Climate and nature risk
Climate and nature reach finance in three ways: physical damage from hazards, transition effects as economies change, and dependence on ecosystems such as water, soils and pollination that many activities assume will continue. The Global Risks Alliance (GRA) examines how each reaches credit, insurance, investment and public finance, with evidence labelled and uncertainty shown. It publishes no climate rating or alignment score and makes no collective commitment on whom to finance, insure or invest in. See Financial-system risk.
- 01In briefThe short answer
- 02TransmissionThree routes from climate and nature to finance
- 03StandardsThe disclosure and scenario frame, as it stands
- 04Spatial financeDependencies and impacts have locations
- 05QuestionsShared questions GRA works on
- 06BoundaryEvidence for each institution's own judgement
- 07ConnectedThe same subject across the Consortium
GRA · Institution · service level R0
The short answer.
Climate and nature risk reaches finance in three ways: physical damage from hazards, transition effects as economies change, and dependence on ecosystems such as water, soils and pollination. GRA examines how each reaches credit, insurance, investment and public finance, with evidence labelled and uncertainty shown, and publishes no climate rating.
Assets on the grid, and the portfolio they make.
Where a portfolio's assets sit, and how much of its value is most exposed. Hypothetical assets, not an assessment.
Three routes from climate and nature to finance.
| Channel | How the shock reaches finance |
|---|---|
| Physical | Floods, storms, heat, drought and wildfire damage assets and interrupt income, raising claims and credit losses |
| Transition | Policy, technology and demand shifts reprice assets and sectors, including stranded assets |
| Ecosystem dependency | Degradation of water, soils or other ecosystem services undermines the activities that finance depends on |
| Insurance withdrawal | Rising losses lead to withdrawn or unaffordable cover, moving risk back to owners, lenders and governments |
| Fiscal | Reconstruction and adaptation costs fall on public budgets |
Channels describe mechanisms, not measured strengths or probabilities.
The disclosure and scenario frame, as it stands.
| Instrument | Body | Status, October 2026 |
|---|---|---|
| IFRS S1 and IFRS S2 | ISSB | Effective for periods from 1 January 2024 where adopted; targeted S2 amendments on financed emissions issued December 2025, effective 2027 |
| Nature-related disclosures | ISSB, drawing on TNFD | Proposed as an IFRS Practice Statement; exposure draft targeted for October 2026. Not a requirement |
| TNFD recommendations and LEAP | TNFD | Published 2023; TNFD completes current technical work in 2026 and pauses new guidance |
| TCFD recommendations | FSB task force | Disbanded 2023; monitoring passed to the IFRS Foundation |
| NGFS scenarios | Network for Greening the Financial System | Long-term Phase V (2024), with physical damage estimates under review after a retraction; Phase VI announced for 2026; short-term scenarios May 2025 |
| PCAF financed emissions standard | PCAF | Third edition of Part A published December 2025 |
| US SEC climate rule | SEC | Stayed and never applied; rescission proposed in 2026 |
Dependencies and impacts have locations.
Nature risk is read with the same geography as climate risk. TNFD's LEAP approach starts with Locate: the interface between assets and ecosystems, such as water withdrawal in a stressed basin or sourcing from a deforestation frontier. GRA applies it to financial exposure by joining asset locations to water stress, land-cover change and protected-area layers, then asking which revenues or collateral depend on the service at risk.
Ecosystem evidence comes from GCRI Biodiversity Nexus and Water Nexus; disclosure governance is discussed at GRF Climate and Nature Governance.
Shared questions GRA works on.
- 01
Compound hazards
How do heat, drought and flood combine with infrastructure dependencies to produce correlated losses?
- 02
Insurability over time
Where is cover likely to retreat, and what follows for mortgage, infrastructure and agricultural credit?
- 03
Nature dependencies
Which financial exposures rest on ecosystem services that are not measured or priced?
- 04
Scenario comparison
How should financial readers compare climate scenarios, rather than rely on a single path?
Evidence for each institution's own judgement.
- GRA issues no climate rating, alignment score or label for any firm, asset or portfolio.
- No collective commitment on which sectors, firms or projects to finance, insure or invest in is discussed or agreed in GRA work.
- Scenarios are labelled as scenarios, never presented as forecasts of loss.
- Related readiness work: Protection gaps.
The same subject across the Consortium.
Climate and Nature Financial Risk
The specialist community, in development: Climate and Nature Financial Risk.
Hazards and biodiversity
Evidence from The Global Centre for Risk and Innovation (GCRI): Climate Hazards and Biodiversity Nexus.
Climate governance
Dialogue convened by The Global Risks Forum (GRF): Climate and Nature Governance.
Terms used on this page.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Physical risk | Financial risk from climate hazards, both acute events and chronic shifts, that damage assets and disrupt activity. |
| Transition risk | Financial risk from the shift to a lower-carbon economy, through policy, technology, market and reputational change. |
| Nature-related financial risk | Financial risk from dependence on nature, its degradation and actions to protect it, as the NGFS frames it. |
| NGFS scenarios | Reference climate scenarios published by the Network for Greening the Financial System. |
Where this page's references lead.
The bodies and documents this page is read against. Status and editions change; each link goes to the issuing body.
- IFRS S1 and IFRS S2 (ISSB), with the December 2025 targeted amendments to IFRS S2 GHG requirements (effective 2027)
- ISSB decision on nature-related disclosures as a proposed IFRS Practice Statement (exposure draft targeted for October 2026)
- TNFD recommendations and LEAP approach (2023)
- TCFD recommendations (2017) and final status report (2023); monitoring passed to the IFRS Foundation
- NGFS climate scenarios: long-term Phase V (November 2024; Phase VI announced for 2026) and short-term scenarios (May 2025)
- NGFS statement on Phase V physical risk estimates after the retraction of the underlying damage-function paper (December 2025)
- PCAF Global GHG Accounting and Reporting Standard, Part A financed emissions, third edition (December 2025)
- SEC climate disclosure rule (2024): stayed, litigation in abeyance, rescission proposed in 2026
Questions and answers.
Does GRA tell members which sectors to avoid?
Where does the climate science come from?
Does GRA publish climate data?
Around GRA.
Start with an enquiry.
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.