Assessing Nature Risks and Opportunities

David Carlin

Head of Climate Risk

In this video, David explores the critical connection between nature and climate, highlighting the financial risks of biodiversity loss and ecosystem degradation. He explains why financial institutions must integrate nature-related risks into their strategies and how frameworks like TNFD and UNEP FI’s Risk Centre support nature-positive finance.

Climate Crisis

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Assessing Nature Risks and Opportunities

12 mins 52 secs

Key learning objectives:

Outline the categories of nature-related risks and their financial implications
Understand how climate change and nature loss are interconnected and why separating them can lead to blind spots in financial decision-making
Identify how financial institutions can respond through disclosure, strategy, and opportunity capture
Outline how frameworks like TNFD and programmes like UNEP FI’s Risk Centre support nature-positive finance

Overview:

Nature and climate are interconnected systems underpinning global economic stability, yet both are under threat. Financial institutions face material risks from biodiversity loss, deforestation, and climate-related shifts, but also new opportunities in restoration, innovation, and sustainable finance. Nature-related risks span physical, transition, and systemic categories. Integrating climate and nature considerations can improve risk management, prevent unintended trade-offs, and reveal synergistic gains. The Taskforce on Nature-related Financial Disclosures (TNFD) and UNEP FI’s Risk Centre are supporting institutions to build more robust, nature-positive strategies. Financial leaders who act now will be better placed to protect long-term value and drive sustainable transformation across markets.

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Summary

What kinds of risks does nature loss present to financial institutions?

Nature loss creates material financial risks across three categories: physical, transition, and systemic. Physical risks arise from degradation like deforestation or water scarcity; transition risks relate to policy, market or legal shifts; and systemic risks involve ecosystem collapse impacting financial systems. Together, these can lead to volatility, asset devaluation, and instability, particularly for institutions with exposure to nature-dependent sectors like agriculture, real estate, or extractives.

Why are climate change and nature loss interconnected, and why must financial institutions address them together?

Climate change and nature loss are tightly linked. Climate change drives biodiversity loss through rising temperatures, shifting weather patterns, and ecosystem disruption. At the same time, nature degradation, like deforestation or wetland loss, reduces the planet’s capacity to absorb carbon, accelerating climate change. These feedback loops can push systems toward irreversible tipping points. For financial institutions, addressing only one side of this equation can lead to major blind spots. A focus on climate alone may backfire, such as investing in a low-carbon hydro project that destroys critical habitats. Integrating both climate and nature into risk and opportunity assessments enables more accurate valuations, resilient portfolios, and informed strategy. It also aligns institutions with evolving disclosure frameworks like TNFD and increasing stakeholder expectations for joined-up environmental action.

What are nature-related opportunities and how can institutions act on them?

Nature-related opportunities span sectors and strategies. They include restoring ecosystems (like mangroves or coral reefs), investing in regenerative agriculture, or developing sustainable infrastructure. Financial institutions can issue green bonds, launch nature-themed funds, or support nature-based solutions through loans. Tech and innovation also play a role—vertical farming and agroforestry are gaining traction. These investments help preserve biodiversity while unlocking value and resilience. Business models that reduce nature dependencies can enhance brand value, mitigate risk, and meet rising stakeholder expectations. Acting early allows institutions to lead in an emerging market and align with global biodiversity and climate goals.

What frameworks or tools help financial institutions manage nature-related risks and opportunities?

The Taskforce on Nature-related Financial Disclosures (TNFD) provides a structured framework with 14 recommended disclosures across governance, strategy, risk management, and metrics. It aligns with the TCFD while recognising nature’s unique challenges. UNEP FI’s Risk Centre supports implementation through content sessions, tools, and scenario analysis. Together, these resources empower institutions to integrate nature into decision-making, build resilience, and unlock nature-positive investment opportunities.

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David Carlin

David Carlin is an acknowledged authority on climate change and its implications for the financial system. He is the founder of D. A. Carlin and Company, an advisor to governments, corporates, and financial institutions on climate and ESG topics. He has authored numerous reports that provide practical tools for financial actors looking to address climate change and has run capacity-building programs for financial institutions and supervisors around the world. David led the creation of UN Environment Programme’s- Finance Initiative (UNEP FI)’s Risk Centre as the head of Risk. Over the past years, he has worked with over 100 global banks, investors, and insurers on climate scenarios, climate risk assessments, and climate governance. He has been an advisor to UNEP FI’s TNFD pilot program on nature and biodiversity related risks, the Net-Zero Banking Alliance (NZBA), and the Glasgow Financial Alliances for Net Zero (GFANZ). David is also a contributor to Forbes and a senior associate at Cambridge’s Institute for Sustainability Leadership (CISL) as well as a visiting fellow at King’s College London. David has worked as a Principal in Finance, Risk, and Public Policy for Oliver Wyman and in Model Risk Management for PNC Bank. His background is in quantitative modeling and decision science.

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