Banks at Risk: Quantifying Endogenous Nature Risk Exposure of G-SIBs

The financial sector’s role in biodiversity loss and ecosystem degradation is gaining attention from civil society, policymakers, and financial institutions. Previous studies on nature-related financial risks have focused on the risks of exogenous nature loss to the financial system without explicit recognition that their portfolios also drive nature loss. We frame nature-related risks as directly linked to economic activities causing degradation. For the first time, we quantify the risk financial institutions generate for themselves through the financed impacts of their portfolios, their endogenous nature risk exposure. Examining the 29 globally systemically important banks (G-SIBs), we assess risk at the sector-, portfolio-, and financial system-level. Our findings reveal high correlation in endogenous nature risk exposure among these “too-big-to-fail” banks, amplifying systemic risks and threatening financial stability. The results underscore the need for policy that recognizes that the financial sector must reduce its financed nature impact to ensure financial and ecological stability.

O’Donnell, Emma and Ranger, Nicola and Sabuco, Juan and Seddon, Nathalie, Banks at Risk: Quantifying Endogenous Nature Risk Exposure of G-SIBs (September 26, 2025). Available at SSRN: https://ssrn.com/abstract=5533799 or http://dx.doi.org/10.2139/ssrn.5533799