Actionable ESG for PE

The ESG landscape is largely being developed in relation to the activities and interests of the largest companies, the largest institutional investors, and the largest PE firms and subsequently applied across entire markets. This creates a dynamic wherein what is being expected and requested of you and your portfolio companies is not necessarily fully-aligned with your own operations and interests. We are dedicated to helping bridge this gap.

Taylor Gray, Ph.D.

Taylor Gray, Ph.D.

With over 15 years of experience in ESG research and practice, I currently lead the Research & Analytics division at Motive, a top ESG advisory for private market investors and companies. As an Oxford-educated expert, I've held academic positions, published in notable journals, and participated in prestigious conferences. My passion for sustainability and ESG has driven me to assist companies ranging from start-ups to Fortune Global 500 firms in harnessing the power of ESG programs and data for positive change.

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Taskforce on Nature-related Financial Disclosures


In September, the Taskforce on Nature-related Financial Disclosures (TNFD) released guidelines on nature-related risks, gaining traction as 'the biodiversity standard'. While voluntary, it's meshing well with major ESG frameworks. The TNFD offers a holistic view of firms' nature dependencies and impacts. However, it's a double-edged sword: delving deep may reveal sensitive competitive data. As the TNFD gains momentum, PE firms and portfolio companies should anticipate shifts in ESG conversations and strategies.

Towards the end of September, the Taskforce on Nature-related Financial Disclosures (TNFD) released their final recommendations to assist in guiding the corporate reporting on nature-related risks ( The term ‘nature-related’ was purposefully engaged to remain inclusive of a wide variety of risks and impacts, however this reporting standard is more commonly referred to as ‘the biodiversity standard’ as it is seen as a companion to the earlier Task Force on Climate-related Financial Disclosures, upon which it is based. If you are reading or hearing more about biodiversity risk or biodiversity reporting, this is the standard they are most likely referring to.

The TNFD standard is a voluntary reporting standard seeking to provide companies and financial institutions with a risk management and reporting framework addressing nature-related risks associated with both the dependencies and impacts a reporting entity may have on nature.

Although the TNFD framework is voluntary, it has been carefully crafted to integrate within, or complement, leading global ESG reporting frameworks and regulatory mandates such as the novel ISSB standards and the growing catalog of EU-Corporate Sustainability Directives. In effect, the standard is voluntary but forces are already organizing to ensure it becomes important.

We have reviewed the TNFD recommendations and have come to two important conclusions:

  1. The TNFD recommendations provide a thorough and well-developed framework for organizations seeking to better understand their dependencies on nature, their impacts to nature, as well as their risks and opportunities derived from nature. The process is comprehensive and encourages companies and financial institutions to explore nature dependencies and impacts across their entire supply chains and assists in determining if any risks or opportunities are acute or chronic. The TNFD is not the first reporting standard to address biodiversity but it is certainly the first to do it in such a comprehensive and actionable manner. It is easy to agree that should any regulatory agencies seek to integrate biodiversity risk into mandatory corporate reporting, then they are likely to lean heavily on this TNFD standard. 
  2. The TNFD recommendations provide organizations with an actionable approach to identifying and managing nature-related dependency and impact pathways and they encourage reporting upon such pathways. In contrast to climate-impact reporting, however, the process of identifying and managing nature-related dependency and impact pathways relies on far more sensitive organizational and operational information which could be of competitive interest. This creates a bit of a paradox in that a company that has fully committed to the TNFD reporting standard may be advised to not publicly release its report on account of the sensitive nature on the information, while at the same time, we would assume that a company that is publicly releasing a TNFD-oriented report has likely not fully committed to the process.

The TNFD recommendations are comprehensive and actionable. We anticipate stakeholders who want more environmental sustainability disclosure and transparency from corporations and financial institutions will be embracing this standard and we expect to see the TNFD to begin influencing regulatory frameworks in the coming years, particularly within the EU corporate sustainability directives. This is something we encourage all companies to prepare for–not urgently but certainly.

Key Implications

The public release of the TNFD recommendations is anticipated to carry material implications for both PE firms and portfolio companies.

  1. PE Firms: We anticipate biodiversity-related metrics will increasingly be integrated into ESG data requests by LPs over the coming 24 months, and particularly by LPs based in the EU as well as those who express a clear Impact Investment thesis. These data requests will most likely draw on the language and methodology of the TNFD standards. We anticipate it will be rare for an LP to request a complete TNFD disclosure report in the near- to medium-term, however we advise PE firms to review the TNFD standards and explore proactively integrating material metrics and key language into their annual ESG/Sustainability Reports and other associated communications with LPs. 
  2. Portfolio Companies: Larger publicly-traded companies are facing greater stakeholder pressure and regulatory mandates to demonstrate enhanced oversight and accountability for environmental and social risks across their supply chains. Currently, such oversight appears predominantly focused on greenhouse gas (GHG) emissions and human rights abuses, however we do anticipate many of these larger companies will be exposed to increasing stakeholder pressure to integrate biodiversity risks into their supply chain oversight and accountability programs. Portfolio companies which are vendors/suppliers to larger publicly-traded companies are advised to review the TNFD standards and prepare a summary statement commensurate with the extent of your nature-based dependency and/or impact pathways. We DO NOT advise you to prepare a comprehensive TNFD report unless this is specifically requested by a key customer as we are of the opinion that such a report, if properly completed, divulges sensitive information of a competitive interest.

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