Nature-Related Risks Under IFRS S1: How TNFD and SASB Can Support Disclosure

The practical risk is not a lack of terminology. It is that a familiar framework, dataset or metric is treated as a complete reporting conclusion without testing the governing IFRS requirements, materiality, evidence and publication claim.

IFRS S1 explains that sustainability-related risks and opportunities arise from the entity’s interactions with stakeholders, society, the economy and the natural environment across the value chain. The entity both depends on resources and relationships and affects them. Degradation, depletion, preservation or regeneration can therefore change operational continuity, input costs, market access, regulation, reputation, financing or strategic options.

A nature assessment should not stop at “the company uses water” or “the company affects biodiversity”. It should identify the mechanism through which the dependency or impact can affect the entity’s prospects. The same impact can generate different financial pathways depending on location, ecological condition, regulation, stakeholder response and the substitutability of the resource.

Figure 1. Nature dependencies and impacts are assessment inputs; IFRS S1 disclosure follows only after the risk or opportunity pathway and effect on prospects are evaluated.

IFRS S1 requires an entity to refer to and consider the applicability of SASB disclosure topics when identifying sustainability-related risks and opportunities and the associated SASB metrics when identifying information to disclose in the absence of a specific ISSB Standard. This is particularly useful for nature because risks and metrics differ substantially by industry.

The entity may also consider the CDSB water and biodiversity application guidance, other investor-focused standard setters and relevant peers. TNFD can be considered as a practical source where it helps identify or explain information that is relevant and faithfully representative and does not conflict with IFRS S1. The source used, industry applied and significant judgements should be traceable.

Nature-related information is often location-specific because ecological condition and regulatory or stakeholder context vary across sites. A group-wide total can obscure a material operation in a water-stressed basin or a supplier dependency concentrated in a high-biodiversity area. IFRS S1 does not prescribe a universal geospatial method, but fair presentation and the aggregation requirements can make location or value-chain disaggregation necessary when it is material.

The reporting entity remains the same as the related financial statements. The assessment, however, considers dependencies and impacts throughout the value chain when they give rise to risks or opportunities affecting the reporting entity’s prospects.

A hypothetical beverage producer depends on reliable water supply and agricultural ingredients. A group-wide water-withdrawal number appears stable, but the nature assessment identifies two high-volume sites in stressed basins and a concentrated crop supply chain exposed to soil degradation and pollinator decline.

The entity uses TNFD LEAP to structure location and dependency analysis, refers to relevant SASB topics and metrics, and links the findings to production disruption, input-price volatility, capital expenditure for water efficiency and supplier diversification. The published IFRS S1 disclosure focuses on the material risk pathways, strategic response, financial implications, metrics and limitations rather than reproducing the entire impact inventory.

Treating a biodiversity impact list as a complete IFRS S1 risk and opportunity assessment.

Using TNFD terminology without explaining the connection to the entity’s prospects.

Ignoring location-specific concentrations or value-chain dependencies.

Reporting only negative physical risks and overlooking transition risks and opportunities.

Selecting metrics because they are available rather than because they inform the material risk or opportunity.

Presenting proposed ISSB nature content as issued requirements.

Using a “TNFD aligned” claim as evidence of IFRS S1 compliance.