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Cambridge Institute for Sustainability Leadership (CISL)



Why risk and resilience matters

Financial institutions and their regulators are recognising that environmental and social issues are now increasingly material drivers of mainstream credit, market and operational risks. This is a major shift from their historical treatment as solely reputational risks.

The Financial Stability Board’s Taskforce on Climate-related Financial Disclosures (TCFD) has been a major driver of this trend. The TCFD recommends that firms use forward-looking scenario analysis to assess climate risks. This is a necessary reflection of the fact that both the physical risks of extreme weather events and the transition risks derived from the shift to a net zero carbon economy will not mimic historical trends. 2021 sees the publication of the Dasgupta Review of the Economics of Biodiversity and launch of the Taskforce for Nature-related financial disclosures (TNFD), in recognition of how environmental sources of risk are vaster than those posed by climate change alone.

Using scenario analysis to integrate environmental risks into routine financing decisions presents most financial institutions and regulators with new challenges. If these can be overcome, the terms on which capital is provided will take better account of the true environmental risks different business activities face. One powerful application is to change how financial institutions assess the resilience of investments in infrastructure to climate risks.


What is CISL is doing about it?

Cambridge’s strengths across both the natural and social sciences give rise to opportunities for truly multi-disciplinary centres of excellence, such as the Cambridge Centre for Risk Studies, the Cambridge Conservation Initiative and the Centre for Environment, Energy and Natural Resource Governance.

Against this backdrop, CISL works with insurers, banks and investors to develop practitioner-owned methodologies that help industry address how to identify environmental sources of financial risk and integrate environmental scenario analysis into their decisions and direct capital towards sustainable infrastructure.

We advise central banks and financial regulators on appropriate actions they can take and we develop research insights that deepen our collective understanding of the links between environmental and social trends and financial risk.


Current programmes of work

Nature-related financial risks

The Banking Environment Initiative and Investment Leaders Group are working closely with banks and asset managers to:

  • Identify and assess the financial risks of nature loss
  • Determine a common language and framework for risk identification, so that nature-related financial risks can begin to be measured and managed by industry leaders.

The programme has so far published:

  1. Briefings detailing the current ways biodiversity loss and land degradation can be seen as financially material, underscoring that materiality but also the limitation of current methods.
  2. A handbook for nature-related risks, explaining key concepts and providing a framework for risk identification
  3. An introduction to nature-related finance

During 2021, we are creating with banks and asset managers use cases that demonstrate specific nature-related financial risks. These use cases will showcase methodologies that aim to bring home more precisely how nature loss is a risk to financial institutions.


Our work and thought leadership

Handbook for Nature-related Financial Risks: Key concepts and a framework for identification

6 July 2021

1 March 2021 – The University of Cambridge Institute for Sustainability Leadership (CISL) has published a handbook for understanding and identifying nature-related financial risks.

Financial materiality of biodiversity loss and land degradation

17 February 2021

May 2020 – The University of Cambridge Institute for Sustainability Leadership (CISL) has published a new briefing document mapping the existing methods and tools that can be used to derive the materiality of biodiversity loss and land degradation.

Mutual microinsurance and the Sustainable Development Goals: An impact assessment following Typhoon Haiyan

6 June 2019

June 2019 – This report explores the potential for a community-owned model of insurance (mutual microinsurance) to deliver economic and social benefits aligned with the United Nations Sustainable Development Goals (SDGs).

Centre for Sustainable Finance chairs discussion on the challenges facing hydropower in Africa

28 May 2019

28 May 2019 – Last month, the Centre for Sustainable Finance chaired a panel discussion on attracting private finance into sustainable infrastructure, with the focus on hydropower, at the “Africa 2019” Water Storage and Hydropower Development for Africa conference in Windhoek, Namibia.

Finance’s shifting focus from risks to solutions

26 February 2019

26 February 2019 – Kajetan Czyz, Programme Director, Sustainable Finance, reflects on four decades of progress in the field of sustainable finance, which is entering a new phase of maturity. He describes CISL’s recent work in developing practical solutions for investors, banks and insurance companies to proactively encourage, create and exploit the opportunities inherent in the shift towards a sustainable economy.

Investors and lenders need better tools to manage climate risk to homes, mortgages and assets, finds new research

18 February 2019

22 February 2019 – New open-source models from ClimateWise, a global insurance network, offer step-by-step guides to help the financial industry prepare for risks posed by climate change.

Transition risk framework: Managing the impacts of the low carbon transition on infrastructure investments

18 February 2019

22 February 2019 – The ClimateWise Transition Risk Framework provides an open-source, step-by-step methodology on how to manage the risks and capture emerging opportunities from the low carbon transition.

Physical risk framework: Understanding the impact of climate change on real estate lending and investment portfolios

18 February 2019

22 February 2019 – The ClimateWise Physical Risk Framework demonstrates how the expertise and tools of the insurance industry can support other parts of the financial system to understand their physical risk exposure.

Risk and resilience

19 December 2018

The ILG has studied the economic and financial impacts of climate and nature related risks in order to identify opportunities for reducing investment risks through portfolio construction and diversification across different asset classes, regions and portfolios. Key outputs Nature-related financial...

How can financiers be encouraged to invest in hydropower for the future?

17 December 2018

17 December 2018 – Following a recent roundtable discussion hosted by the University of Cambridge Institute for Sustainability Leadership (CISL) and the FutureDAMS consortium, Dr Judith Plummer Braeckman, CISL Senior Research Associate, discusses the risky reputation of hydropower projects and the potential solutions that could help to drive investment in this sector.


Severe flooding in a residential area of Baton Rouge, LA; credit: U.S. Department of AgricultureCreative Commons Attribution-2.0 Generic

Rewiring the Economy

This work relates directly to Rewiring the Economy, CISL's ten-year plan to lay the foundations for a sustainable economy.

Task 4: Ensure capital acts for the long term

Task 5: Price capital according to the true costs of business activities