Nature, Biodiversity and Environmental Impact
Foundation + Level 1 — Natural Capital Economics · TNFD LEAP Methodology · Biodiversity Risk Mapping · Water Risk Assessment

This unit covers the conceptual architecture of natural capital economics, establishing the vocabulary and frameworks that all subsequent Track 7 modules use. The unit covers the TEEB framework, which in its 2010 report provided the first comprehensive economic assessment of the value of biodiversity and ecosystem services, and the SEEA Central Framework and SEEA Ecosystem Accounts (adopted by the UN Statistical Commission in 2021), which provide the standard international accounting system for natural capital covering the stocks and flows of ecosystem assets and services aligned to the System of National Accounts.

The unit introduces the four ecosystem service categories using the Common International Classification of Ecosystem Services (CICES), the classification system referenced by TNFD and ENCORE. The provisioning category covers tangible goods extracted from ecosystems: biomass (crops, timber, fish, and wild plants), water, minerals, and energy. The regulating and maintenance category covers ecosystem processes that regulate environmental conditions: climate regulation, water flow regulation (flood attenuation and groundwater recharge), waste treatment (water purification and air filtration), and habitat maintenance (nursery habitat for commercially important species). The cultural category covers recreation, tourism, aesthetic values, and spiritual and educational values. Supporting services underpin all others and include soil formation, nutrient cycling, and primary productivity.

This unit covers the ENCORE database structure and navigation methodology, establishing the working knowledge required for the TNFD LEAP screening exercise in Module 1.1. ENCORE organises its data in a three-level hierarchy: production processes (167 processes across 15 high-level sectors), natural capital assets (6 categories: land, water, ocean, minerals, atmosphere, and biodiversity), and ecosystem services (21 services covering flows of benefits from natural capital assets to production processes or to human welfare).

The navigation exercise uses the ENCORE web interface at encorenature.org to look up a specified production process, view its dependency profile (which ecosystem services the process depends on, and at what dependency level: high, medium, or low), and its impact profile (which ecosystem services the process affects, at what impact level, and through which impact driver: land use change, water use, pollution, invasive species, overexploitation, or climate change). The unit works through the navigation for three production processes representative of the track's emerging market focus: palm oil cultivation, copper mining, and commercial aquaculture. The output is an ENCORE dependency and impact profile table for each process, which is the starting input for the TNFD LEAP Locate phase in Module 1.1.

This unit applies the ENCORE dependency data to a corporate case, producing a prioritised ecosystem service dependency analysis. For a company in agribusiness, the primary dependencies are on provisioning services (soil quality for crop production, freshwater availability for irrigation) and regulating services (pollination for yield, climate regulation for temperature and precipitation stability). For a mining company, the primary dependencies are on provisioning services (freshwater for ore processing) and regulating services (water flow regulation and water purification for managing mine water quality). For a bank with agricultural and mining lending, the dependencies are indirect: the bank's loan book is exposed to the ecosystem service dependencies of its borrowers.

The prioritisation methodology ranks ecosystem service dependencies by three criteria: the degree of dependence (high, medium, or low in the ENCORE classification), the substitutability of the ecosystem service (can the production process continue if the ecosystem service degrades? Can the service be replaced by a technological substitute at acceptable cost?), and the geographic availability (is the ecosystem service currently available in adequate quantity at the company's operating locations?). The combination of high dependence, low substitutability, and geographically concentrated availability identifies the ecosystem services where natural capital loss poses the greatest financial risk to the company.

This unit applies the ENCORE impact data to the same corporate case, producing a prioritised ecosystem service impact analysis. Ecosystem service impacts differ from dependencies in their financial transmission channel: dependencies affect the company's input costs and operational continuity (upstream effects), while impacts affect the company's regulatory exposure, legal liability, and reputational risk (external effects on ecosystems that create feedback to the company). The impact analysis uses the ENCORE impact driver classification to identify the specific mechanisms through which the company's production processes affect ecosystem services: land use change, water use, pollution, overexploitation, and invasive species.

