Introduction

The Network for Greening the Financial System (NGFS) identifies that nature degradation is a material source of economic and financial risk. Ecosystem deterioration can impair economic activity through channels such as reduced water availability, biodiversity loss, and soil degradation. Concurrently, policy measures designed to protect and restore nature can generate transition risks for firms and financial institutions. This compendium builds on the 2024 NGFS Conceptual Framework by documenting how members are applying it in practice. It reviews 35 nature-risk assessment initiatives across multiple jurisdictions and includes six in-depth case studies covering various geographies and analytical objectives.

Conceptual framework implementation practices – survey review

The survey review covers 24 initiatives assessing physical impacts and 11 initiatives assessing transition impacts. Physical risks are broadly categorised into disruptions in water-based ecosystem services, biodiversity and pollination loss, soil and land degradation, and acute environmental hazards. Water-related ecosystem services appear consistently as a priority; for example, a study in the Netherlands found that over €510 billion (36%) of investments by Dutch financial institutions are highly dependent on at least one ecosystem service. In Hungary, corporate lending exposure to water-dependent sectors reached €24.4 billion (43% of corporate lending).

Transition risks are typically associated with policy responses such as land-use regulation, biodiversity protection measures, and subsidy reform. These are transmitted through pressure-restriction channels, where policies penalise activities that exert pressure on nature, and ecosystem-service-access channels, where policies change the availability or cost of dependent services. Most jurisdictions remain at the exposure and dependency-mapping stage, frequently using the ENCORE database to link economic sectors to ecosystem services.

Case studies

Six national and regional case studies illustrate the practical application of the framework. In the Baltic and Nordic countries, research linked an Ecosystem Condition Index (ECI) to agricultural output, finding that higher degradation is robustly associated with lower gross value added (GVA) per hectare. Brazil conducted a nationwide assessment at the municipal level, identifying that risk-weighted exposures are highest in livestock and grain cultivation. A Chilean study on wildfires demonstrated an immediate 10% drop in economic activity for affected firms, with the decline deepening to 15% in sectors with high ecosystem dependency.

In France, an analysis of water-stress scenarios estimated turnover losses for industrial firms ranging from €2 billion to €17 billion over one year. The German case study revealed that 52.4% of total bank lending goes to firms with a high dependency on at least one ecosystem service, and 51.9% to those dependent on water-based services. Finally, North Macedonia explored the transmission of nature-related risks to sovereign credit risk, estimating that a uniform 1% ecosystem-depreciation shock could increase foreign-exchange reserve credit-risk exposure by approximately 3%.

Identification of key sources of nature-related financial risk

The report identifies a nascent convergence on prioritised risk categories. Water-related disruption is the most frequently assessed source of risk because it is a basic input for agriculture, manufacturing, and energy. Nature-related risks are highly sector-concentrated, particularly in agriculture, forestry, water-intensive manufacturing, and real estate. Despite this concentration, these sectors are sufficiently large that the aggregate financial system remains exposed. Furthermore, supply-chain and value-chain effects materially amplify direct impacts. Shocks resulting from ecosystem degradation propagate through domestic and international networks, affecting institutions not directly exposed to the original environmental shock.

Key lessons learned

Eight cross-cutting messages emerge from the review. Credit risk is the most widely analysed transmission channel, with initiatives using default-probability models, non-performing loan (NPL) estimates, and capital-depletion models. Physical-risk assessment is currently more advanced than transition-risk assessment, largely due to the greater availability of physical hazard and ecosystem-condition data. A significant barrier to implementation remains the scarcity of firm-level microdata and the lack of a single common metric for nature, unlike the carbon-equivalent unit used in climate risk. Most jurisdictions are still in the early stages of analytical practice, progressing from exposure mapping to economic impact quantification, with only a few reaching financial-risk quantification.

Conclusions and way forward

The compendium demonstrates that nature-related financial risk assessment is no longer a purely conceptual exercise. To advance these practices, several priorities are identified. These include improving ecosystem datasets and disclosure information, strengthening the use of geospatial data, and developing more standardised ecosystem metrics. There is a critical need to expand macroeconomic and integrated nature-economy modelling to trace how degradation propagates through the economy. Additionally, the report suggests greater integration between climate and nature assessments and the development of more robust nature-related stress-testing frameworks to translate environmental shocks into measures of financial-system resilience.