Abstract
This study examines adherence to the Taskforce on Nature‐related Financial Disclosures (TNFD) framework in relation to the ESG performance of non‐financial and non‐utility S&P 500 firms. Drawing on legitimacy, stakeholder, and institutional monitoring theories, we construct measures of TNFD, nature‐related risk and opportunity indicators for the period 2018–2023 using a retrieval‐and‐scoring natural language processing (NLP) methodology applied to ESG/sustainability reports. Findings reveal that adherence to the TNFD framework, clear identification of nature‐related risks and opportunities, and comprehensive reporting are positively associated with a firm's environmental score and overall ESG ratings. Robustness tests confirm that endogeneity concerns do not compromise these findings. The results indicate that integrating the TNFD framework provides clearer insights into corporate sustainability and nature‐related performance, potentially influencing investor perceptions and ESG assessments. The results provide practical insights for environmentally conscious investors and companies seeking to enhance their sustainability reporting by integrating the TNFD guidelines.