Central banks are increasingly aware of the role that nature plays in the economy and the need to understand potential financial risks from biodiversity loss, a new framework from the Network for Greening the Financial System (NGFS) shows.
The NGFS, a group of central bankers focused on understanding how climate change risks impact the economy, released a framework on Thursday to help supervisors integrate nature risks into their financial assessments.
Sabine Mauderer, chair of the NGFS and first deputy governor of the Deutsche
Bundesbank, said the reports provide practical tools for supervisors.
“It is increasingly important for central banks and supervisors to understand the risks linked to nature loss,” she said. “When ecosystems are damaged, the effects can spread through the economy.”
Nature-related risks are also often created by the very companies at risk of them, the NGFS says.
“As drivers of traditional financial risks … and given their potential impact on financial stability, nature-related risks are part of supervisors’ mandates, whether considered through the outside-in or where applicable, inside-out perspectives.”
Nature risk toolkit
The NGFS nature-related guidelines propose a four-step approach to how regulators can supervise the relevant financial risks. Those steps include: understanding those risks; setting supervisor expectations for financial institutions while engaging with them to understand their practices; and incorporating nature-related financial tools into traditional risk categories.
The NGFS also makes several recommendations, including: integrating nature-related risks with climate risks; clarifying how nature is part of a supervisor’s mandate; analysing how institutions mitigate nature-related risks; exploring methodologies for nature-related scenario analysis and stress testing; implementing measures gradually; and adding nature-related risks to transition plans.
Nicola Ranger, executive director of Earth Capital Nexus and a professor at the London School of Economics and Political Science, commended the NGFS for their work on nature risks which “has been a very important leader in this area”.
“The ecosystem services on which our whole economy depends are being eroded at an unprecedented rate,” she said during an NGFS webinar to launch the toolkit.
Nature is often thought of as being local but it can have a global impact, she said, and global supply chains are just as susceptible to nature risks as they are to climate change.
She noted research she has conducted with the European Central Bank on water-related risks in Europe, where around half of the risks were through supply chains. While water risks impact the expected areas like agriculture, it also has effects on manufacturing and data centres, Ranger said.
These risks are starting to show up in prices, and central banks and financial institutions are taking note.
Overcoming data gaps
The NGFS says that while using these methods and resources are helpful for supervisors, the quality of assessments depends on the type of metrics and indicators used.
The framework also notes that progress is still needed in terms of data quality and availability, as there is a lack of standardised reporting frameworks. However, these data gaps can be addressed through public-private partnerships.
One of the biggest issues identified is that of economic modelling, said Ranger.
“A lot of models being used right now only really capture a narrow part of the risks,” she said. This means that many models are underestimating a risk that climate scientists say is very significant.
Her comments echo warnings from other economists who say central bankers often don’t accurately account for climate tipping points.
Still, Ranger notes that central bankers don’t need to wait for perfect sets of data. By taking an integrated approach, they can start to build an understanding of the potential risks.
“We don’t need to wait for the perfect data … we know these risks are material. So the priority is to start building this into our existing approaches to assess financial risk today”.
This page was last updated September 10, 2026
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
