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Cambridge Institute for Sustainability Leadership (CISL)

April 2022 – The University of Cambridge Institute for Sustainability Leadership (CISL) in collaboration with HSBC has published a use case about the risk posed by water stress

Heavy industry at risk of downgrade from Investment to Speculative grade due to water stress exposure

In collaboration with CISL, HSBC analysed the impact of a stress scenario in which access to water is curtailed for select heavy industry companies in East Asia.

Following a scenario of how areas of very high water stress may need to curtail commercial access to protect residential supply, the use case found:

  • Most of the companies in the sample are subject to a downgrade of internal rating of at least one notch, with cases of extremely severe downgrades also occurring.
  • The sample’s risk weighted assets (RWAs) increase by ~20 per cent in the year immediately following the shock.

Download the use case 

These conclusions showcase the financial materiality of nature-related risks, underscoring the need for lenders to engage with at risk clients portfolio companies and other stakeholders about how to mitigate and adapt to the risks posed by water stress.





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

“By assessing nature-related financial risks in mainstream financial risk frameworks we move toward a financial system that accounts for nature and helps prevent catastrophic nature loss. The credit risk identified by HSBC due to water stress factors is highly material and underscores the need to begin incorporating these risks into financial decisions today.”

Marine de Bazelaire, Group Advisor on Natural Capital, HSBC & TNFD Taskforce Member said:

“To integrate the value of nature into financial decisions, we need to understand the materiality of nature related risks in on our loan portfolio. This ‘use case’ developed with CISL will support progress on this journey: The findings evidence that a third of the heavy industry companies analysed would move from Investment Grade to Speculative, in the case of a very high water stress, non-related to climate impact. This reinforces what we already know, that nature is core to our global economy and we must, collectively, better understand nature related risks to set the right standards and mobilise capital towards activities that restore and protect nature.”

Citing this Use Case

Please refer to this report as: University of Cambridge Institute for Sustainability Leadership (CISL) and HSBC, 2022. Nature-related financial risk: use case. Impact of water curtailment on credit rating of heavy industry companies in East Asia.


Regina Kahl, Matteo Oriani and Marine de Bazelaire, drawn from the Risk and Sustainability functions at HSBC, wrote the report in close collaboration with Grant Rudgley and Dr Nina Seega at CISL.

Find out more about our work on nature-related financial risks

Published: April 2022

Centre for Sustainable Finance


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Investment Leaders Group


Nature-related financial risks





Our work

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30 by 30 Economic Analysis

The Wealth Economy

The Economics of Biodiversity: The Dasgupta Review

TNFD and related Global Canopy work

DNB, Indebted to Nature

NGFS, Environmental Risk Analysis by Financial Institutions

Business for Nature



The opinions expressed here are those of the authors and do not represent an official position of CISL, the University of Cambridge, or any of its individual business partners or clients.