Nature and business are deeply interconnected, with financial systems both dependent on and influencing biodiversity. As highlighted in recent assessments by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), nature is effectively the “life support system of our economies,” yet this foundation is rapidly weakening as multiple planetary boundaries have already been exceeded. The accelerating loss of biodiversity is now widely recognised as a systemic risk with serious environmental, social, and financial implications.
For financial institutions, nature loss is increasingly seen as a core financial risk factor. Issues such as water scarcity, soil degradation, and weakened ecosystem services can disrupt supply chains, reduce asset values, and heighten credit and insurance risks. In response, regulators and supervisors across regions are beginning to integrate biodiversity considerations into financial oversight, reflecting a growing recognition that nature-related risks must be embedded into economic and financial decision-making.
However, a major challenge remains the lack of reliable and comparable biodiversity data. Studies show that very few companies publicly disclose their impacts on biodiversity, making it difficult for financial institutions to assess exposure and risk accurately. Despite this, expectations from regulators, investors, and stakeholders continue to rise, increasing pressure on firms to improve transparency and reporting quality.
At the same time, the nature-related reporting landscape is evolving rapidly. New frameworks and standards are helping structure disclosures and improve consistency across markets. Tools such as the Taskforce on Nature-related Financial Disclosures (TNFD) and the updated Global Reporting Initiative biodiversity standard are enabling organisations to better measure and report their impacts and dependencies on ecosystems. These developments are gradually allowing financial institutions to connect corporate-level biodiversity impacts with portfolio-level risk analysis.
Regulatory momentum is also building globally, with jurisdictions such as the European Union, China, and Malaysia strengthening sustainability disclosure requirements. The International Sustainability Standards Board is also advancing work on biodiversity and ecosystem-related reporting, signalling that nature-related disclosure is moving toward mainstream financial reporting standards. A key trend emerging across these efforts is the concept of “double materiality,” which considers both financial risks and environmental impacts.
For banks and insurers, this shift has direct operational implications. Understanding how nature loss affects clients and portfolios is becoming essential for lending, underwriting, investment, and risk management decisions. Impact reporting is increasingly used to identify how financed activities contribute to ecosystem degradation and how these dependencies may affect financial performance and resilience over time.
Financial institutions are already beginning to act on this agenda. Many are piloting nature-related risk assessments, using tools like ENCORE, and integrating biodiversity considerations into governance and strategy. Case studies from global banks demonstrate how emerging methodologies are being applied in practice to better understand environmental dependencies and guide capital toward more sustainable and nature-positive outcomes.
Overall, nature reporting is transitioning from a voluntary sustainability practice to a core element of financial regulation and risk management. As frameworks mature and data improves, the focus is shifting toward practical implementation. Continued coordination between regulators, standard-setters, and financial institutions will be essential to ensure consistent, comparable reporting that ultimately aligns financial flows with the protection and restoration of nature.
