Climate Risk8 min read

Nature-Related and Biodiversity Financial Risk

By Jonas Adam Mohamed Osman, known as Yonas Osman

CEO of Quantica Risk

60 Rue François Ier, 75008 Paris, France

Published 15 October 2026

Biodiversity loss is emerging as a distinct financial risk alongside climate change, with frameworks like TNFD shaping how institutions should assess exposure.

Executive answer

Nature-related risk covers the financial consequences of ecosystem degradation, biodiversity loss and depletion of natural resources, and it is increasingly treated as distinct from, though linked to, climate risk. A business dependent on pollination, water availability, or healthy fisheries can face material operating disruption from biodiversity loss even in a scenario where climate transition risk is well managed, which is why financial institutions are starting to assess nature dependencies separately.

The Taskforce on Nature-related Financial Disclosures (TNFD) has provided a structured approach modelled on the climate-focused TCFD framework, helping institutions identify where their lending, investment or insurance portfolios depend on or impact nature. Central banks and supervisors, through the NGFS, have begun exploring how nature loss could transmit into financial instability through similar channels to climate risk.

Dependencies, impacts and double materiality

Assessing nature-related risk requires distinguishing between a firm's dependencies on natural capital, such as clean water or stable soil for agriculture, and its impacts on nature, such as land use change or pollution. Both dimensions carry financial relevance: dependencies create exposure to physical risk from ecosystem degradation, while impacts create exposure to transition and liability risk as regulation on land use, water extraction, or deforestation tightens.

Sector-specific heatmaps, similar to those used in early-stage climate risk assessment, are a practical starting point for financial institutions, since dependency and impact levels vary enormously by sector and geography. Agriculture, food and beverage, mining, and real estate development are generally the highest-dependency sectors and warrant earliest attention in a phased assessment programme.

Data limitations and proxy approaches

Nature-related data is considerably less mature than climate emissions data, with fewer standardised metrics and limited historical time series linking ecosystem health to financial outcomes. Institutions are therefore relying on a combination of geospatial ecosystem data, sector dependency ratios published by organisations such as the Natural Capital Finance Alliance, and qualitative supply chain assessments.

Given this immaturity, institutions should be transparent about the proxy nature of early nature-risk assessments and avoid presenting composite nature-risk scores with false precision. A phased approach that starts with high-dependency sectors and expands coverage over time, while documenting methodology limitations, is more credible to supervisors and investors than a premature attempt at full portfolio coverage.

Regulatory direction and disclosure expectations

While nature-related disclosure is not yet mandatory in most jurisdictions to the degree climate disclosure is, the direction of travel under frameworks like the EU's Corporate Sustainability Reporting Directive increasingly references biodiversity and ecosystem impacts alongside climate metrics. Financial institutions with exposure to high-dependency sectors should expect disclosure expectations to tighten over the coming reporting cycles.

Supervisors have signalled interest in understanding whether nature-related risk could amplify financial instability through correlated exposures across institutions with similar sector concentrations, echoing early climate stress testing work. Institutions that begin building internal nature-risk capability now will be better positioned when disclosure or stress testing requirements formalise.

Conclusion

Nature-related financial risk is following a trajectory similar to climate risk a decade ago: initially dismissed as too diffuse to quantify, now attracting dedicated frameworks, data initiatives and supervisory attention. Institutions with material dependency on natural capital sectors should begin structured assessment now rather than waiting for mandatory disclosure.

Yonas Osman, CEO of Quantica Risk, approaches nature-related risk the way he approached early climate risk work, by prioritising sector dependency mapping before attempting any quantitative scoring, given how immature the underlying data still is.

Primary sources

biodiversityTNFDnature riskESG