The Nature of Risk

Posted on September, 06 2019

A Framework for Understanding Nature-related Risk to Business

Scientific consensus is building around risks to business from the loss and degradation of nature, or ‘nature-related risks’. These risks are not adequately addressed by businesses, and need to be considered together with climate-related risks. The two are inextricably interlinked because climate change drives change in nature, and change in nature drives climate change.

This report and framework aim to catalyze the incorporation of nature-related risks into private-sector decisions in a manner that facilitates sustainable development at all scales.

The report includes:

  1. A literature summary of existing work on the topic that outlines how nature-related risk is not adequately accounted for by businesses.
  2. A synthesis framework for how nature-relate risk emerges that builds on the many existing frameworks and that brings together understanding of natural capital and climate-related risk.
  3. A typology based on analysis of existing literature which serves as a proxy for risks that are most widely acknowledged as high importance.
  4. A set of case studies—examples of businesses facing consequences due to nature-related risk.
The terminology used in this report draws on both nature- and climate-related risk to facilitate a unified approach.

Further informatiom

The recent Global Assessment released by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) supplied clear indicators of the loss of nature and the decline of ecosystem services—valued in the hundreds of trillions of dollars—which provide the basic building blocks of the global economy, from water to energy, and food to carbon sequestration.

This decline in ecosystem services is even more important as climate-related risk becomes a growing concern for business and finance: In organizations from central banks to individual businesses, climate-related risks have quickly risen to the top of the corporate mindset. Climate-related risk and nature-related risk are not separate entities; the loss of nature decreases climate resilience, and climate change exacerbates drivers of nature loss.

However, action on nature-related risk has been fragmented, in part because of an array of competing concepts and frameworks for understanding the financial materiality of nature and its services. This report provides a synthesis framework for nature-related risk, consolidating work from over 70 sources.

We build on the years of study done by environmental economists, corporate risk managers, and climate  scientists, as well as the momentum fueled by the Task Force on Climate-related Financial Disclosures (TCFD).

As attention grows around climate change-related risk to business, there is a need for nature-related risk to be considered in parallel.

Together, the loss of nature and climate change are the 'twin emergencies' facing humanity; turning a blind eye to either can leave businesses vulnerable and exposed to risks.

The Nature of Risk
The Nature of Risk