The financial materiality assessment of impacts follows the three-channel model from F1: regulatory cost (if the impact triggers environmental permit obligations, remediation requirements, or regulatory fines), reputational and market access risk (if the impact is associated with controversies that affect brand value or access to key markets), and liability risk (if the impact creates legal claims from affected communities or governments). The unit works through the impact analysis for the case company, producing a prioritised impact table that identifies the two or three impacts with the highest combined score for probability, severity, and financial consequence — the output that connects to the TNFD LEAP Evaluate phase in Module 1.1.

This unit establishes the connection between the ENCORE dependency and impact analysis and the TNFD framework, explaining how the B7 foundational work maps to the TNFD LEAP methodology that Module 1.1 develops in full. The TNFD recommends that companies conducting a LEAP assessment begin with ENCORE to screen for material ecosystem service dependencies and impacts before proceeding to location-specific biodiversity data (IBAT and GLOBIO, covered in Module 1.2) and financial risk assessment. The unit maps the ENCORE output table to the TNFD LEAP phases: the Locate phase uses ENCORE to identify which ecosystem services are relevant to the company's production processes; the Evaluate phase assesses the condition of relevant ecosystems at the company's specific operating locations; the Assess phase quantifies the risks and opportunities arising from ecosystem condition change; and the Prepare phase develops the TNFD disclosure narrative.

The unit also covers the relationship between the Kunming-Montreal Global Biodiversity Framework (GBF) targets and natural capital economics. GBF Target 15 requires large companies and financial institutions to monitor, assess, and disclose their nature-related dependencies, impacts, risks, and opportunities, using the TNFD framework as the primary disclosure vehicle. The capstone deliverable is the ENCORE dependency and impact profile table for the case company, with a prioritised materiality ranking and the initial TNFD LEAP phase mapping.

This unit covers the TNFD framework structure and the LEAP methodology overview, establishing the context within which the four-phase assessment exercise operates. The TNFD recommendations follow the same four-pillar structure as TCFD (governance, strategy, risk and impact management, and metrics and targets), reflecting the deliberate design choice to make TNFD accessible to organisations already familiar with TCFD. The unit covers the key differences between TNFD and TCFD: TNFD covers all nature-related dependencies and impacts (not only climate change), requires location-specific assessment (because nature-related risks are inherently place-based, unlike climate risk which operates at global scale), and requires disclosure of both dependencies on nature and impacts on nature (the TNFD double materiality approach, analogous to CSRD but framed in ecosystem service terms).

The LEAP methodology is introduced as the recommended process for companies to conduct the analysis needed to populate the four disclosure pillars. Locate identifies where the company interfaces with nature. Evaluate assesses the condition of nature at those locations. Assess evaluates the nature-related risks and opportunities that arise from those interfaces and conditions. Prepare develops the disclosure narrative and metrics. The unit covers the TNFD's guidance on applying LEAP proportionately: large companies with complex, multi-geography supply chains may apply LEAP at a high level initially and deepen the assessment for priority locations in subsequent years. The case company for the module is an agricultural commodity trading company with operations and supply chain sourcing in three tropical regions.

This unit covers the Locate phase, which identifies all the locations where the company's operations or value chain activities interface with nature. The Locate phase has three steps: business activity mapping (identifying all the company's direct operations and the upstream and downstream activities in its value chain that are relevant to nature), location identification (obtaining the geographic coordinates or administrative boundaries for each identified activity location), and ecosystem service sensitivity screening (applying ENCORE to each activity location to identify which ecosystem services are potentially relevant based on the production process type). The Locate phase output is a location register: a table of all identified interface locations with the production process type, the geographic coordinates or administrative boundary, and the ENCORE-screened ecosystem service relevance.

