Handbook for Nature-related Financial Risks
Our economy depends on the services that nature provides. Yet despite these services being worth more than USD100 trillion per year, nature is in decline1. 23 per cent of land is now degraded and ocean ‘dead zones’ span an area greater in size than the United Kingdom2.
As nature declines, businesses, households and financial institutions are put at risk. While climate change is a substantial driver of nature loss and subsequent nature-related financial risks, others such as water pollution also cause considerable financial risks. By understanding and measuring these nature-related financial risks, in addition to climate risk, financial institutions move a step closer to understanding how to manage these risks in their portfolio.
To translate trillions of dollars of dependence on nature onto identification of specific risks posed by nature loss, the Cambridge Institute for Sustainability Leadership (CISL) has created this handbook. This handbook, supported by HBSC, was co-created by banks, asset managers, CISL’s Centre of Sustainable Finance and academics from the University of Cambridge. This handbook looks to address key concepts in relation to nature-related financial risks, it details transmission channels that make nature loss a financial risk and outlines a framework that banks and asset managers can use to identify nature-related financial risks.
1Costanza, Robert et al (2014). Changes in the global value of ecosystem services. Global Environmental Change.
2United Nations. (2019, May). Nature’s Dangerous Decline ‘Unprecedented; Species Extinction Rates Accelerating