In today’s financial world, where uncertainty is the only constant, regulators and industry leaders are widening their scope of what constitutes a financial risk. One of the most groundbreaking developments in 2025 has come from the Swiss Financial Market Supervisory Authority (FINMA), with the release of its circular on “Nature-related Financial Risks.” At first glance, this may sound like a niche concern or another compliance item in an already crowded risk register. But take a closer look—and the message is clear: the stability of financial systems is now recognized as being tightly intertwined with the health of our natural ecosystems.
This isn't just an environmental issue. It's a financial one. And it’s time for Swiss banks, insurance providers, and all financial actors to pay close attention.
The Natural World as a Source of Financial Risk
Traditionally, discussions around biodiversity loss, deforestation, or water scarcity have been the domain of environmentalists, NGOs, and climate scientists. But that’s no longer the case. Increasingly, it’s the CFOs, CROs, and board members of financial institutions who are being urged to factor these into their decisions.
FINMA's circular is one of the first concrete regulatory steps in Europe to formally acknowledge the financial implications of nature-related risks. It reflects a global shift in thinking—aligned with initiatives like the Taskforce on Nature-related Financial Disclosures (TNFD)—toward a more integrated understanding of how the degradation of natural capital can directly and materially affect the financial sector.
Let’s break this down:
- Dependency: Many businesses and economic sectors are deeply dependent on nature. Agriculture relies on healthy soils and pollinators. Tourism often depends on natural landscapes and biodiversity. Manufacturing depends on raw materials sourced from nature. When ecosystems degrade, these dependencies turn into vulnerabilities.
- Impact: Companies themselves can contribute to environmental degradation, either directly or through their supply chains. This can backfire in the form of reputational damage, regulatory sanctions, legal liabilities, or even operational shutdowns in extreme cases. And when clients or counterparties are impacted, so are their lenders and insurers.
What FINMA has done is turn the dial up on how seriously these connections should be treated—by explicitly requiring financial institutions to identify, assess, manage, and disclose their exposure to such risks.
What’s Inside FINMA’s Circular?
The circular itself sets forth a range of expectations for supervised entities. It’s not overly prescriptive, but it is firm in its intent. Here's what stands out:
1. Broad Definition of Nature-related Risks
FINMA takes a holistic view. Nature-related financial risks are defined as those stemming from the deterioration of ecosystems and the services they provide. This includes:
- Physical Risks: Like soil erosion, water scarcity, and biodiversity collapse.
- Transition Risks: Such as policy changes, shifts in consumer preferences, new regulations, litigation tied to environmental damage, or disruptive innovations that affect the value of nature-dependent assets.
2. Integration into Core Risk Categories
Institutions are not being asked to reinvent the wheel but rather to embed nature-related considerations into existing risk frameworks:
- Strategic Risk: How nature-related factors affect long-term business models and strategy.
- Credit Risk: Evaluating exposure to clients in vulnerable sectors (e.g., agribusiness, forestry, mining).
- Market Risk: Understanding how the value of financial instruments might be affected by nature degradation or regulatory change.
- Operational Risk: Accounting for supply chain disruptions or infrastructure vulnerabilities caused by ecosystem degradation.
- Reputational Risk: Recognizing that consumers and investors increasingly expect companies to manage their environmental impact.
3. Governance & Strategy
Boards and executive management are explicitly called upon to ensure these risks are understood at the highest level. Nature-related considerations must be embedded into business strategy and risk appetite discussions—not relegated to ESG departments or treated as peripheral concerns.
4. Disclosure Expectations
Transparency is not optional. Institutions are expected to disclose how they are exposed to nature-related risks, how they’re managing them, and what frameworks (like TNFD) they align with. This is not only about regulatory compliance—it’s about maintaining credibility with investors, clients, and the public.
5. Proportionality Principle
Not every institution is expected to respond in the same way. FINMA acknowledges that smaller firms or those with limited exposure may apply the circular’s principles in a proportionate manner. But the expectation is clear: no institution is exempt.
