Four ways to properly integrate nature-related risk in financial decision-making

Last month, nearly 200 governments signed the Kunming-Montreal Global Biodiversity Framework, a historic agreement in which governments committed to halt and reverse nature loss by 2030. More specifically, Target 14 instructs governments to align all relevant public and private activities, fiscal and financial flows with the goals of preserving and protecting nature and its services; and Target 15 to ensure that large companies and financial institutions assess and disclose their impacts and dependencies on nature, and reduce biodiversity-related risks.

Some leading central banks are already taking nature-related risks seriously.[1] In 2019, the Dutch Central Bank (DNB) published its first study on nature-related risks facing the Dutch financial sector[2], and more recently, draft guidance for managing climate and environmental risks.[3] These are crucial first steps for embedding these risks in supervisory tasks.

Increased efforts by the financial sector to assess and act on nature-related risks, as well as recognition of them by governments, are very encouraging. Despite this progress, the draft DNB guidance illustrates how approaches to nature-related risk assessment and response often neglect or omit four critical aspects that render approaches less effective and, on occasion, cause more harm than good.

To properly integrate nature-related risk in financial decision-making, financial regulators and other financial institutions must engage in systemic risks, stewardship, site-specific approaches, and transition plans.

1. Systemic Risks

2. Stewardship and Collaboration

3. Site-Specific Approaches

4. Transition Plans

Despite the significant progress that has been made in recent years, and the immediate steps that can be taken to integrate risks today, there is still much to be done before nature-related risks and opportunities can be fully addressed.

Understanding systemic and site-specific nature-related risks, identifying appropriate stewardship opportunities, and designing long-term transition plans are all critical steps that financial institutions must take to properly integrate nature-related risks in their decision-making. And improving asset-level data, facilitating supply chain traceability, and developing sector-wide transition scenarios, will accelerate their pursuit. Taken together, these steps will help shift financial flows towards nature-positive outcomes and avoid increasing price and financial instability.

WWF and partners are working to bridge the gaps, so stay tuned, and please reach out for more information on our work and opportunities to collaborate.

Nicolas Poolen, Advisor Green Finance, WWF Netherlands

Thanks to Avital van Meijeren Karp for her contributions to this article.


[2] De Nederlandse Bank & Planbureau voor de Leefomgeving (2019) Indepted to Nature: Exploring biodiversity risks for the Dutch financial sector, available here

[3] De Nederlandse Bank (2022), Gids voor beheersing van klimaat- en milieu-risico’s, available (in Dutch) here

[4] See “Cascading Risks” (p. 12) in WWF, Deltares, Achmea IM (2022) Bridging the Gaps in ESG and Water Data to Create Opportunities, available here

[5] See this paper in Frontiers in Environmental Science on the effects of improved irrigation efficiency discussed by Conor Linstead, WWF-UK Freshwater Specialist.

[6] For more information on WWF’s work with AB Inbev, see here.

[7] For more information on WWF’s work with H&M, see here.

[8] For more information on WWF-UK’s Basket Program, see here.

[9] WWF, World Bank Group & Global Canopy (2022) Geospatial ESG, available here.

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