The case exercise works through the Locate phase for the agricultural commodity trading company, whose interface locations include its own storage and processing facilities (identified through operational records), its Tier 1 commodity supplier farm locations (identified through supplier disclosure), and its Tier 2 processing locations (estimated from trade data and sector knowledge). The ENCORE screening produces a sensitivity profile that identifies water, soil, and biodiversity services as highly relevant for the agricultural production locations and water and land-use services as relevant for the processing locations. The unit covers the practical challenge of value chain location data availability and the proportionate approach for handling incomplete data.

This unit covers the Evaluate phase, which assesses the current condition of the ecosystems at the locations identified in the Locate phase. Ecosystem condition assessment uses spatial data layers that report the status of specific biomes, habitats, and species at specific locations. The three primary data tools covered are: IBAT (Integrated Biodiversity Assessment Tool), which provides data on protected areas, Key Biodiversity Areas (KBAs), and IUCN Red List species at any geographic location; ENCORE ecosystem service condition data, which provides a global assessment of the condition of 21 ecosystem services at the biome level; and WWF Freshwater Ecoregions data, which assesses the conservation status of freshwater ecosystems relevant to water-dependent operations. Module 1.2 develops IBAT and GLOBIO in much greater depth; this unit covers them at the level required for LEAP Evaluate.

The case exercise applies the three data tools to the priority locations from the Locate phase, producing an ecosystem condition assessment for each location: the presence and proximity of protected areas and KBAs, the IUCN Red List species known to occur in or near the location, the condition rating for the relevant ecosystem services at the biome level, and the freshwater ecosystem conservation status. The combined assessment identifies where the company's interface is occurring in an ecosystem under high or very high conservation pressure, which elevates the financial risk in the subsequent Assess phase.

This unit covers the Assess phase, which evaluates the financial materiality of the nature-related risks and opportunities identified through the Locate and Evaluate phases. The Assess phase connects the ecosystem interface map and the ecosystem condition assessment to the financial transmission channels from B7: for each identified nature-related dependency or impact, the assessment estimates the probability and financial magnitude of the risk or opportunity through the four channels (input cost, operational disruption, regulatory cost, and reputational and market access risk). The assessment output is a nature-related risk and opportunity register that prioritises the items requiring disclosure and management attention.

The risk and opportunity register format covers: the risk or opportunity description (which ecosystem service, which location, which production process), the classification (physical risk arising from ecosystem condition change, regulatory risk, or market and reputational risk), the time horizon (short, medium, or long term), the probability of materialisation (low, medium, or high, with the evidence basis), the financial magnitude estimate (expressed as a range with identified transmission channel), and the current management response. The opportunity section covers nature-related revenue opportunities: markets for sustainably certified products, access to green finance instruments with nature-related eligibility criteria, and avoided regulatory costs from proactive habitat restoration.

This unit covers the Prepare phase, which develops the TNFD disclosure narrative and metrics from the LEAP assessment outputs. The Prepare phase drafts the four TNFD disclosure elements. The governance section documents the board-level oversight of nature-related risks and opportunities and the management roles with accountability. The strategy section presents the material nature-related risks and opportunities identified in the Assess phase, the time horizons applicable, and the implications for the company's strategy and financial planning. The risk and impact management section describes the LEAP methodology applied, the processes for identifying, assessing, and managing nature-related dependencies and impacts, and the integration with the company's existing risk management framework.

The metrics and targets section presents performance metrics and any nature-related targets the company has set, using the TNFD core metrics (the cross-industry core metrics for land use, freshwater use, and biodiversity impact) and the sector-specific metrics from the TNFD agribusiness sector pilot. The capstone deliverable is the complete LEAP four-phase output set and the TNFD disclosure draft for the case company.

This unit covers the IBAT database structure, the access tiers, and the query methodology for site-level biodiversity screening. IBAT provides access to three global datasets: the World Database of Protected Areas (WDPA), which contains the boundaries of over 270,000 nationally and internationally designated protected areas; the World Database of Key Biodiversity Areas (WDKBA), which contains the boundaries of over 16,000 KBAs identified as sites of outstanding importance for biodiversity; and the IUCN Red List of Threatened Species, which provides species occurrence data for over 150,000 assessed species with IUCN conservation status ratings.

