Banks, Birds, Bees: Biodiversity Risks Back on the Finance Agenda

Nov. 26, 2025

At a recent gathering hosted by the Swedish House of Finance, researchers, asset owners and banks warned that biodiversity loss is becoming a material financial risk, while markets are still only beginning to price it.

In his keynote, Zacharias Sautner of the University of Zurich said emerging research shows that “nature risks are investment risks.” He argued that backlash against ESG often stems from a “fundamental misunderstanding,” saying investors must show that “these risks create financially material investment risk that we should care about from a financial value, not just values perspective.”

Evidence is mounting. Nearly half of firms surveyed already judge nature-related risks to be financially material. Sautner noted that companies with heavier biodiversity footprints tend to deliver higher stock returns, suggesting investors demand a premium for bearing the risk. Physical exposures are also coming into view, he said, pointing to a lawsuit involving Tesla that shaved more than 3% off the firm’s share price in a single day over worries about water use.

No Longer in ‘Premature’ Stage

Financial institutions are beginning to respond. Swedbank now treats biodiversity loss as a significant risk, said Johanna Fager Wettergren, the bank’s head of group sustainability.

“[The issue] is high on the agenda… all the way to the board's agenda today,” she said. “It's not premature anymore.”

Adapting climate-risk tools provides a starting point, yet nature risk brings its own awkward complications. It is intensely local, making measurement far harder. Client understanding is similarly uneven. Large firms may lead the way, but among smaller firms, Fager Wettergren said, “the awareness is still quite low, in general”.

AP4, one of Sweden’s largest pension funds, believes sustainable investing will yield stronger risk-adjusted returns. But data gaps remain an obstacle.

“We haven't taken a position yet, and the reason for that is that we think the data is difficult, too noisy, and the area is very complex,” said senior analyst Julia Ripa. “But we are also losing patience on waiting for good data.”

Ripa said AP4 will now move forward regardless.

“We are going to start smaller, with one subcategory of biodiversity. So, I think it will be deforestation that we will research and see if the area is investable for us now.”

Complexity and Information Gaps

Researchers cautioned that progress on biodiversity data still leaves major gaps. Mark Sanctuary of KTH said new tools—from satellite imaging to DNA analysis—are transforming monitoring, yet most species remain unidentified.

“Biologists are talking about 80% plus of the species on the planet are not even identified… others are saying… it's closer to 99% if you include bacteria,” he said. “And that's mind-blowing kind of uncertainty.”

Calls for Better Regulation… Without Over-Regulation

Panelists agreed regulation will determine how the field matures.

“Now we are in the in the kind of shift where the debate is about, if we are over-regulating within the EU I think there is one risk that would go too far on the other direction,” Fager Wettergren said. “If it’s too complex, it's burdensome, and it won't help us. It will lead our focus wrong.”

Sautner added that investor coalitions are shrinking amid legal threats, especially in the United States, and urged clearer guidance on permitted coordination. He also warned against over-reliance on major ESG data vendors.