The degradation of our natural environment is not just an ecological concern. It poses significant risks to the stability and growth of the global economy. With over half of the world’s economic activities directly dependent on nature, the urgency to assess and enhance corporate sustainability efforts has never been more pressing.

As stewards of capital allocation, financial institutions define global investment priorities and must take an active role in evaluating and encouraging nature-positive initiatives among their corporate clients and portfolio companies. Given the financial risk involved and the inextricable link between investment strategies and the health of ecosystems, forward-thinking banks and other enterprises are looking for sustainable ways to move beyond mere compliance with regulations and embrace proactive engagement in nature-positive practices.

Stemming nature loss also addresses climate risks banks and other financial institutions face. By moving forward on nature, they can not only mitigate the risks but also unlock new opportunities for sustainable growth for both their investments and the planet.

Why bridging climate and nature is important for businesses

Biodiversity loss has emerged as one of the most significant global economic threats. Over the past 50 years, wildlife populations have declined 69%, on average. Freshwater species experienced the most dramatic decrease, plummeting an alarming 83%. The decimation reflects the current fragility of the planet’s supply of freshwater.

The Earth’s land surface is also under threat, with approximately three-quarters profoundly altered by human activities. The repercussions from failing to act will reverberate throughout economies and societies, threatening humans as well as species.

Yet, despite the dire statistics, the challenge of nature loss opens opportunities for financial institutions and businesses. Research from the World Economic Forum suggests that by investing an estimated US$2.7 trillion annually in systemic transitions, the global economy could unlock over $10 trillion in new business opportunities and create nearly 395 million jobs by 2030. This potential for sustainable growth underscores the need for financial institutions to embrace nature-positive investment strategies.

Unlocking nature-positive potential with key financial indicators

Financial institutions can be catalysts for change, leveraging their influence to drive corporate clients toward nature-positive initiatives. While nature-positive funding has predominantly focused on financing conservation activities, what is truly needed is investment in the systemic transformation of real economy operations and value chains. Our report, “Nature Positive: Corporate Assessment Guide For Financial Institutions,” serves as comprehensive guidance on how financial institutions can assess and inform a company's nature performance, ultimately paving the way for a more sustainable and resilient economy.

Critical to this guidance are 11 indicators spread across three key dimensions, deemed critical for financial assessments of progress made by corporate clients and portfolio companies on nature.

The first dimension is an evaluation of a company's starting point. Financial institutions need to form a view on where companies stand concerning nature and their exposure to nature-related risks. This begins with assessing corporate impacts and dependencies, and associated risks and opportunities, and then determining the materiality of nature-related issues.

The second dimension involves an appraisal of a company's ambition and targets. For material nature-related issues, financial institutions expect their portfolio companies and clients to develop and articulate broad goals and, over time, set more specific targets.

The third dimension focuses on transition credibility and achievability. Financial institutions look for proof points that confirm nature ambitions and targets are being embedded into a company's activities.

In a recent survey we conducted with the World Economic Forum, financial institutions identified areas that required more guidance to support further capital allocation to nature. Of the 36 participants, 72% pointed to “methodology to evaluate corporate nature-positive transition plans and their performance on nature” as a key area where further guidance was needed to enable financial institutions to increase nature-positive financing.

By taking decisive action now, financial institutions can not only help safeguard their investments but also contribute to the restoration and preservation of our planet's invaluable natural resources.

How financial leaders can benefit from a nature-positive approach

The message to financial leaders is clear: The risks associated with nature loss are mounting, and the potential for sustainable growth through nature-positive initiatives is vast. Financial institutions must prioritize the integration of nature-related assessments into their decision-making frameworks. This involves not only evaluating the current state of corporate sustainability efforts but also fostering a culture of innovation that encourages clients to adopt nature-positive practices.

To capitalize on the growing recognition of the need for nature-related questions in climate risk assessments and standardized data from corporate clients, financial institutions should assess their portfolio companies' alignment with nature-positive strategies. This can be achieved through structured frameworks that evaluate key metrics such as water consumption and biodiversity impacts. By leveraging existing climate assessment tools and establishing governance mechanisms to monitor progress, financial institutions can effectively contribute to global nature protection efforts while mitigating financial risks.