Day 3 of 515 minutes

Day 3: The Voluntary Side — Nature Markets and TNFD

Voluntary nature and carbon credits, corporate demand, and the Taskforce on Nature-related Financial Disclosures

A peat bog in the Flow Country of northern Scotland has been quietly leaking carbon for decades. Drained generations ago for forestry or grazing, it now releases what was once locked underground back into the atmosphere — degraded peatlands across the UK emit roughly 16 million tonnes of carbon dioxide equivalent each year, comparable to the emissions of a mid-sized industrial sector. Restoring that bog — blocking the drains, raising the water table, letting the sphagnum moss return — stops the leak. But the work costs money, and the landowner does not necessarily see a financial return on a wet, peat-rich field. So how does the restoration get paid for? In some cases, by a corporate buyer somewhere else in the country buying a verified peatland carbon credit, voluntarily, to back its own decarbonisation claims. That transaction is not mandated by law. It happens because someone has decided to spend money on nature, and because they trust the certification standard that says the climate benefit is real.

Yesterday's Day 2 looked at the mandatory side of UK nature markets: Biodiversity Net Gain, where developers must buy biodiversity units because the Environment Act 2021 requires it. Today is the parallel story — the voluntary nature markets, where capital flows into nature because companies choose to participate, and the disclosure framework that increasingly directs that capital. The two sides matter for different reasons. The mandatory market is fixed in scale by what the regulation requires. The voluntary market is, in principle, unbounded — it can grow as fast as corporate demand and credible supply can be matched. But voluntary markets only work if the disclosure infrastructure tells investors, customers, and regulators which companies are doing genuine work on nature, and which are not. That disclosure infrastructure is currently mid-handover.

The Daily Brief (5 mins)

A Disclosure Framework in Mid-Transition

By the first quarter of 2026, voluntary adoption of the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations had reached 733 organisations representing approximately $22 trillion in assets under management and $9 trillion in market capitalisation among listed companies — a 46% increase in commitments since CBD COP16 in November 2024. Ninety-five of these are UK companies. The TNFD framework, launched in 2023, was deliberately designed as the nature analogue of the climate-focused TCFD — a four-pillar structure (governance, strategy, risk management, metrics and targets) capable of being absorbed into formal disclosure standards once the International Sustainability Standards Board (ISSB) was ready to take over.

That handover is now happening. On 7 November 2025, the ISSB announced that it would begin formal standard-setting on nature-related risks and opportunities, drawing directly on the TNFD framework — including the LEAP approach (Locate, Evaluate, Assess, Prepare) and the TNFD's recommended metrics. The ISSB is targeting an Exposure Draft of incremental disclosure requirements ready by the Convention on Biological Diversity COP17 in October 2026, to be held in Yerevan, Armenia. In response, the TNFD has confirmed it will complete its current technical work by Q3 2026 and pause new guidance development to support the ISSB's work programme. The ISSB's nature standard-setting is likely to conclude in 2027, at which point the TNFD will formally wind down its technical mandate.

For UK companies, this transition arrives at the same moment they are absorbing the new UK Sustainability Reporting Standards (UK SRS S1 and S2), finalised on 25 February 2026 (as covered on Day 4 of the parent course). The voluntary nature markets that depend on capital allocation from disclosing institutions — peatland carbon, woodland carbon, biodiversity, nutrients — are being asked to scale at exactly the moment when the disclosure regime they rely on is mid-construction.

The central question for today is: how does a voluntary market scale when the disclosure infrastructure that allocates capital to it is in the middle of an institutional handover? The Deep Dive walks through the framework, the markets it serves, and the structural risks of getting the timing wrong.

