| Generally analyzed using categories adapted from climate financial risk, naturerelated financial risk encompasses physical risks, systemic risks, transition risks, and liability risks. All such risks may result in negative impacts on economies, individual financial institutions, and commercial businesses. These four form of risk are associated with: (i) the degradation of nature, including its biodiversity, and the loss of ecosystem services that flow from it (i.e., physical risks); (ii) the misalignment of economic actors with actions aimed at protecting, restoring, and/or reducing negative impacts on nature (i.e., transition risks); (iii) the impact of one institution’s failure cascading through wider financial systems (i.e., systemic risks); and (iv) the cost of litigation, fines, and fees for having caused environmental harm (i.e., liability risks). Source: Network of Central Banks and Supervisors for Greening the Financial System (NGFS). |
Nature-related Financial Risk
