Climate and Nature Financial Risk
The Global Risks Alliance (GRA)
Climate and nature financial risk is the discipline that translates physical and policy change into financial terms: losses, defaults, valuations, capital and protection gaps. This page sets out the discipline as research rather than execution: what it examines across insurance, banking and investment, the methods it uses and where sector-level analysis stops. It is the starting point for the platform's topic pages.
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The Climate and Nature Financial Risk sector overview covers climate and nature exposures, scenario methods and transmission into financial institutions and markets. It sets out who is in scope, from climate risk professionals and risk modellers, how risk reaches the sector and how it travels onward, analysed with physical/transition risk scenarios, nature dependencies and asset exposure. GRA builds shared industry understanding and does not advise, rate or assess individual firms.
Fig.How GCRI, GRF and GRA share one field while the authorities decide. Design, not a record.
The working screen behind this subject: its structure, terms and states. Names are placeholders and values illustrative.
Claims, pricing and the availability of cover. See Insurance, bank and investment effects.
Borrowers' ability to repay and the value of collateral.
Repricing of securities and portfolios.
The field combines climate and atmospheric science and ecology and biodiversity science, which describe how hazards and ecosystems are changing, with financial economics and macro-finance, which explains how those changes reach cash flows, asset prices and credit. scenario design and stress testing provides the tools for exploring futures that history cannot describe, and spatial statistics and geostatistics links hazards to the location of exposed assets.
It recognises three risk families, physical, transition and nature-related, and a further dimension of liability risk, where parties seek compensation for climate-related losses. All are characterised by long horizons, deep uncertainty and non-linear effects.
Climate and Nature Financial Risk frames are set by NGFS, ISSB and TNFD and BCBS and IAIS.
| Part | Channel Climate and Nature Financial Risk studies |
|---|---|
| Insurance | Claims and repricing |
| Banking | Collateral and income |
| Investment | Repricing |
| Public finance | Residual losses |
Shocks travel between these parts, and Climate and Nature Financial Risk studies the links: How do climate and nature reach balance sheets? The evidence base is hazard layers, pathways, ecosystem data.
Combining hazard maps with asset locations. See Physical climate risk and Model and measurement gaps.
Exploring plausible futures and their financial effects, presented under scenarios. See Scenario analysis.
Linking sectors to the ecosystem services they rely on. See Nature dependencies.
Assessing the quality and comparability of reported data. See Disclosure and data.
The platform works at sector level and with aggregated data. It does not assess individual firms, assets or portfolios, issue ratings or scores, recommend transactions or constitute advice.
GRA is a nonprofit business league for the financial services industry. It does not lend, underwrite, rate, invest, advise on or arrange transactions, introduce counterparties or take transaction-based pay, and readiness work is not approval.
The companion page financial-system transmission shows how real-system and financial vulnerabilities propagate. Institutional responses are convened at The Global Risks Forum (GRF), in Climate and Nature Governance.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Transmission channel | The route by which a shock reaches financial institutions' balance sheets. |
| 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. |
| Systemic risk | The risk of disruption to financial services caused by impairment of all or parts of the financial system, with serious consequences for the real economy, as the IMF, FSB and BIS define it. |
The bodies and documents this page is read against. Status and editions change; each link goes to the issuing body.
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.