The Deep Dive (7 mins)

1. The TNFD Framework: DIRO and LEAP

The TNFD's conceptual contribution is the DIRO model: an organisation's relationship with nature has four distinct dimensions — Dependencies (the ecosystem services a business relies on, such as freshwater, pollination, soil stability), Impacts (how the business affects ecosystems, positively or negatively), Risks (the financial consequences of dependencies and impacts crystallising), and Opportunities (new revenue, cost savings, or capital access from nature-positive action). The point of the four-part framing is that an exclusively risk-based view — the lens many companies inherited from climate reporting — misses the dependency side. A food retailer is not just exposed to the risk that pollinator decline reduces yields; it depends on pollination as an upstream input. Pricing the dependency, not just the risk, is what TNFD is designed to make possible.

The implementation tool is LEAP: Locate the company's interfaces with nature (which biomes, which assets, which supply-chain hotspots), Evaluate dependencies and impacts at those locations, Assess the resulting risks and opportunities, and Prepare the disclosure. LEAP is more demanding than the equivalent climate-reporting workflow because nature is place-specific in a way carbon is not. A tonne of CO₂ emitted in Aberdeen has the same atmospheric effect as a tonne emitted in Auckland; a hectare of habitat lost in the Cairngorms is not interchangeable with a hectare lost in the Amazon. This place-specificity has direct consequences for both data infrastructure and audit.

The four pillars themselves — governance, strategy, risk management, metrics and targets — mirror the structure UK readers will recognise from UK SRS S2 (parent course Day 4). This is by design. The TNFD was built to be ISSB-compatible from the outset, and the architecture has now been formally adopted: the ISSB will draw on the TNFD's recommendations, metrics, and the LEAP approach in building its own incremental disclosure requirements on top of IFRS S1.

2. The Voluntary Markets That Depend on This Infrastructure

Voluntary nature markets in the UK fall into four broad segments, each at a different stage of maturity.

Biocarbon — woodland and peatland. The most mature segment. The UK Woodland Carbon Code (WCC), launched in 2011 and delivered by Scottish Forestry on behalf of the four UK governments, is the certification standard for woodland creation projects that sequester carbon. Projects are independently validated and verified by organisations accredited to ISO 17029 by the UK Accreditation Service (UKAS), with units recorded on the UK Land Carbon Registry. The UK Peatland Code, launched in 2015 and run by the IUCN UK Peatland Programme with Defra support, applies the same logic to peatland restoration: avoided emissions rather than removals, but verified to a comparable standard. The Peatland Code has now been extended to lowland fen peats following an evidence review by the UK Centre for Ecology & Hydrology and the James Hutton Institute. Together, the WCC and Peatland Code constitute the UK's most established voluntary nature-finance infrastructure, with thousands of registered projects and an active secondary market in pending and verified units.

Nutrient neutrality credits. A more recent and more localised segment, driven by Natural England's nutrient neutrality requirements in catchments where agricultural and wastewater nutrients have driven ecological harm — the Solent, Stodmarsh, the Somerset Levels, the Tees. Developers in these catchments must offset the additional nutrient load from new housing, and pay landowners (via local authority schemes or private intermediaries such as EnTrade, which operates catchment-based trading platforms) to take farmland out of intensive production or create wetlands that filter nutrients. Pilot trades in the Solent have priced nitrate credits at around £3,000 per credit (one credit representing 1 kg of nitrates avoided per year), with project lifetimes of 80–125 years. The market is small, hyper-local, and structurally different from carbon — it sits at the awkward boundary between voluntary and compliance markets.

Biodiversity credits — the voluntary tier. Distinct from the mandatory BNG units covered yesterday, voluntary biodiversity credits are an emerging segment in which buyers — typically corporates with TNFD or future ISSB-aligned commitments — purchase verified habitat improvements outside the BNG compliance framework. Organisations such as Nattergal and the Environment Bank are developing measurement methodologies; Wilder Carbon is pioneering projects that combine carbon and biodiversity benefits. The Peatland Code is also now developing the methodology to issue biodiversity credits alongside its carbon units, addressing a long-standing tension in stacking.

Marine credits and emerging segments. Saltmarsh, seagrass, and soil carbon credits remain in development, with methodologies under construction through the Marine and Coastal Natural Capital Investment Readiness Toolkit and adjacent GFI Hive workstreams. These are years from being investable at scale.

