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Cambridge Institute for Sustainability Leadership

 

What are nature-related financial risks?


Leading companies recognise that a prosperous business relies upon nature. They also recognise that the ‘E’ in ‘ESG’ is about protecting our biodiversity and natural capital, as well as our climate.

Nature’s health is under pressure from global trends in consumption, structural inequalities and economic growth. 

This creates long-term risks to business, citizens and wider society who depend on nature. These pose nature-related financial risks to financial institutions

Empowering financial institutions to recognise nature-related financial risks


The Banking Environment Initiative and Investment Leaders Group at the CISL Centre for Sustainable Finance are working closely with member 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.

To achieve these two objectives CISL, financial institutions and academics are co-creating frameworks, methodologies and business briefings, as outlined below. By doing so, we are targeting a third objective:

  • Enabling the wider financial community to understand, measure and manage the financial materiality and risk of nature loss.

Dirty Water Flowing

Identifying nature-related financial risks

  1. Business Briefings detailing the current ways biodiversity loss and land degradation are financially material, underscoring the urgency of mapping the risk but also the limitations of existing methods.
  2. Handbook for nature-related financial risks, explaining key concepts and providing a framework for risk identification
  3. Introduction to nature-related finance

      Abandoned boat

      Assessing nature-related financial risks

      During 2021, CISL and its partner banks and asset managers are creating use cases that demonstrate specific nature-related financial risks.

      These use cases will showcase methodologies that aim to illustrate how nature loss is a risk to financial institutions, as well as what can be done to understand and address them.

      Connecting finance leaders with Cambridge academics


      A steering group of ten global banks and asset managers is co-delivering this programme of work, drawn from the Banking Environment Initiative and Investment Leaders Group.  Individuals on the steering group bring a range of expertise, with titles including:

      • Head of Asset Allocation
      • Global Head of Chief Investment Office
      • Head of Responsible Investment
      • Head of ESG Research
      • Positive Impact Fund Manager
      • Global Head of Sustainable Finance
      • TCFD Implementation Manager
      • Head of Sustainability Strategy
      • Climate, Environment and Emerging Issues Lead

      In addition to this team, we are joined by academics from the University of Cambridge conservation cluster, the largest of its kind worldwide, and supported by the CISL Business & Nature team:

      The programme is led by Dr Nina Seega, Research Director at the CISL Centre for Sustainable Finance and leading expert in the field of environment risk assessment in financial decision making. The programme team comprises Grant Rudgley, Annabel Ross and Lucy Auden from CISL.   

       

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