The point query methodology covers the process of submitting a site location (geographic coordinates) to IBAT and interpreting the output: the distances to the nearest protected areas and KBAs, the number and names of protected areas and KBAs within a specified buffer distance (typically 10 kilometres for a preliminary screening, with 50 kilometres for sites in biodiversity-sensitive biomes), the IUCN protection categories of the overlapping or proximate protected areas, and the number and conservation status of IUCN Red List species occurring within the buffer. The unit works through the point query for three sites in the case portfolio, illustrating the range of outputs from a site in a highly protected landscape (multiple KBAs and Critically Endangered species within 10 kilometres) to a site in a degraded industrial area (no KBAs, no Red List species with Vulnerable or higher status).

This unit covers the KBA overlap analysis in depth, explaining the KBA concept, the KBA standard, and the regulatory and voluntary framework implications of operating within or near a KBA. A Key Biodiversity Area is a site that meets one or more of eleven criteria covering threatened species (sites that hold significant populations of globally threatened species), range-restricted species, ecologically or evolutionarily significant species, congregatory species, irreplaceable habitats, and threatened ecosystems. KBAs are identified through an alliance of biodiversity organisations including BirdLife International, the IUCN, and CI, using a standardised assessment methodology.

The critical habitat classification covers the IFC Performance Standard 6 criteria, which apply to projects financed by IFC and by the Equator Principles-adopting financial institutions. Under PS6, a site qualifies as critical habitat if it meets any of five criteria: it contains the habitat of critically endangered or endangered species, it contains intact natural habitat of a restricted-range species, it contains 5 percent or more of the global or regional population of a species, it contains biodiversity of exceptional scientific importance, or it is a key source of ecosystem services for affected communities that cannot be replaced. Sites classified as critical habitat require a specific biodiversity management plan and preclude activities that would result in significant residual impacts without compensation. The unit maps the PS6 critical habitat criteria against the IBAT data outputs, showing how to determine whether each site in the case portfolio meets the critical habitat threshold.

This unit covers the GLOBIO mean species abundance (MSA) dataset and its application to portfolio-level biodiversity intactness screening. GLOBIO calculates biodiversity intactness as the mean abundance of originally present species relative to their abundance in undisturbed reference ecosystems, expressed as a percentage from 0 (complete species loss) to 100 (intact reference ecosystem). The global mean MSA has declined from approximately 84 percent in 1970 to approximately 75 percent in 2020, reflecting the cumulative impact of land use change, climate change, nitrogen deposition, and other pressures. Individual landscapes range from near 100 percent in undisturbed tropical forests to near 0 in intensively managed agricultural land.

The GLOBIO data extraction covers the process of obtaining the MSA score for each site location in the case portfolio from the GLOBIO dataset, which is available as a global raster dataset at 10-kilometre resolution through the PBL Netherlands Environmental Assessment Agency. The unit covers the data access method, the interpretation of MSA values in the context of biodiversity risk (MSA below 30 percent: highly degraded ecosystems; 30 to 60 percent: moderately degraded; above 60 percent: relatively intact), and the complementarity between GLOBIO (which provides a modelled intactness measure based on known pressures) and IBAT (which provides data-driven protected area and species occurrence data). The combination of low MSA with KBA overlap produces the highest composite biodiversity risk score.

This unit covers the design of the composite biodiversity risk scoring methodology and the construction of the site portfolio heat map. The scoring methodology combines four data inputs: protected area proximity (scored by protection category and distance: IUCN Category I or II within 1 kilometre = highest score; Category V or VI within 10 kilometres = lowest score in the protected area dimension), KBA overlap (overlap with any KBA = highest score; no KBA within 50 kilometres = lowest score), IUCN Red List species presence (Critically Endangered species within 10 kilometres = highest score; no threatened species within 50 kilometres = lowest score), and GLOBIO MSA (above 80 percent = highest sensitivity score because intact ecosystems in natural vegetation types are most at risk from further disturbance). The composite score is calculated as a weighted average of the four inputs, with weighting reflecting the regulatory significance of each input.