The structural feature that ties these segments together is that they all need investors who care about nature outcomes and who can credibly tell their own stakeholders why they are paying for them. That is the role of TNFD-aligned (and, in due course, ISSB-aligned) disclosure: it converts nature-related action from a discretionary expenditure into a reportable, comparable, capital-relevant decision.

3. The UK Government's Position — and the Convergence Problem

The UK government has been one of the TNFD's most active backers since its inception. It contributed £4.8 million between 2021 and 2025 to the TNFD's secretariat and the UK Consultation Group, which is convened by the Green Finance Institute. By 2026 the UK Consultation Group had grown to over 1,300 members and 600 companies — one of seventeen national consultation groups globally, but the largest. Rachel Reeves, as Chancellor, explicitly referenced "nature-related financial risks" in her November 2024 remit letter to the Governor of the Bank of England, instructing the Financial Policy Committee to consider their materiality. The Bank of England has been working with Defra, the Network for Greening the Financial System (NGFS), and the TNFD to build a clearer picture of UK nature-related financial exposures. This is not peripheral activity — it is the policy substrate on which mandatory UK nature disclosure will eventually be built.

The government's March 2026 response to its consultation on expanding the role of the private sector in nature recovery confirmed the direction. The Green Finance Institute is being further funded to progress TNFD uptake through the UK Consultation Group, with that work evolving to include a pilot programme on integrated nature transition plans, with 15 businesses already signed up. The government also signalled it is awaiting the ISSB's October 2026 Exposure Draft to inform the path to integration in UK policy and regulation — meaning that any mandatory UK nature disclosure regime is likely to wait for the ISSB standard, not pre-empt it.

But here's the problem. The UK SRS framework, finalised in February 2026, is built on IFRS S1 and S2 — and IFRS S1 already requires disclosure of all material sustainability risks and opportunities, including nature-related ones, where they are financially material. So a UK-listed company under the UK SRS regime is already, in principle, on the hook for material nature disclosures from January 2027 onward, even before the ISSB publishes its dedicated nature standard. The practical implication for reporters is to build TNFD-informed capabilities under the IFRS S1 architecture rather than alongside it — geolocating assets, screening for sensitive ecosystems, assessing dependencies and impacts. Get this right, and the future ISSB standard is an evolution, not a step change. Get it wrong, and the company will be running parallel processes and reconciling them late.

The convergence problem cuts both ways. For the voluntary nature markets, the question is whether buyers will wait for the ISSB's October 2026 Exposure Draft and the subsequent UK adoption decision before scaling their nature spend, or whether the existing TNFD framework gives them enough cover to act now. The TNFD's view, supported by the ISSB, is that current adoption is the right preparation: continue applying the TNFD framework, because IFRS S1 already covers nature where it is financially material, and the future ISSB requirements will build on the same architecture. A UK Treasury minister has stated publicly that the UK government's expectation is that TNFD adoption should move faster than TCFD did — meaning the regulatory clock is intended to be tighter than the climate analogue. Whether that proves accurate, or whether buyers wait, will determine how much voluntary capital flows into peatlands, woodlands, and habitat banks in the eighteen-month window before the ISSB standard is finalised.

4. The Materiality Question — Why Nature Is Harder Than Climate

UK SRS uses a financial-materiality lens (parent course Day 4): a company must disclose what could affect its financial position, cash flows, or cost of capital. The same lens applies under the future ISSB nature standard. This is operationally clean, but it has a known weakness for nature: financial materiality is easier to assess at the impact stage than at the dependency stage. A flood risk that closes a factory has a clear, modellable cash-flow impact. A 30% decline in pollinator populations across the company's supply-chain regions has a financial impact that is both larger and more diffuse — easier to feel than to quantify.

