INSIGHT by Stuart Breyer, CEO mallowstreet
When it comes to implementation of nature-related disclosures for pension funds, it is a question of ‘when’, not ‘if’.
In October 2022, the Pensions Regulator made it mandatory for schemes over £1bn to provide climate metrics aligned with recommendations from the Taskforce for Climate-Related Disclosures (TCFD). Now, with TCFD reporting feeling more familiar, it is time to turn our attention to the Taskforce for Nature-Related Financial Disclosures (TNFD).
I know – another acronym. But while TNFD might sound like a ‘new kid on the block’, it has actually been operational since 2021. The TNFD framework takes its inspiration and approach from TCFD recommendations. The idea is that biodiversity and nature-loss data should, and eventually will, complement companies’ existing climate disclosures. In other words, those who report against TCFD requirements will be able to use their existing TCFD governance framework and augment it by adding nature-related risks and opportunities.
In September 2023, the full and final TNFD framework was published. Expecting this coming down the regulatory track, we asked UK pension trustees about their progress on nature-related risks – but as the mallowstreet Trustee Report 2022 has revealed, this is not yet on the radar.
As with climate change and the resulting risks and opportunities, investors will likely need to repeat the usual steps but with natural capital in mind:
〉Nature-related risk management: risks can be physical (e.g. flooding, loss of materials and resilience) as well as transition-related (e.g. changes in public policy and consumer preferences, litigation risks in different European jurisdictions). The TNFD LEAP approach starts with identifying where your assets are exposed to nature-related risks. Additional resources include the Sustainable Accounting Standards Board (SASB) materiality map, the Integrated Biodiversity Assessment Tool database (IBAT)or the ENCORE framework.
〉Nature-positive engagement: investors already engage with managers and issuers about reducing their carbon footprints. In the context of TNFD, engagement should focus on the issuers and managers’ exposure to and impact on at-risk and high-value ecosystems, akin to the goals of SFDR Article 8 or SDR Sustainable Improvers funds.
〉Nature-positive investing: this can start with investing in companies more mindful of their impact on nature – and taking proactive steps to reduce and reverse it, akin to what SFDR Article 9 or SDR Sustainable Impact funds do. But there are ways to play a much more direct role.
〉Investing in natural capital: much of the investments in natural capital and biodiversity benefit from government subsidies and/ or generate certified carbon credits which can be sold as a profitable investment. Carbon credits go beyond simply trading to offset emissions, which allows issuers to stay within their permitted allowance and avoid carbon tax. While the UK currently does not have an established carbon crediting mechanism, there are 27 such mechanisms in various international jurisdictions. The most popular independent one is the Verified Carbon Standard (VCS). If not possible to verify the carbon credits, there are many organisations which can at least vet the projects receiving the investments.
Last year, our insights research team found that 75% of schemes with an endgame longer than 10 years are interested in investing in biodiversity protection. There is also strong interest in sustainable agriculture and water management. Most importantly, green bonds are a way for schemes with significantly shorter time horizons to still play a role.
There are lessons to be learned with implementing TNFD reporting. The first is to lean on the experience from TCFD. More importantly, however, is the discussions we are hearing trustee boards having today. They want to go further, faster, and deploy their capital in a meaningful way that ensures their members are retiring into a world worth living in. I’ve seen so many new ideas, developments and innovations in the past few months. If you’re not already having these conversations, you soon will – so why not start today?
| brief bio
For the past seven years Stuart Breyer has been the CEO of mallowstreet, the online a social network and educational events portfolio for professionals in the UK institutional pensions community. mallowstreet’s goal is to ‘help provide a better pension for everyone’, and with Stuart heading up the peer-based collaboration site, which was one of the first financial services companies in the UK to become a B-Corp in 2021, the business has seen sustained and impressive growth over the last several years.
With an active community of over 4,000, mallowstreet has 40 new members joining each month and circa 50 events each year. mallowstreet has nearly £2 trillion Pension Scheme assets represented by 700 Pensions Funds and the community’s membership looks after the retirement saving of about 19 million people in the UK. Stuart has ambitious goals for mallowstreet’s direction in 2024.
“Since completing my Masters in Policy, to my current role as CEO of mallowstreet, the trajectory of my career has continued to reflect my passion for the betterment of the Pensions industry.
From its inception, mallowstreet’s mission has been clear: to revolutionise the pensions industry by fostering collaboration and delivering innovative solutions. Our journey has been defined by evolution and adaptation – staying true to our purpose while embracing change. Innovation is key in our approach. Our team continues to find cutting-edge solutions for the evolving needs of the pensions landscape.
Looking forward to 2024, the trajectory of AI technology and how it will transform innovation, trust, security, and efficacy in financial services excites us immensely.
We envisage opportunities and advancements that will shape our strategies and enable us to continue leading in solving the most challenging problems facing the pensions industry.”
mallowstreet is rapidly expanding the firm’s service offering to cover a new suite of products that apply the power of Machine Learning technologies and Artificial Intelligence.
The firm recently launched SOFI – an AI tool designed to help their clients save time, check messaging, improve delivery, monitor performance, and capture questions.
Alongside his CEO role, Stuart is a Trustee of the 10,000 Interns Foundation – this foundation is transforming the horizons of young talent with paid internships across more than 25 sectors through the 10,000 Black Interns and 10,000 Able Interns Programmes.
Having graduated from Drexel University with an MBA, followed by several years at Susquehanna International Group in Philadelphia, Stuart moved to the UK to complete an Msc in Social Planning and Policy at the LSE in 2006. He’s still here and in his free time enjoys running and travel.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
