N°24-90: Using AI to Assess the Decision-Usefulness of Corporates’ Nature-related Disclosures

Nature-related disclosures by companies are insufficient. As long as they remain voluntary, this situation is unlikely to improve, even under well-intentioned initiatives like the Task Force on Nature-related Financial Disclosures (TNFD). These conclusions are based on our investigation into the decision-usefulness of such disclosures through the development of ASKNATURE 1 , an AI-powered tool that analyzes company reports to assess their environmental impact. Our conversational AI prototype can answer challenging questions in two settings: (1) recommendations and guidelines from organizations such as the Task Force on Nature-related Financial Disclosures (TNFD) and (2) user-specific inquiries for Corporate Sustainability Reports (CSR). As an illustration, we apply ASKNATURE to the CSRs of the Nature Action 100 (NA100) companies. Based on the answers provided by our tool and in line with the double materiality paradigm, we classify companies' activities based on their impact direction: company-to-nature (C2N), nature-tocompany (N2C), or neutral. Despite the unprecedented loss of biodiversity and significant depletion of natural capital, our sentiment analysis reveals that corporate disclosures predominantly report positive C2N impact. Moreover, there is minimal overlap between the countries mentioned in the reports and regions of environmental significance, which raises concerns about transparency. Consequently, we find that current CSR disclosures, although aligned with the TNFD, are not sufficiently decision-useful for stakeholders and lack legal enforceability.