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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.   



      Understanding the climate performance of investment funds

      29 July 2021

      29 July 2021 – Understanding the climate performance of investment funds should be made simple to all investors. Analysis from CISL’s Investment Leaders Group (ILG) found that the present disclosure of fund performance does not allow investors to understand and compare the alignment of funds with the Paris Agreement on climate change. The latest reports from the group now provides a tour of the assumptions and approaches behind existing methods, and introduces a simple and transparent disclosure method that enables investment managers to report the alignment of their portfolios with the Paris ambition.

      CISL’s Centre for Sustainable Finance responds to EU sustainable finance strategy

      6 July 2021

      6 July 2021 - The EU Commission today presented its new Sustainable Finance Package which includes plans to bring financial institutions along on its goal to create a carbon neutral continent by 2050. CISL and its finance leadership groups across banking, insurance and investment respond to the new strategy.

      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.

      Climate product innovation within the insurance sector

      30 June 2021

      30 June 2021 – The University of Cambridge Institute for Sustainability Leadership’s (CISL) ClimateWise initiative has published a new white paper on climate product innovation.

      Centre for Sustainable Finance

      9 June 2021

      A ‘quiet revolution’ is underway in the global financial system as its leaders wrestle with the implications of global sustainability. Expectations from clients and regulators are climbing steadily, causing financial institutions to rethink current operating practices, and adopt longer term, more...

      Centre for Sustainable Finance

      4 June 2021

      Nick Villiers, Director of Sustainable Finance Nick leads the Centre for Sustainable Finance, which helps financial institutions play a leading role in building a more sustainable economy. Prior to joining CISL in September 2019, Nick spent 18 years in investment banking working in Debt Capital...

      Let’s Discuss Climate: The essential guide to bank-client engagement

      5 May 2021

      The University of Cambridge Institute for Sustainability Leadership’s (CISL) Banking Environment Initiative has published a new guide to bank-client engagement, which aims to address the need for a market-wide transformation in how banks and their corporate clients interact.

      Investing in the age of climate transitions: The case for universal disclosure of Paris alignment by investment funds

      11 April 2021

      28 April 2021 – Understanding the climate performance of investment funds should be made simple to all investors. Lucy Auden, Senior Programme Manager for the Investment Leaders Group (ILG), analyses the current approaches to measuring fund climate performance and makes the case for a universal disclosure of Paris alignment. This analysis will be followed by a report in summer 2021 which proposes a disclosure methodology and explores the underpinning science, methods of emissions projection, and distribution of carbon budgets used by current approaches.

      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.

      New action plan for banks to halt deforestation unveiled by University of Cambridge Institute for Sustainability Leadership

      6 January 2021

      12 January 2021 – A new report outlines how banks can take steps to accelerate the reduction and reversal of deforestation leading to greater stability for nature, climate and the economy.