The Taskforce on Nature-related Financial Disclosures (TNFD) today released at London Climate Action Week a paper on the evidence of financial effects resulting from nature-related risks. The paper is co-authored by TNFD, the University of Oxford’s Environmental Change Institute (as part of the Resilient Planet Finance Lab) and Global Canopy. The TNFD also issued a set of case studies of businesses identifying nature-related risks and opportunities to their organisations arising from their dependencies and impacts on nature, developed with the Global Reporting Initiative (GRI).
Together, this new research and case studies demonstrate clear evidence of financial effects of nature-related risks.
Evidence review on the financial effects of nature-related risks
The TNFD, the University of Oxford’s Environmental Change Institute (as part of the Resilient Planet Finance Lab) and Global Canopy released a paper synthesising the current evidence on the financial materiality of nature-related risks for corporates and financial institutions.
Drawing on over 600 pieces of evidence from 360 sources – including academic research, case studies, company reports and expert insights – and interviews with corporates and financial institutions, the paper shows how nature-related risks, stemming from business dependencies and impacts on nature, can translate into financially-material outcomes.
- Improve understanding of how nature-related risks affect cash flows, cost of capital and access to capital;
- Identify gaps in the evidence of the financial materiality of these risks;
- Share insights from corporates and financial institutions on current practices of risk assessment, challenges and lessons learned; and
- Provide recommendations to corporates, financial institutions, data providers, academia, standard setters and regulators.
Key findings are that – while nature-related risks are not yet consistently assessed or disclosed as financially material – the evidence of financial effects of nature-related risks for businesses and the economy is extensive, and information on nature-related risks can be important to investors. While there is high-quality evidence across all evidence types, the evidence at the company level is not yet as abundant. The report highlights the importance of integrated risk assessment approaches, improved data availability and scenario analysis in strengthening financial resilience.
The paper was released at an event hosted by TNFD, GRI, University of Oxford and LSE at KPMG, Assessing and measuring the financial materiality of nature-related issues: How dependencies and impacts on nature can create financially material risks and opportunities for businesses.
Niki Mardas, Executive Director, Global Canopy:
“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.”
Professor Nicola Ranger, Professor in Practice for Natural Capital, Risk and Finance at the London School of Economics and Political Science and Director, Resilient Planet Finance Lab:
“Nature is more than birds, bees and butterflies; it is about the foundational ecosystem services upon which our prosperity depends – water, food systems, raw materials. This new research draws together findings across hundreds of studies to demonstrate clearly that the loss of nature poses a material financial risk to the economy and financial system. This is a risk that any prudent person should be aware of when considering investment decisions.”
Andrew Howard, Global Head of Sustainable Investment, Schroders:
“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.”
GRI-TNFD case studies of corporates on nature-related DIROs
A report was also published by TNFD and GRI today summarising the findings of seven corporate case studies on their approach to identifying risks and opportunities to their organisation arising from their dependencies and impacts on nature. These case studies illustrate how these risks and opportunities can originate from dependencies and impacts on nature under a financial or double materiality lens, by using the GRI’s materiality approach focused on impacts and the TNFD LEAP approach.
The case studies show that, for all companies, dependencies and impacts on nature inform the identification of nature-related risks and opportunities and, in particular, dependencies provide crucial additional value for the assessment. While companies progress in assessing nature-related risks and opportunities, most report that these methods are less developed than those used to evaluate dependencies and impacts.
Bastian Buck, Chief Standards Officer, GRI:
“The joint GRI-TNFD case studies practically demonstrate how leading companies are advancing nature-related reporting, by integrating both impact and financial materiality. When organizations understand their nature impacts, they can better identify and address related risks and opportunities. By ensuring interoperability between reporting standards and frameworks, we empower companies to connect these dimensions and turn transparency into action – underpinning resilience and long-term value creation.”
Final sector guidance for water utilities
The TNFD also published final sector guidance for water utilities and services, which has been developed through engagement with industry stakeholders and science-based experts. The sector guidance, which follows the release of guidance for other water-related sectors, helps organisations identify and manage their nature-related issues, critical in view of the ongoing and mounting pressures on our world’s water bodies.
The guidance is relevant to all stages of the water cycle, all stages of an individual water utilities and services sector organisation’s involvement with a particular water system and all activities of an organisation.
The TNFD’s sector guidance complements its core recommendations and LEAP assessment approach, published in September 2023. The sector guidance provides sector-specific considerations when following the TNFD’s LEAP approach for assessment of nature-related issues and recommended sector-specific disclosure metrics for companies reporting in line with the TNFD’s recommendations.
The release of the water utilities and services sector guidance brings the total number of TNFD sector guidance documents to 16. The total number of sectors for which the TNFD provides final and draft guidance now covers 50% of the SICS® industries.
Kari Vigerstøl, P.E. Director of Water Security Science and Innovation, The Nature Conservancy:
“The business models of water utility organisations are highly dependent on the ecosystem services of nature to deliver water services to customers. Therefore, understanding nature-related impacts and dependencies—and identifying options to turn these into risks to be mitigated and opportunities to be invested in—is a key business imperative for the sector. At TNC, we are pleased to have been able to contribute to the development of the TNFD sector guidance, as it offers a concrete tool for the industry to further strengthen nature stewardship.”
José Luis Blasco, Global Sustainability Director, Acciona S.A.:
“Acciona is pleased to have been part of shaping the TNFD sector guidance for Water Utilities and Services. We see the guidance as an important tool to further support businesses in the sector to disclose and manage their nature-related impacts, dependencies, risks, and opportunities. As a global provider of water infrastructure and services, this information is key to enabling us to embed sustainable innovations into our solutions, enhance operational efficiency, and strengthen the long-term resilience of the businesses and communities we serve.”
Rebecca Sly, Research and Engagement Analyst, Regnan:
“While most economic activity depends on nature, the accelerating loss of biodiversity now threatens the stability of our global economic, environmental, and social systems. For the water utilities sector, these risks are not abstract; they are immediate and foundational. These companies face distinct challenges due to their direct dependence on the health of local water systems and the stringent regulatory environments in which they operate—a complexity historically compounded by the absence of effective governance mechanisms to manage nature-related risks. In this context, the TNFD’s sector-specific guidance for water utilities is an important development. It offers recommendations that empower these companies to navigate the heightened complexities of their dependencies and impacts on nature. It is our view that this guidance should be used as more than a compliance tool; but as a strategic roadmap that advocates for higher standards across the industry, enabling water utilities to transform their inherent risks into opportunities for resilience and to drive better outcomes for the environment, society, and the broader economy.”
Christine O. Casabar, Corporate Center Manager – Sustainability, Manila Water Company Inc.:
“Manila Water is pleased to have contributed feedback to the TNFD Water Utilities and Services sector guidance. We view this guidance as a valuable tool for our business and for the sector as a whole. It helps us identify nature-related dependencies and impacts, and translate them into actionable risks and opportunities. As a water utility, the guidance provides clarity on how to interpret sector-specific requirements, allowing us to effectively implement and disclose in line with the TNFD recommendations.”
The TNFD is undertaking further work on nature-related opportunities to increase corporate and financial institutions’ understanding of nature-related opportunities, spotlight the challenges in identifying and assessing an opportunity and highlight any solutions to those challenges.
As part of this work, the TNFD will compile a collection of case studies that showcase nature-related opportunities with a strong business case. To support this effort, the TNFD is issuing a call for evidence for suggestions of nature-related opportunity case studies. To learn more and submit a case study, visit https://tnfd.global/
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