Investors who want to understand how biodiversity loss could affect portfolio performance can use a newly launched analytical tool that translates nature degradation into financial risk metrics.
Launched by GIST Impact, the Nature Value at Risk (NVaR) dataset aims to estimate how much of a company’s production and financial value could be at risk if the natural systems it depends on were severely degraded. It covers ecosystem services such as water supply, pollination, climate regulation and flood protection, across both direct operations and upstream supply chains.
Nature-related financial risk has risen up the agenda for institutional investors, but translating ecological impacts into metrics suitable for investment decision-making has proved challenging.
“We developed this Nature Value at Risk dataset in direct response to what we were hearing from clients: a need for nature risk analysis that aligns with the latest research from the ECB and leading academics, while also being readily deployable across portfolios,” said Thomas Moran, head of nature and biodiversity products at GIST Impact.
“The transparency we’ve embedded in the tool also means investors can see directly which business activities, ecosystem services and geographic factors are driving their risk.”
According to GIST Impact, the NVaR dataset addresses this gap by operationalising methodologies developed by the European Central Bank and the London School of Economics for portfolio-level analysis.
The approach is geo-sector-based, reflecting the fact that nature-related risks vary significantly by economic activity and geographic location. The dataset also incorporates local ecosystem conditions and company-specific resilience and adaptation factors, enabling investors to identify which locations, activities and ecosystem services are most material to portfolio risk.
The initial release focuses on physical risks across 25 ecosystem services, including water availability, flood control and pollination.
The data is intended to support a range of investor use cases, from high-level portfolio exposure analysis to company-level assessments, stewardship and engagement, and nature-related disclosures aligned with frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD).
Investors are also increasingly focused on transparency in nature-risk metrics, particularly as regulatory scrutiny grows. To support this, the dataset enables users to view the underlying drivers of calculated risk, including geographic exposure and ecosystem dependencies, information that may also help inform engagement with investee companies.
Further development is planned later this year, including the addition of transition risks linked to regulatory change and shifting market preferences related to nature and biodiversity.
GIST Impact said it is also working with financial institutions and research bodies to encourage greater methodological consistency in the emerging field of nature-related financial risk analysis.
