Evidence of nature risks’ financial impacts on the business world is extensive, shows a new report from the Taskforce on Nature-related Financial Disclosures (TNFD).

Published during London Climate Action Week, the report takes a ‘study of studies’ approach, pulling data from 360 sources around the world including academic papers, case studies and company reports, plus a range of news articles. 

It states that although “clear linkages” exist between nature risks and companies’ financial challenges, nature-related issues “are frequently not considered financially material in corporate reports, especially from a single-materiality perspective”.

With that in mind, the report’s cache of evidence demonstrates how nature risks can affect a company’s cash flows – as well as cost of, and access to, capital – over different time horizons, thereby influencing investor decisions and capital allocation.

The report groups its evidence into key risk areas, setting out macroeconomic effects and real-world examples of how the relevant risk factors have affected specific companies and financial services. Three of those areas are:

1) Water risks

Exposure to water risk “could lead to substantial impacts across the real economy”, says the report. In 2022, 69% of listed corporates that submitted water-related data to environmental disclosure body CDP reported risk exposure of up to $225bn. That’s almost double what the same companies reported it would cost to answer those risks.

Impacts that the companies cited were disrupted or reduced production capacity (44%), increased operating costs (24%), reduced revenues (11%), supply chain disruption (9%), closure of operations (8%) and constraints to growth (5%).

As the largest copper-producing country, with 27% of global production, Chile is bearing the brunt of water stress, as most of its copper reserves lie in affected regions.

Congressional bills are aiming to make desalination plants mandatory for large mining companies operating in Chile. While none have yet been passed, several companies have already invested in desalination plants. Last year, for example, Antofagasta Plc inaugurated a plant in Los Pelambres, with expansion plans underway up to 2027 at a cost of $2bn.

Water shortages also lead to stranded assets. Following a 2020 referendum in Mexicali, northwest Mexico, triggered by water-shortage protests, beverages producer Constellation Brands was forced to announce the asset impairment of a partially completed brewery construction in the city, at a cost of $650m-$680m.

2) Invasive alien species

Research of 2023 estimates the cumulative costs of biological invasions at $1.26trn in North America, $433bn in Asia, $140bn in Europe and $17.8bn to $78.9bn in Africa.

With annual revenues of around $167bn, the global banana market delivers 105m tonnes of production per year in over 150 countries. Last year alone, it exported more than 19m tonnes. However, it has a determined biological enemy: a new strain of Panama disease, called Tropical Race 4 (TR4).

Capable of travelling through water and adhering to vehicles, animals, tools and clothes, TR4 persists in soil for decades and can cause 100% yield destruction – posing an existential risk to the livelihoods of around 400 million smallholders. As such, it is considered the world’s greatest threat to the banana industry, with 80% of global production potentially at risk.

In its 2024 to 2025 sustainability report, Chiquita – one of the world’s largest banana companies – identified TR4 as “Most important” in its materiality assessment and called for enhanced collaboration and biosecurity investment to combat the disease. The company was already a founding member of the World Banana Forum – also comprised of farmers, government officials, scientists and retailers – which coordinates efforts to tackle TR4.

3) Disasters caused by changes in nature use

Deforestation, wetland loss and monocrop tree plantations are highlighted in the report as examples of changes in land and freshwater use that “exacerbate the magnitude and frequency of natural disasters such as flooding, drought and fire”.

As well as worsening the consequences of natural disasters, including those that climate change has made more likely, nature-use changes feed directly back into climate change via loss of carbon capture capacity.

Swiss Re estimates that global insurance losses from natural disasters are likely to hit $145bn in 2025. In the firm’s analysis, the high cost of natural disasters stems from rising exposure values, resulting from economic growth and booming populations in regions susceptible to severe weather. As urbanisation reduces natural areas around cities, inflationary pressures and increased building costs ramp up exposure values.

According to Deloitte, in flooding incidents of 2022, Southeast Queensland incurred AU$7.7bn of damage. Residents and businesses made more than 97,000 insurance claims, with a total value of AU$1.36bn. Uninsured residential and commercial losses came to AU$646m. Some 62% of businesses were forced to temporarily close, and around 4,000 workers were left unemployed.

Restore and regenerate

TNFD produced the report in partnership with the University of Oxford Environmental Change Institute and non-profit Global Canopy, which harvests data on factors that are destroying nature.

In a statement, Global Canopy Executive Director Niki Mardas said: “This report lays out a clear base of evidence for what is surely becoming ever more plain to all: the increasing degradation and destruction of nature poses a financially material threat to businesses and financial institutions.”

He added: “For companies, financial institutions, regulators and fiscal policymakers alike, the most effective way to mitigate these risks is to act now – to shift financial flows away from activities that harm nature, toward those that can maintain, restore and regenerate it.”

ICAEW Sustainability Manager, Nature and Biodiversity, Toby Roxburgh says: “This research is a wakeup call: nature-related risks are no longer abstract – they’re showing up in balance sheets and boardrooms. For businesses and financial institutions alike, this is a call to action to integrate nature into core risk management and strategic planning. It’s not just good stewardship – it’s essential for long-term resilience and value creation.”

Helpful materials

Find plenty of advice on this topic in the Global Accounting Alliance guide Why Nature Matters to Accountants.

For further learning opportunities, join ICAEW’s Sustainability Accelerator Programme.