Integrating climate and nature: The rationale for financial institutions

27 September 2022 – Building on the nature-related financial risks collaboration between the Banking Environment Initiative (BEI) and Investment Leaders Group (ILG), CISL has published a new report detailing the importance of an integrated approach to addressing environmental challenges, encompassing climate and other nature-related issues.

Download the report.

Climate change and nature loss cannot be addressed in a sequential or segregated manner

Temperature rises, changes in precipitation patterns and extreme weather events have a range of impacts on nature. Despite their deep interconnections, the risks and financial implications of climate change and the degradation of nature are largely tackled as independent issues. Financial institutions have first focused on addressing the challenges of managing climate-related risks and the transition to a net-zero economy and are engaging and supporting clients with their emissions reduction plans. But this engagement must also address nature loss. If it does not, a number of risks and opportunities will be missed.

The rationale for financial institutions to integrate climate and nature considerations

i. materiality of nature-related risks, over and above climate-related financial risks

ii. unintended consequences for nature when actions focus exclusively on climate mitigation and adaptation

iii. compounding effects from interactions between climate change and nature loss

iv. potential synergies and cost efficiencies when addressing climate change and nature and

v. macroprudential risks to the stability of the financial sector.

Next steps

Integrating climate and nature

By detailing this rationale for integrating climate and nature, the paper aims to:

  • inform the design of a corporate engagement guide for use by financial institutions which enables them, their clients and their investees to achieve net zero whilst protecting and restoring nature and
  • incorporate nature-related financial risks into existing climate agendas, building on the pioneering research collaboration between CISL and its partners, including the BEI, ILG, ClimateWise, Cambridge University academics and the Taskforce on Nature-related Financial Disclosures (TNFD). Targets for nature protection and restoration will be finalised by the end of 2022, COP27 is due to focus more on physical adaptation and therefore nature-based resilience to extreme weather, and regulators in NGFS are broadening their environmental risks and financial stability agenda to include nature. Plainly, the time to get to grips with the interconnection between climate and nature has arrived.

Dr Nina Seega, Research Director, Centre for Sustainable Finance at CISL said:

“Urgent efforts to find solutions that slow and potentially reverse climate change and revive nature are failing because we are treating these issues as separate when the reality is they are inextricably linked on multiple levels. Systems change, by dint of its very essence, cannot be tackled by extracting subject strands and expecting focus on those in isolation to offer the answers.”

Citing this report:

University of Cambridge Institute for Sustainability Leadership (CISL). (2022). Integrating climate and nature: the rationale for financial institutions. Cambridge, UK: University of Cambridge Institute for Sustainability Leadership.