Why we care

The rapid pace of biodiversity loss and water scarcity poses significant threats to global health, food security, poverty, migration, and even armed conflicts. Economic activities are a major driver of environmental degradation, leading to long-lasting consequences. For this reason, biodiversity and water have been recognized as U.N. social development goals (SDGs) and are important goals in the regulatory agenda of sustainable finance, for example the EU Sustainable Finance Taxonomy.

But beyond public policy and regulatory reporting, there is also a business reason for companies to incorporate biodiversity and water in their strategy. This business reason is risk management: Biodiversity and water risks are important operational risks with substantial financial materiality to companies. As part of operational risk, integrating nature risks into the risk management concept of a company makes those risks visible and manageable. However, this integration needs a clear bottom-up assignment of impacts to companies and a translation of those impacts into financial dimensions. This will enable, for the first time, the holistic internalization of all nature risk costs. In our publication, we are calling this concept Biodiversity Value at Risk (BioVaR).

To solve this challenge, we structured our interdisciplinary team to support the process chain from biodiversity and water risk measurement in environmental terms to mapping the corporate ownership of those risks and to the integration into the financial modelling of the resulting operational business risks.