The heat map construction produces two outputs: a ranked data table showing each site with its four component scores, the composite score, and the resulting risk tier (low, medium, high, or very high); and a geographic map visualising the site portfolio with colour-coding by risk tier. The regulatory notification trigger column in the data table identifies for each high-risk site the specific obligations triggered: IFC PS6 critical habitat plan requirement, ESRS E4 material topic disclosure, TNFD LEAP Assess phase priority designation, and any national environmental impact assessment requirements applicable to the site jurisdiction.

This unit maps the biodiversity risk heat map outputs to the specific disclosure obligations they generate, covering TNFD core metrics, ESRS E4 requirements, and IFC PS6 critical habitat management plan requirements. TNFD core metrics for biodiversity include: the area of natural habitats within the company's direct operations and supply chain (in hectares), the number and type of sites located in or adjacent to KBAs or protected areas, the number of IUCN Red List species in the company's area of operations, and the company's total impacts on biodiversity intactness (expressed using the MSA footprint methodology where applicable). The unit covers the data availability for each metric and the disclosure format required.

ESRS E4 biodiversity disclosure covers: the material impacts, risks, and opportunities the company has identified related to biodiversity and ecosystems (informed by the LEAP assessment from Module 1.1 and the spatial analysis from this module), the company's policies addressing biodiversity (covering owned, leased, and managed sites in or near protected areas, value chain biodiversity impacts, and biodiversity restoration commitments), the actions taken and planned (covering habitat restoration, buffer zone management, and supply chain biodiversity requirements), and the metrics tracking performance (area of habitat restored, number of KBA sites with management plans, and trend in biodiversity intactness at managed sites). The capstone deliverable is the complete biodiversity risk heat map, the disclosure obligation mapping table, and a draft ESRS E4 material topic overview section for the case company.

This unit covers the WRI Aqueduct Atlas database structure and the interpretation methodology for its risk scores. Aqueduct provides six water risk indicators at the sub-catchment (HydroSHEDS level 6 basin) level, globally: baseline water stress (the ratio of total water withdrawals to available renewable surface and groundwater, scored from low to extremely high), projected water stress (the projected stress under RCP 8.5 in 2030 and 2050), groundwater table decline (the rate of groundwater depletion), interannual variability (the year-to-year variation in water supply), seasonal variability (the within-year variation in water supply), and riverine flood risk.

The risk score interpretation covers the five-tier scoring system (low, low-medium, medium-high, high, and extremely high) and the practical implications at each tier for corporate water management. An extremely high baseline water stress score (above 4.0, meaning total withdrawals exceed total available renewable water) indicates a basin where the company is competing with other users for a scarce resource and where any reduction in supply directly affects operational continuity. The unit works through the Aqueduct score extraction for the case company's operating sites using the Aqueduct web portal and the downloadable dataset.

This unit covers the assessment of the company's absolute water footprint, covering withdrawal volumes by source type, consumptive use, and discharge by receiving water body. Water withdrawal data comes from operational metering records; where metering is incomplete, the unit covers estimation approaches using production volumes and published water intensity benchmarks for the relevant industry. The source type breakdown distinguishes surface water, groundwater, rainwater harvesting, and purchased third-party water, because the risk profile and regulatory status differ by source type: groundwater withdrawal in a stressed basin faces the highest regulatory risk; purchased municipal water transfers the immediate operational risk to the utility.

