12.12.2025Initiative in Sustainable Finance: Firm-level Nature Dependence

The authors of this paper introduce firm-level measures of nature dependence and explore whether and how financial markets pay attention to such dependence.

• Alexandre Garel, Audencia Business School
• Arthur Romec, Toulouse Business School
• Prof. Zacharias Sautner, University of Zurich and Swiss Finance Institute
• Prof. Alexander Wagner, University of Zurich and Swiss Finance Institute

As firms face the complexities of dependence on nature, understanding their dependence on ecosystem services becomes critical for risk management and corporate strategy. Investors' growing interest in nature-related risks underscores the need for firms to improve their disclosures and actions related to biodiversity and the sustainability of ecosystem services. This changing landscape presents both challenges and opportunities for firms seeking to align their business activities with environmental sustainability goals.

The paper develops quantitative measures of how much individual firms depend on nature’s ecosystem services, such as water supply, flood protection, and soil retention. By using a new, more granular version of the ENCORE database, the authors construct “NatureDep” scores for 31,772 listed firms in 117 countries over 2010 – 2023, providing the first global dataset with broad coverage of firm-level nature dependence.

The authors map information on firms’ revenues across business segments to economic activities in ENCORE and extract ecosystem service dependence ratings for each segment.

They aggregate these ratings to the firm level using revenue weights, generating

   (i)    NatureDep^Overall, the average dependence on ecosystem services above a minimum relevance threshold, and 

   (ii)    NatureDep^High, the count of ecosystem services for which a firm has a high or very high dependence.

They then analyze descriptive patterns and the financial relevance of these scores, and benchmark them against alternative nature dependence metrics from IDL and S&P.

1. Typical listed firms show low to moderate nature dependence: the average NatureDep^Overall is about 2.8 (on a 1  –6 scale, with higher values indicating higher dependencies), but with wide dispersion (1.57 – 4.27). The average firm has around two high dependencies, yet some firms rely heavily on up to 13 different ecosystem services. Dependence is concentrated in water related services (water flow regulation, storm mitigation, water supply, flood control, soil sediment retention).
2. Nature dependence varies strongly by sector: Firms in Pharmaceuticals, Food, Beverage & Tobacco, and Household & Personal Products display the highest values of average NatureDep^Overall, with firms in Food, Beverage & Tobacco also having the largest number of high dependencies (NatureDep^High ≈ 4).
3. Firms with high tangible assets, higher biodiversity footprints, and higher carbon emissions tend to have higher NatureDep scores, indicating tight links between nature dependence, nature impact, and climate exposure.
4. The scores relate positively to measures of downside risk, with effects stemming mostly from high dependencies on water-related ecosystem services. Moreover, the scores predict nature-related incidents that arise when high nature dependence leads firms to damage nature, overuse resources, or trigger disputes with local communities.

"There is a growing recognition among investors regarding the importance of nature dependence. Asset managers, such as BlackRock, are increasingly engaging with firms that exhibit high nature dependence, signaling a shift in focus towards biodiversity and natural capital. Despite this, corporate disclosures regarding nature dependence remain limited, highlighting a gap in environmental transparency."
-Prof. Zacharias Sautner

The NatureDep scores offer a scalable, transparent way to quantify how exposed firms are to disruptions in ecosystem services, filling a key gap for investors, regulators, and researchers concerned with nature related financial risks.

The results imply that nature related risks are highly sector and firm specific and are closely intertwined with climate risk and biodiversity impact, so that standard ESG or climate metrics alone are insufficient.

For practitioners, high values of NatureDep^High scores are particularly informative: firms with concentrated high dependencies face higher downside risk and more nature-related incidents, suggesting that these scores can support stress testing, portfolio construction, engagement, and the implementation of TNFD aligned risk management.

"Firms with high nature dependence are often more vulnerable to financial risks associated with ecosystem service degradation. For example, companies that rely heavily on water resources may face significant operational challenges and financial losses if water availability decreases."
-Prof. Alexander Wagner

Understanding Nature Dependence

More Information:

• Garel, Alexandre, Arthur Romec, Zacharias Sautner, and Alexander Wagner, Firm-Level Nature Dependence, Review of Finance, forthcoming.
• A working paper version of the article can be downloaded here: https://ssrn.com/abstract=5196826 
• The NatureDep scores constructed by the researchers can be accessed for free here: https://osf.io/d85e7/ 

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