Beyond Compliance: A Strategic Imperative
At first glance, this may look like just another regulatory requirement. But it’s much more than that. For forward-thinking institutions, FINMA’s circular should be viewed as a strategic opportunity.
Why?
Because nature-related financial risks are not a theoretical future problem—they are already here. From the growing frequency of floods, droughts, and wildfires, to disruptions in agricultural yields and natural resource availability, the financial consequences of nature degradation are no longer abstract.
What does this mean for institutions?
• Enhance Data and Analytics Capabilities
Nature-related risks can be difficult to quantify, especially since many impacts are non-linear or cumulative. Institutions will need to invest in new tools, data sources, and methodologies. This includes geospatial analysis, supply chain mapping, and biodiversity assessment tools—many of which are still evolving.
• Build Internal Capacity
New data alone won’t suffice. Risk managers, credit analysts, and investment teams need training to interpret these new data points and translate them into meaningful actions. Internal education and upskilling will be critical.
• Engage Clients and Partners
Financial institutions should not just assess their own exposure, but also that of their clients. Proactive engagement—helping clients transition to more sustainable, nature-positive practices—can both reduce risk and create new business opportunities.
• Adjust Investment and Lending Policies
Portfolio strategies may need to be revisited. Certain sectors may carry higher nature-related risks than previously understood. Institutions will need to consider integrating exclusion criteria, positive screening, or sectoral caps based on nature impact and dependency.
• Prepare for Future Disclosure Regimes
Regulatory alignment is already moving at pace, especially across Europe. Getting ahead of disclosure expectations now—by adopting best practices and voluntary frameworks like TNFD—can reduce future compliance costs and signal leadership to the market.
Why This Matters—Now More Than Ever
Nature loss is accelerating globally. According to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), around 1 million species face extinction, many within decades. Over half of the world’s GDP—roughly $44 trillion—is moderately or highly dependent on nature and its services.
In this context, FINMA’s move is not radical. It’s rational.
By embedding nature-related risks into risk management processes today, financial institutions are not only protecting themselves—they are contributing to broader economic resilience. And in doing so, they help stabilize the very systems that underpin their long-term viability.
How Resilience Guard Can Help
At Resilience Guard, we understand that navigating this new landscape can be daunting. Our mission is to help organizations—large or small, traditional or digital-native—embed resilience into the core of their operations. That now includes helping them understand and manage nature-related financial risks.
Here’s how we can support:
- Risk Identification & Quantification: Using both traditional and advanced tools, we help institutions assess where nature-related risks reside across their portfolios.
- Training & Capacity Building: We offer tailored training programs for teams across risk, compliance, ESG, and investment functions.
- Policy & Framework Development: We assist in updating risk policies, governance structures, and disclosure protocols to reflect new requirements.
- Client Engagement Strategies: We help you build strategies for engaging with clients exposed to nature-related risks, whether in agriculture, tourism, manufacturing, or energy.
- Technology Enablement: We advise on and help implement tools for data analytics, reporting, and scenario modeling aligned with TNFD and other international frameworks.
Our extensive experience in risk management, ESG consulting, and research-backed advisory services means we’re uniquely positioned to bridge the gap between regulatory requirements and practical implementation.
Final Thoughts: Turning Risk Into Opportunity
As the financial industry adjusts to this new reality, there’s a chance to not just comply—but to lead. Those who embrace FINMA’s circular early and with conviction will not only de-risk their operations but position themselves at the forefront of a more sustainable and responsible financial system.
This is a chance to demonstrate leadership, not just in financial terms, but in shaping the future of finance itself. Institutions that act now will be better prepared, more agile, and more trusted—by regulators, investors, and the public.
The path to a resilient future goes through nature. Let’s walk it with purpose.
Interested in a deeper dive? Contact us for a tailored resilience assessment.
Interested in a deeper dive? Contact us for a tailored resilience assessment.