Introduction

The report examines how biodiversity loss and environmental degradation create material financial risks for the UK. It highlights that over 50% of global GDP depends directly on nature and that the UK, one of the most nature-depleted countries, faces significant risks through physical, transition, and litigation channels. The study develops new methodologies to quantify these risks, combining spatial, economic, and financial data. It concludes that nature degradation could slow growth and reduce UK GDP by 6–12% by the 2030s, exceeding the economic impact of both the Global Financial Crisis and COVID-19.

Uk Nature-Related Risk Inventory

The Nature-Related Risk Inventory (NRRI) identifies 29 key risks—22 physical, five transition, and two litigation. Highest-rated risks include antimicrobial resistance, zoonotic diseases, soil health decline, and global food insecurity. Seventy-five per cent of the UK is affected by at least one hotspot of natural capital depletion. Pressures stem from degraded soil, water pollution, and biodiversity loss, which increase exposure to drought, flooding, and food supply disruptions.

Climate change amplifies these risks, while international dependencies expose the UK to global ecosystem decline. Around half of nature-related financial risks originate overseas through supply chains and investment flows. Transition and litigation risks also emerge from policy tightening, biodiversity targets, and stricter environmental regulations.

Exposures To Nature-Related Risks

The analysis shows that £3.8 trillion in UK banking and insurance assets are exposed to nature-related risks, with 52% of assets moderately dependent on ecosystem services and 10% highly dependent. Including indirect exposures, 56% of upstream financial exposures—worth £3.2 trillion—are highly or very highly dependent on nature.

Water-related services present the largest dependencies, followed by soil stability and flood protection. Internationally, 44% of upstream activities are at high risk where nature dependency overlaps with high rates of natural capital depletion. Transition risks also vary: about 35% of bank holdings are significantly exposed to transition pressures, particularly in agriculture, manufacturing, construction, and utilities.

Nature-Related Value At Risk (nVaR)

A new “nature-related value at risk” (nVaR) metric estimates financial losses across sectors under 1-in-100-year stress conditions. The most material risks are linked to water scarcity and quality, valued at nearly £300 billion, followed by risks from declining climate regulation and biodiversity. Chronic environmental degradation is found to double the impact of climate change on GDP over the next decade.

Agriculture faces the greatest proportional risk, with potential production losses of up to 15% from disrupted pollination, soil erosion, and invasive species. In monetary terms, services and manufacturing sectors face the largest absolute losses, with total water-related risks alone equivalent to 13% of UK GDP. Across the seven largest banks, portfolio adjustments of up to 5% in domestic holdings are projected from physical nature-related risks.

Nature-Related Risk Scenarios

Three integrated scenarios were developed to test macroeconomic and financial resilience:

• Domestic scenario: Declining soil and water quality, biodiversity loss, and heatwaves lead to reduced crop yields, public health pressures, and wildfire losses.
• International (supply chain) scenario: Global ecological degradation, trade shocks, and multiple breadbasket failures drive food and commodity price spikes, trade wars, and financial instability.
• AMR-pandemic scenario: Rising antimicrobial resistance triggers livestock collapse and a severe pandemic, with GDP impacts exceeding those from COVID-19.

Under combined shocks, UK GDP could fall by 8–12%, equivalent to four to seven years of lost growth, with acute shocks causing a temporary £200 billion reduction in output.

Summary And Recommendations

The findings confirm that nature-related risks are material to UK financial stability and are comparable to major climate and systemic risks. The report recommends that central banks, regulators, and government bodies explicitly incorporate nature-related risks into supervisory frameworks, disclosures, and scenario testing. Financial institutions are urged to integrate nature into risk management and transition plans, while policymakers should enhance data quality, scientific collaboration, and investment in nature-positive projects.

The analysis underscores the urgency of aligning the UK’s financial system with the Kunming-Montreal Global Biodiversity Framework and advancing international cooperation to manage cross-border nature-related risks.