The consumptive use proportion measures the fraction of withdrawn water not returned to the source watershed (consumed by evaporation, incorporation into products, or discharge to a different watershed). High consumptive use in a water-stressed basin has a greater impact on basin water availability than high withdrawal with high return flow, because the returned water is available for downstream users. The ESRS E3 water reporting standard requires disclosure of both total withdrawal and consumptive use. The discharge quality assessment covers the key parameters of the company's wastewater discharge and the quality of the receiving water body, establishing the pollution impact potential of the company's discharge operations.

This unit covers the TNFD water-specific indicators that supplement the WRI Aqueduct quantitative stress scores with freshwater ecosystem condition data. The TNFD recommends three water-specific indicators for companies with material freshwater dependencies or impacts: the freshwater ecosystem condition score (derived from the WWF Freshwater Ecoregions of the World dataset), the watershed health index (a composite measure of the hydrological, chemical, physical, and biological integrity of the watershed, derived from the Global Freshwater Biodiversity Atlas), and the change in IUCN Red List Index for freshwater species (tracking the direction of change in conservation status for freshwater species in the relevant ecoregion over the prior decade).

The unit works through the application of these three indicators to the highest-risk sites identified from the WRI Aqueduct analysis, building a site-level freshwater condition profile that combines the quantitative stress measures with the ecological condition measures. The combination reveals a nuanced risk picture: a site may face low water stress but be located in a freshwater ecoregion with very high species sensitivity, meaning that even modest pollution discharges could have significant biodiversity impacts; conversely, a high water stress site in a degraded ecoregion may face primarily operational risk from supply constraints rather than biodiversity-related regulatory risk.

This unit combines the WRI Aqueduct scores, TNFD indicators, and withdrawal and discharge footprint data into a composite water risk profile for the company's operating sites, and uses that profile to prioritise the sites for watershed stewardship strategy development. The composite score methodology applies weights to four primary risk dimensions: water supply stress (WRI Aqueduct baseline and projected stress scores), water supply reliability (WRI Aqueduct variability scores), freshwater ecosystem sensitivity (TNFD freshwater ecosystem condition score), and discharge impact potential (the combination of discharge volume, quality, and receiving water body condition). Sites in the top risk tier receive a watershed stewardship strategy.

The strategic prioritisation identifies the category of water risk that dominates at each site: supply-constrained sites (where the primary risk is insufficient water to sustain operations) require water reduction and alternative source development strategies; quality-constrained sites (where the primary risk is discharge quality affecting regulatory compliance or community relations) require wastewater treatment investment and pollution reduction strategies; and ecosystem-sensitive sites (where the primary risk is the impact of water use or discharge on a sensitive freshwater ecosystem) require minimum ecological flow strategies and catchment engagement. The risk category determines the stewardship approach, mapped to the Alliance for Water Stewardship (AWS) Standard elements.

This unit covers the design of a watershed stewardship strategy for the two highest-risk basins in the case company's portfolio, following the Alliance for Water Stewardship Standard framework, and the preparation of the core ESRS E3 disclosure sections. The AWS Standard organises stewardship into five steps: gathering site context data (covered in Units 1.3.1 through 1.3.4), understanding own water use and impacts, implementing site-level improvements, engaging in catchment context (participating in or establishing multi-stakeholder water governance mechanisms for the shared catchment), and measuring and reporting outcomes.

The catchment engagement element acknowledges that the company shares the watershed with other users (agriculture, municipalities, other industries, and ecosystems) and that effective water risk reduction requires coordination across these users rather than individual efficiency improvements alone. The governance mechanisms available include formal Water User Associations, informal multi-stakeholder platforms such as the WaterFoundation's catchment partnership model, and industry sector-wide catchment engagement programmes such as the Beverage Industry Environmental Roundtable's water stewardship collaboration. The ESRS E3 disclosure sections drafted in this unit cover the material water risks and opportunities, the water stewardship policy, the actions and targets (including quantified water withdrawal reduction targets using the Nature Conservancy's Target Tool for water), and the performance metrics required under ESRS E3-4. The capstone deliverable is the complete watershed stewardship strategy and the ESRS E3 disclosure draft.