This is not a reason to discard financial materiality; it is a reason to be careful about what gets disclosed under it. The TNFD's DIRO framing is partly a corrective: by requiring companies to surface dependencies as well as impacts, it forces some of the diffuse, slow-moving risks into the disclosure conversation even before they have crystallised into legible cash-flow effects. Whether the ISSB's eventual standard preserves this distinction, or whether it narrows the lens to impacts and risks alone, is one of the substantive choices the October 2026 Exposure Draft will need to make. For UK voluntary nature markets, the answer matters: capital tends to flow toward what gets disclosed.

The Designer's Corner (3 mins)

Design Challenge: From LEAP Workflow to Reportable Disclosure

The Day 4 challenge in the parent course asked how a sustainability team navigates the four-pillar UK SRS S2 disclosure without drowning in form fields. Today's challenge extends that into nature: how do you translate the LEAP workflow — Locate, Evaluate, Assess, Prepare — into a navigable product experience for a sustainability team that has just inherited nature reporting on top of an already heavy climate disclosure load? This is institutional literacy (Day 1 of the parent course) and Compliance UX (Day 4 of the parent course) applied to a domain that is fundamentally place-specific.

Problem 1: Geolocation as a first-class object. The "L" in LEAP — Locate — is the step that distinguishes nature reporting from climate reporting. A company cannot answer questions about nature dependencies without knowing where its operations, suppliers, and material sourcing locations physically are, often down to coordinates rather than country-level addresses. Most enterprise sustainability platforms inherited from the climate era treat location as a metadata field on a financial entity, not as the primary axis of analysis. This is structurally wrong for nature: the relevant question is not "what does this subsidiary do" but "what does the ecosystem at this latitude and longitude provide, and what is the company doing to it?" Design implication: Build nature-reporting interfaces that lead with a map, not a list of entities. The unit of analysis should be the location — with its ecosystem type, sensitivity, and TNFD-relevant attributes — and the financial entity should be a layer on top, not the other way round. ENCORE-style screening data (covered tomorrow) should feed the map directly.

Problem 2: The dependency–impact asymmetry. Companies are practiced at disclosing impacts (emissions, waste, water use) because impact metrics resemble the regulatory disclosures they have been making for years. They are much less practiced at disclosing dependencies — the ecosystem services their business relies on, often deep in the supply chain. Yet under TNFD, and likely under the future ISSB standard, dependency disclosure is where the most decision-useful information for investors lives. A product UI that defaults to impact metrics will systematically underweight dependencies; users will fill in the impact side because the data is closer to hand, and leave the dependency fields blank. Design implication: Make dependency disclosure the structural default of the product, not an optional add-on. Pre-populate dependency fields based on industry-sector mappings (TNFD's sector guidance and ENCORE provide starting points) so users are responding to a draft rather than filling in a void. The cost of a wrong default is a thoughtful user override; the cost of a blank field is a blank disclosure.

Problem 3: The voluntary-to-mandatory glide path. A UK company building its first TNFD report in 2026 needs to make a judgement call: how much should I invest in this voluntary disclosure now, given that the ISSB's October 2026 Exposure Draft may shift the goalposts and the UK adoption decision is not yet made? Most platforms treat voluntary disclosures as final outputs — a report is generated, it is published, and the workflow ends. But the TNFD-to-ISSB glide path requires something different: a structured artefact that can be re-emitted under successive standards as they evolve, with traceability between what was disclosed under TNFD and what would now be required under ISSB. Design implication: Build disclosures as versioned data structures, not as documents. Each TNFD-aligned report should carry a machine-readable mapping to the underlying data points so that, when the ISSB Exposure Draft lands in October 2026 and is consulted on into 2027, the same underlying evidence base can be re-rendered under the new standard without re-collecting the data. This is the same structural lesson from the parent course Day 4: disclosure is a continuous operational capability, not an annual document.

