New report finds extensive evidence that nature-related risks are financially material for the economy

A new report from Global Canopy, the Taskforce on Nature-Related Financial Disclosures (TNFD) and the University of Oxford finds strong evidence that damage to nature triggers and exacerbates financial damage to businesses and the economy.

The report, Evidence review on the financial effects of nature-related risks, spotlights the wide-ranging and significant financial effects of nature-related risks to businesses, financial institutions and the economy globally.

Read the report

There is strong evidence that nature degradation triggers and worsens disasters, such as floods, wildfire and drought, and other forms of damage to business, and is therefore critically linked to economic loss, according to the report. It finds evidence demonstrating that information on nature-related risks is increasingly important to investors and that omitting, misstating or obscuring such information could reasonably be expected to influence investors’ decisions.

The report is based on an extensive literature review of more than 600 pieces of existing research, interviews with financial institutions and businesses, and dialogue with academia, NGOs and other experts. Global Canopy’s Technical Nature-Related Finance Lead, Dr Natacha Postel-Vinay, is a co-author of the report.

“The report highlights a critical but often overlooked ripple effect, ultimately linking human-caused nature loss to economic loss. Human activity drives nature loss through, for example, deforestation, wetland loss, water pollution, water overuse and soil depletion. This can trigger or exacerbate droughts, floods, fires, and disease outbreaks. These often interact with climate and end up damaging the economy in a raft of ways.”

Dr Natacha Postel-Vinay, Technical Nature-Related Finance Lead

“The effects of damage to nature can ultimately range from price rises for consumers, to hikes in operating costs and capital expenditure for businesses, insurers and reinsurers paying out enormous sums on claims, hours of lost staff productivity through physical displacement, and more.” Dr Natacha Postel-Vinay continued.

Deforestation, monocrop tree plantations and exacerbated hazard risk

The report finds strong evidence that deforestation and monocrop tree plantations – such as pine, palm and eucalypt grown for commodities including timber, pulp and paper and palm oil – pose a financially material risk to businesses and the economy. They contribute to the risk of, and exacerbate, drought, fire, flooding and disease. 

Monocrop tree plantations present greater flood risk than native forests, with logging exacerbating this risk. As an example, the report points to the effects of exotic pine plantations and logging being sorely felt in New Zealand in the aftermath of Cyclone Gabrielle in 2023. Without the natural protection provided by native vegetation, such as enhanced ground water retention, and with logging leaving forestry land littered with dead trees, flood waters swelled, carrying wood debris. This smashed into property and transport infrastructure and exacerbated flooding by blocking up rivers which would otherwise have moved flood waters away. This contributed to insurance claims reaching a record US$1.2bn (NZ$2.1bn), property insurers making a loss in the financial year, and an estimated 0.3 percentage-point rise in inflation. 

Global Canopy’s recommendations 

Financial institutions, businesses and regulators should take a precautionary approach in avoiding and mitigating damage to nature.

The 2025 World Economic Forum’s Global Risks Report cites the top four global risks in the next decade as: biodiversity loss and ecosystem collapse, critical change to earth systems, natural resource shortages, and extreme weather events. The next five to ten years will be critical in halting and reversing nature loss and supporting the global economy and financial system. Given the complex and compounding interactions between climate and nature, and the near-term time horizon left to take action, there is a strong case for financial institutions, businesses and regulators to take a precautionary and urgent approach in avoiding and mitigating damage to nature, and to invest in opportunities that support the transition to a nature-positive economy. 

Science-based nature transition plans should be marked ‘urgent’. 

Given the financially material and wide-ranging near-term risks the report highlights, effective mitigation would involve financial institutions and businesses acting now to produce and implement comprehensive nature-related transition plans, integrated with climate and aligned with science. Transition plans must feature unambiguous nature commitments and policies,  including on ending commodity-driven deforestation, if they are to be considered credible. It would support the success of climate-nature transition planning for regulators, governments and standard setters to set strict requirements for financial institutions on what they can finance within a credible plan.

Central banks could include nature in their supervisory scope.

Central banks throughout the world could exert their influence by incorporating nature, in addition to climate, into their supervisory scope. For example, the Bank of England could amend its CP10/25 (‘Enhancing banks’ and insurers’ approaches to managing climate-related risks’, currently out for consultation) to include nature in addition to climate. This could encompass:

• Embedding nature-related risks across all material risk categories (credit, market, liquidity and operational) as opposed to being treated in isolation, and acknowledging their interactions with climate risks.
• In scenario analysis, integrating climate and nature to inform strategy and business planning rather than treating them in isolation.
• Institutions identifying and addressing data gaps and justifying proxies.

Evidence review on the financial effects of nature-related risks was produced by the TNFD, Global Canopy and the University of Oxford. Global Canopy is a founding partner of the TNFD and is a piloting partner. We provide technical expertise to the TNFD, and build capacity among companies and financial institutions, preparing them to get started with adopting the TNFD recommendations.