The work of IFB Knowledge Exchange Fellow, Dr Jimena Alvarez, is covered in two oral presentations at the World Biodiversity Forum next month. The abstracts can be seen here.
Alvarez, J., Postel-Vinay, N., Melis, A., McKenzie, E., and Ranger, N.: Evidence Review on the Financial Effects of Nature-Related Risks, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-59, https://doi.org/10.5194/wbf2026-59, 2026.
In line with the expectations of investors, regulators, standard setters and policy-makers, and in response to the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations, corporates and financial institutions are beginning to understand how nature-related risks and opportunities emerge from their dependencies and impacts on nature. This calls for an integrated approach to identify, assess and manage material nature- related dependencies, impacts, risks and opportunities. Despite growing recognition, nature-related risks remain underrepresented in corporate reporting, and their financial implications are poorly quantified. We investigate how nature-related risks can lead to material financial effects on corporates and financial institutions. Although clear linkages exist, nature-related issues are frequently not considered financially material in corporate reports, especially from a single materiality perspective. Additionally, despite being a critical pathway to potential risk affecting the financial prospects of a business, dependencies on nature remain poorly understood and typically underexplored. Many companies continue to struggle to implement robust risk assessment methods, particularly with assessing the financial implications of these risks. We demonstrate how nature-related risks may affect an entity’s cash flows, cost of capital and access to capital over different time horizons, and thus influence investor decisions and capital allocation. We synthesize evidence from a database of over 600 entries across 360 sources, complemented by corporate interviews and stakeholder consultations. The evidence of financial effects of nature-related risks for businesses and the economy is extensive. The evidence spans sectors, scales, hazards, time horizons and types of effect, with high-quality analysis across evidence types. In particular, through water scarcity, liability risk, reputational risk and policy risk. However, full causal chains (from dependencies and impacts to financial effects) are rarely fully mapped, with transmission channels remaining underexplored. Interviews and disclosure reports reveal evidence to demonstrate that information on nature-related risks is important to investors and that omitting, misstating or obscuring such information could reasonably be expected to influence investors’ decisions.
Ceglar, A. and Alvarez, J.: Assessing the materiality of nature-related financial risk for the European Union: a narrative-based approach to scenario development, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-115, https://doi.org/10.5194/wbf2026-115, 2026.
Nature in Europe is facing a ‘serious and continuing decline’ (EEA, 2025) with less than 40% of its surface bodies achieving ‘good’ ecological status and over 80% habitat assessments achieving ‘poor’ or ‘bad’ conservation status (EEA, 2024). Europe is not on track to meet its targets on water, climate or energy by 2030. Local as well as global environmental degradation pose a risk to the economy given the connection between the global economic system through supply chains and the financial system (Ranger et al., 2024). Nature loss can lead to systemic financial risks through compounding effects, cascading effect and/ or financial contagion (NGFS, 2024).
Following the scenario development methodology in Ranger et al. (2024) - based upon a combination of narrative scenario development coupled with a quantified macroeconomic model - we develop a nature-related risk scenario for Europe driven by domestic environmental degradation to understand the potential impacts of nature degradation on financial stability. The approach for scenario design is consistent with IMF (2019)’s guidance on scenario for stress-testing which focusses on plausible yet extreme shocks and learns from the literature on narrative scenario development as well as robust decision making. First, we develop a Nature-related Risk inventory for Europe (NRRI-EU) —a long- list of over thirty nature-related risks to Europe and assess the likelihood of each risk materialising in the next 5-10 years. We validate the NRRI-EU by liaising with natural sciences’ experts and gathering feedback on both the list of risks included, the classification on the likelihood of these risks materialising in the short-term (5-10 years) as well as the confidence in that assessment. Second, we analyse the interactions between these risks to identify whether some risks could co-occur driven by shared driver/s or feedback processes. Third, we develop a cluster of interrelated risks which enable identifying compounding shocks for the scenario design. Fourth, we develop a narrative domestic scenario including both chronic and acute impacts. Next steps include parametrising the narrative scenario into individual shocks (some of these compounding and, possibly cascading) based on the latest literature to quantify the macroeconomic impacts.