Key Terms

Term	Definition
TNFD (Taskforce on Nature-related Financial Disclosures)	A market-led, science-based and government-endorsed framework, launched in 2023, providing recommendations for organisations to assess, report, and act on their nature-related dependencies, impacts, risks, and opportunities. Its technical work concludes in Q3 2026, transferring to the ISSB.
LEAP	The TNFD's structured implementation approach: Locate the organisation's interfaces with nature, Evaluate its dependencies and impacts, Assess the resulting risks and opportunities, and Prepare the disclosure. The ISSB has confirmed it will draw on LEAP in its incremental nature-related standard-setting.
DIRO	The TNFD's framing of an organisation's nature relationship as four interconnected dimensions: Dependencies on ecosystem services, Impacts on nature, Risks arising from dependencies and impacts, and Opportunities for nature-positive action.
Nutrient Neutrality	The Natural England requirement that new housing developments in designated catchments (notably the Solent, Stodmarsh, Somerset Levels, and the Tees) must offset their additional nitrogen and phosphorus load. Has produced a localised credit market with prices around £3,000 per kg-nitrate-per-year credit.
Biocarbon	Voluntary carbon credits generated through nature-based solutions — primarily woodland creation (UK Woodland Carbon Code) and peatland restoration (UK Peatland Code) in the UK context — verified to standards accredited by UKAS.
UK Land Carbon Registry	The official UK registry, operated by Scottish Forestry, that records Woodland Carbon Code and Peatland Code projects and the issuance, ownership, and retirement of carbon units generated under those standards.

Sources

TNFD — ISSB decision on nature-related standard setting drawing on TNFD framework (7 November 2025): The TNFD's announcement of the ISSB handover, including the 733-organisation adoption figure and the commitment to wind down technical work by Q3 2026 in support of the ISSB's October 2026 Exposure Draft target. tnfd.global
IFRS Foundation — ISSB welcomes TNFD's support as it advances nature-related disclosures (November 2025): The ISSB's confirmation that incremental nature-related disclosure requirements will build on IFRS S1 and S2, drawing on the TNFD framework and the LEAP approach, with an Exposure Draft targeted for CBD COP17 in October 2026. ifrs.org
Green Finance Institute — UK Policy on TNFD (December 2025): The GFI's stocktake of UK policy on nature-related disclosure, including the £4.8m UK government contribution to TNFD between 2021 and 2025, the UK Consultation Group structure, and the BoE/FPC remit references to nature-related financial risks. greenfinanceinstitute.com
GOV.UK — Expanding the role of the private sector in nature recovery: government response (March 2026): The UK government's formal response to its private-sector nature recovery consultation, confirming continued GFI funding for the TNFD UK Consultation Group, the integrated nature transition plans pilot, and the wait-for-ISSB position on mandatory disclosure. gov.uk
GOV.UK — Voluntary Carbon and Nature Markets: Raising Integrity (consultation document) (2024–2025): The Defra/HMT consultation document underpinning the UK's framework for voluntary nature markets, including the role of UKAS-accredited validation and verification bodies and the Woodland Carbon Code / Peatland Code as integrity benchmarks. gov.uk
IUCN UK Peatland Programme — Peatland Code (ongoing): The official site for the UK Peatland Code, including methodology, project lists, and the Code's relationship with the UK Land Carbon Registry. The Code now extends to lowland fen peats following the 2024 UKCEH/James Hutton evidence review. iucn-uk-peatlandprogramme.org
Slaughter and May — Sustainability reporting in 2026: Horizon Scanning (early 2026): Legal commentary on the converging UK SRS, ISSB, and TNFD landscape, including the practical recommendation to build TNFD-informed nature capabilities under the IFRS S1 architecture rather than alongside it. slaughterandmay.com
British Safety Council — Aligning financial flows with the Global Biodiversity Framework: the role of the TNFD (March 2026): A practitioner overview of the TNFD's adoption metrics in early 2026 (733 organisations, $22.4tn AUM, 95 UK companies), the DIRO framework, and the UK government's expected pathway from voluntary TNFD to mandatory ISSB-aligned disclosure under the SDR framework. britsafe.org