Tuesday, 4 November 2025
As sustainability reporting becomes more detailed and data-driven, companies and investors are beginning to confront a new challenge: how to measure and manage their impact on nature. Biodiversity risk — once seen as a distant environmental concern — is now being recognised as a financial and operational issue, influencing supply chains, regulation, and access to capital.
Unlike carbon emissions, biodiversity loss cannot be expressed through a single universal metric. It involves many interconnected factors: land use, water consumption, pollution, habitat change, and species decline. For this reason, the process of assessing exposure to biodiversity risk requires several layers of analysis — from identifying where a company’s activities intersect with natural ecosystems, to estimating how those activities could affect business performance over time.
Across Europe, companies are beginning to adopt structured methods for doing so. The most common approach starts by mapping operations or assets that depend heavily on natural resources — such as water, soil, or local ecosystems. Once those links are established, businesses evaluate the condition of the surrounding environment and measure how their activities influence it. These findings are then translated into risk assessments that connect environmental pressure with potential financial outcomes, such as higher operating costs, stricter permitting, or supply disruptions.
Financial institutions are moving in the same direction. Banks and asset managers are testing portfolio-wide screening tools that help identify sectors most exposed to biodiversity loss, including agriculture, construction, and extractive industries. These analyses help determine where investment risks may rise as environmental regulations tighten or as ecosystems become more fragile.
Regulators are also expanding their focus. The European Union’s new corporate reporting standards require large companies to disclose not only their environmental footprint but also their dependence on ecosystems and natural services. This shift means that biodiversity risk will soon have to be measured, documented, and verified in much the same way that carbon emissions are today.
Industry advisers say this change represents a major evolution in corporate sustainability. Instead of treating nature as an abstract externality, companies are being asked to account for it as a measurable component of business performance. The data may still be imperfect, but the direction is clear: biodiversity risk is emerging as the next defining metric of sustainable value creation.
For businesses, the lesson is simple. Understanding how operations depend on and affect the natural environment is no longer just a reputational concern — it’s becoming a core element of financial strategy. Those that can measure biodiversity risk effectively will not only comply with future regulations but also gain insight into long-term resilience and resource efficiency.
Source: CMS
