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Physical and transitional risk analysis

As financial markets shift towards nature-positive investments, understanding physical and transitional risks has become critical for investors and businesses alike. The Corporate Sustainability ReportingDirective (CSRD) now requires companies to disclose their impact on biodiversity, along with the risks they face due to climate change and ecosystem degradation. But with complex regulations and fragmented data, how can institutions effectively assess and report on these risks?

NatureAlpha’s Geoverse 2.0 provides a comprehensive, AI-powered risk analysis platform that enables companies and investors to identify, quantify, and manage physical and transitional risks with precision.

What Are Physical and Transitional Risks?

Physical Risks: These include direct environmental threats, such as deforestation, habitat destruction, extreme weather, and biodiversity loss, which can disrupt supply chains, reduce asset value, and increase operational costs.

Transitional Risks: These arise from the shift to a nature-positive economy, including changing regulations (CSRD, TNFD), evolving consumer expectations, and financial market adjustments that impact asset valuation and investment strategies.

How NatureAlpha Helps You Stay Ahead

Biodiversity-Aligned CSRD Reporting – Our platform provides the data and analytics required to meet CSRD disclosure requirements, helping companies remain compliant and future-proof their investments.

Precision Risk Assessments – By analyzing 8.5 million asset locations with 28geospatial layers, Geoverse 2.0 delivers unparalleled insights into physical and transitional nature-related risks.

Smarter, Faster Decision-Making – With real-time automated analytics, investors can swiftly adapt their strategies to align with regulatory and market expectations.

Turn Risk Into Opportunity

By integrating NatureAlpha’s data into your reporting and investment process, you can navigate regulatory requirements with ease, protect your assets, and capitalize on the transition to a sustainable economy.

Get ahead of CSRD reporting with NatureAlpha today.

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NatureAlpha Team
April 11, 2025

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Transitional: Investor divestment & strategy revision

As nature-related risk becomes a core consideration in sustainable finance, investor divestment is emerging as a significant transitional risk for companies failing to align with biodiversity and ecosystem protection goals.

Transitional: Litigation and liability risk

As environmental regulations tighten and public scrutiny intensifies, litigation and liability risk is becoming a critical transitional issue for businesses and financial institutions.

Transitional: Supply chains, systems & processes

As the global economy undergoes a transition toward sustainability, companies face increasing pressure to re-evaluate the supply chains, systems, and processes that underpin their operations.

Transitional: Policy change and activism

As awareness of biodiversity loss and environmental degradation rises, policy change and activism are rapidly reshaping the operating environment for businesses and investors.

Transitional: Natural resource availability

As the global economy shifts toward sustainability, natural resource availability is becoming a central transitional risk. Businesses that rely heavily on finite or declining resources are increasingly exposed.

Transitional: Regulatory and compliance changes

As global momentum builds around sustainability and biodiversity protection, regulatory and compliance changes are emerging as a key transitional risk for businesses and financial institutions.

Physical: Pandemics and social impact

The interconnectedness of human health, biodiversity, and business has never been more evident. Pandemics and their cascading social impacts present significant physical risks to businesses.

Physical: Biodiversity & ecosystem loss

As the natural world continues to degrade, biodiversity and ecosystem loss is becoming a major driver of physical risk—undermining the very systems businesses rely on for resources, resilience, and stability.

Physical: Water risk and rising sea levels

As global temperatures rise, physical water risks and sea level rise are emerging as some of the most material threats to infrastructure, economies, and investment portfolios.

Physical: Droughts, deforestation and landslides

As climate change accelerates and ecosystems are degraded, physical risks such as droughts, deforestation, and landslides are becoming more severe and financially consequential.