Natural risks affect a company’s net worth, financial position, and earnings through various channels. The consequences are evident in credit rating adjustments, changes in liquidity, and financial ratios. Banks are becoming increasingly sensitive to the risk potential posed by natural hazards when it comes to financing and equity investments, but they also recognize the opportunities that arise from addressing these issues. Companies can significantly improve their negotiating position if they understand the extent to which they are affected by such risks. The authors—Prof. Johannes Hofinger, Prof. Anna-Lena Kotzur, Dr. Julian Blohmke (LBBW), and Michael Stich (LBBW)—outline two suitable approaches—the portfolio approach and the individual approach—that companies can adopt now to gain a comprehensive understanding of their natural risks and opportunities.
Your next annual meeting with your bank’s credit department might hold some surprises. Topics such as water and pollination could be on the agenda. You may find yourself thinking back to your biology classes from years ago and wondering why these topics are coming up in a financing discussion. That’s understandable, but there’s a serious reason behind it. Water and pollination are just two examples of natural resources and ecosystem services that can influence a company’s financial position, cash flow, and profitability. For instance, water shortages in the supply chain can lead to higher procurement costs for necessary raw materials[1], while a lack of pollination can result in lower revenues in the agricultural supply chain[2].
Companies’ business models can be both dependent on natural risks (outside-in perspective) and have an impact on nature (inside-out perspective). Through their questions, bank advisors aim to look “behind the scenes” of financial metrics. They want to understand how natural changes affect profitability and liquidity—and, consequently, creditworthiness and the ability to service debt. This approach is not entirely new. The implementation of the climate agenda[3] in recent years has led to the expansion of credit risk management to include non-financial risks. Similar developments are now also being observed in the consideration of natural risks and their transmission into financial risks. Companies—and their finance departments in particular—are therefore well advised to address this issue more closely and without delay.
Support is coming in particular from the international level, where nature-related risks are already being addressed through various initiatives. Similar to the 2015 Paris Agreement on Climate Change, the Kunming-Montreal[4] Global Biodiversity Framework was established in 2022 to address ecosystem services. In parallel, the Task Force on Nature-related Financial Disclosures (TNFD)[5] and, in particular, the Partnership for Biodiversity Accounting Financials (PBAF)[6]—which is important for the banking and financial sectors—are developing proposals for implementation and solutions. At the EU level, the guidelines on ESG risk management[7] published in January 2025 set the direction, with numerous references to biodiversity, environmental, and nature-related risks. The current 9th amendment to the MaRisk[8] integrates these guidelines into German banking supervision in a principles-based manner. The Deutsche Bundesbank’s monthly report for April 2026 looks further into the future by introducing the “Foresight” [9] project, which examines four future scenarios for nature-related risks. Important examples of best practices can be found in the European Central Bank’s May 2026 publication on “Good practices for advancing climate and nature-related risk management.”[10]
From the perspective of the CFO’s agenda, the question now arises as to what concrete steps could be taken to identify financial dependencies on and impacts of nature. A major challenge lies in the complexity of the task: corporate structures can be complex, and nature and its interconnections are certainly complex. (…)
You can find the full article in the October 29, 2026, issue of the journal REthinking Finance.
Authors
Prof. Dr. Johannes Hofinger
is a professor of finance and accounting at Munich Business School and a forester whose family-owned forestry business is plagued by natural risks.
Prof. Dr. Anna-Lena Kotzur
teaches national and international accounting at ESB Business School and advises companies on implementing ESG requirements.
Dr. Julian Blohmke
is an experienced consultant on sustainability strategy, transformation, and sustainable finance at Landesbank Baden-Württemberg and has worked for development banks, research institutions, and companies worldwide.
Michael Stich
works as a senior expert in Transition Analytics & Advisory at Landesbank Baden-Württemberg. He has been in corporate banking for over 20 years and supports companies in their sustainable transformation.
[1] Cf. investESG, Just 1 in 10 Fashion Companies Show Awareness of Water Pollution Across Whole Value Chain, ESG. Guide vom 21.09.2020, https://fmos.link/31114 (as of 04.07.2026).
[2] Cf. Reilly et al., Crop production in the USA is frequently limited by a lack of pollinators, Proceedings B 2020, 20200922.
[3] Cf. Regulation (EU) 2021/1119 (‘European Climate Law’).
[4] Cf. Kunming-Montreal Global Biodiversity Framework, CBD/COP/15/L25, Convention on Biological Diversity, 2022.
[5] Cf. Recommendations of the Taskforce on Nature-related Financial Disclosures, 2023. The TNFD is a global initiative that provides companies and financial institutions with a framework for assessing and disclosing nature-related risks, dependencies, and impacts. It is comparable to the TCFD (Task Force on Climate-related Financial Disclosures) in the context of climate change.
[6] Cf. Biodiversity Footprinting Standard: Financed Impact, PBAF, 2024.
[7] Cf. EBA, Guidelines on the management of ESG risks, 2025.
[8] Cf. Bafin, Mindestanforderungen an das Risikomanagement – MaRisk, 2026.
[9] Cf. Foresight-Project of the Bundesbank „Biodiversitätsrisiken 2040 – die Zukunft der Biodiversität und Implikationen für Gesellschaft und Wirtschaft“, Monthly Report – April 2026, Deutsche Bundesbank, 2026.
[10] Cf. European Central Bank, Good practices for advancing climate and nature-related risk management, 2026.
