Nearly 45% of firms say nature loss and damage is already costing them

One of the world’s biggest investors asked its portfolio companies if they were exposed to financial risks from nature

Nearly 45% of companies are already experiencing the financial impact of physical nature-related risks, according to a major new study. 

NBIM, the investment house in charge of Norway’s trillion-dollar sovereign wealth fund, asked 389 of its listed portfolio companies how they perceived nature-related risks. 

Mirroring the way climate risk is framed, NBIM distinguished between physical and transition-related nature risks. 

It described the former as those posed by loss and damage including biodiversity loss, the degradation of ecosystems and resource scarcity. 

Transition risks, on the other hand, are those associated with policy interventions and changing consumer behaviour, such as bans on certain activities or a swing towards more ecologically-friendly products.  

Nearly half of respondents (48%) said they considered such risks material, with a large proportion already feeling the effects. 

Physical risks were the most pressing, with 44% saying they “have financially material effects for them ‘already today’”, said NBIM, which conducted the research with academics from the University of Zurich.  

For transition-related nature risks, that figure was 28%.  

The authors of the report admitted that the sample is “likely biased” towards those with greater focus on nature, given that just 6% of the 6000+ companies they contacted chose to respond to the survey. 

Three quarters of those that did participate (74%) said they already provide, or plan to provide, public disclosures on their nature risks. 

CDP’s disclosure framework is the preferred platform, according to the survey, although a significant number expect to use the European Sustainability Reporting Standards, the Global Reporting Initiative guidelines or the recommendations of the Taskforce on Nature-related Financial Disclosures.  

Just under a quarter (23%) of companies said they were considering “hedging” nature-related risks through financial instruments. 

Several firms mentioned insurance coverage, while others cited the use of carbon credits and sustainability-linked debt.