Quantifying firm-level risks from nature deterioration

Abstract

We estimate the loss of value that companies might suffer from nature overexploitation. We find that global equities shed 26.8% in a scenario of unabated nature decline, while the worst-performing firms lose ~75% of their value. Our risk framework considers five environmental hazards: biodiversity loss, land degradation, climate change, human population and nature capital. We also introduce two metrics to assess nature-related risks: a Country Degradation Index that tracks the damage caused by environmental hazards in specific territories, including nonlinear dynamics and tipping points; and a Nature Risk Score that summarizes the risk that companies face due to the decline of nature and its services.

arXiv comment28 pages, 5 figures, 5 tables