TNFD reveals ‘extensive’ evidence of financial effects of nature-related risks

TNFD research shows that while more work is needed to assess and quantify the financial impacts of nature-related risks, the evidence of these impacts on businesses and the economy is “extensive”.

The research, conducted by the Taskforce on Nature-related Financial Disclosures (TNFD) alongside the University of Oxford’s Environmental Change Institute (as part of the Resilient Planet Finance Lab) and Global Canopy, was released today (June 27) during London Climate Action Week.

It draws on over 600 pieces of evidence from 360 sources including academic research, case studies, company reports and expert insights, as well as interviews with corporates and financial institutions, to prove that nature-related risks can translate into financially-material outcomes. 

‘High-quality evidence’ of financial impacts

Aiming to improve the understanding of how nature-related risks affect cash flows, cost of capital and access to capital, identify data gaps around financial materiality and present current risk assessment practices, the study finds “high-quality evidence across all evidence types” of the financial impact of nature degradation.

It adds that information on nature-related risks is important to investors, but that companies need to do more to assess and present the financial impacts of these risks by undertaking integrated risk assessment approaches and improving data availability and scenario analysis. 

Niki Mardas, Executive Director, Global Canopy, said: “This report lays out a clear base of evidence for what is surely becoming ever more plain to all: the increasing degradation and destruction of nature poses a financially material threat to businesses and financial institutions. In a rapidly heating world, nature degradation triggers and worsens floods, wildfires, droughts and other extreme events that cause significant financial damage. And the connection between nature and the economy is all-encompassing – investors who think they can simply diversify away from this risk are bringing old paradigms to a new problem. 

“The snowballing impacts of nature risks are already affecting the insurance sector, leading to the threat of higher premiums and a growing arc of uninsurability. For companies, financial institutions, regulators and fiscal policymakers alike, the most effective way to mitigate these risks is to act now - to shift financial flows away from activities that harm nature, toward those that can maintain, restore and regenerate it. They will find they are in good company.”

Nature-related financial risks database

Alongside the discussion paper, TNFD also released a set of case studies developed with the Global Reporting Initiative (GRI) on how companies are identifying nature-related risks and opportunities in their organisations.

A public consultation is now open to gather additional evidence and feedback on the nature-related financial risks database until 31 December 2025. 

Andrew Howard, Global Head of Sustainable Investment, Schroders, added: “Only a few percentage points of nature’s value to society and the economy are ultimately recognised financially. This only needs to rise to a few percentage points more for the importance of nature exposures to double, with room to keep rising in importance as regulation and policies toughen and take hold. As forward-looking investors, we aim to identify risks and opportunities before they crystallise. This report’s compilation of evidence on the financial implications of nature-related risks is a valuable step to helping recognise the importance of nature to investors.”