission. Are the TCFD reports made in the past still useful?

have. The four pillars and core recommendations of TCFD have been incorporated into the IFRS S2 structure, and past governance, risk identification and scenario analysis can serve as an important foundation. Enterprises should conduct gap analysis to supplement IFRS S2’s requirements for material information, financial impact, industry indicators, greenhouse gases and reporting processes.

Do IFRS S2 and TCFD each need to make a report?

Usually not required. Companies can create a climate governance and risk management draft and organize content according to applicable regulations and reporting locations. The key is to clearly compare the requirements to avoid duplication of disclosures or contradictory content.

Is TNFD a mandatory guideline?

TNFD itself provides voluntary recommendations and methods, but local regulations, investors, financial institutions, customers or industry initiatives may refer to its content. Enterprises should confirm actual obligations based on the location of operations, capital market and contract requirements.

Is TNFD only suitable for the agriculture or food industry?

no. Almost all companies rely on nature through water, land, energy, raw materials, climate regulation or supply chains, but the degree of dependence and impact varies. Manufacturing, finance, retail, technology, real estate and service industries may also be exposed to natural risks through their locations, financing or supply chains.

I don’t have supplier coordinates. Can I do a LEAP assessment?

You can start with your own locations and major supply categories, use information such as supplier address, place of origin, country, industry or expenditure to conduct preliminary screening, and include high-priority projects in the data improvement plan. Proxy information, assumptions and limitations need to be transparently stated in the report.

Does climate scenario analysis have to accurately quantify the amount?

Enterprises should choose methods based on the reasonable and supportive information available and their own capabilities. The conduction path, direction, interval or sensitivity can be established in the early stage, and then gradually quantified; no matter which method is adopted, the situation, assumptions, methods, uncertainties and decision-making purposes should be explained.

Are natural risks equal to biodiversity risks?

Biodiversity is an important component of nature, but nature-related issues also include water, land, oceans, atmosphere, and ecosystem services. The assessment should start from the company’s dependence and impact, and then judge its transformation risks and opportunities.

Governance responsibilities, risk processes, locations and supply chains, timescales, financial information, internal controls and some environmental indicators can be shared. Climate emissions and scenario data, natural site and ecosystem data each have unique requirements and need to be designed separately.

How long does counseling take?

The timeline depends on the location and value chain scope, the maturity of the existing TCFD, data availability, whether situational quantification is performed, and the expected depth of disclosure. After launch, scope and gap analysis will be completed first, and then a phased work plan will be proposed.

If an enterprise has completed the TCFD report, is preparing for IFRS S2, or wants to introduce TNFD from high-priority locations, Startrust can assist in taking stock of the current situation, designing methods and completing the first round of trials.