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Physical: Wildfires, heatwaves and air quality

As climate change accelerates, nature-related physical risks such as wildfires, heatwaves, and declining air quality are becoming increasingly severe—and financially material. For businesses and investors alike, these threats go beyond environmental concern; they pose direct challenges to the value, functionality, and longevity of assets.

Wildfires can destroy critical infrastructure, threaten operational facilities, and cause widespread evacuation or shutdowns. Even in cases where assets are not directly damaged, surrounding fires can render areas inaccessible, delay supply chains, or increase insurance premiums significantly.

Heatwaves place enormous stress on energy systems, cooling infrastructure, and workforce productivity. Prolonged exposure to extreme temperatures can degrade equipment, reduce efficiency, and pose serious health risks to employees—affecting both output and safety compliance.

Meanwhile, poor air quality—often exacerbated by wildfire smoke or industrial pollution—can lead to workforce absenteeism, regulatory penalties, and reputational damage for companies seen to neglect environmental safeguards.

The combined result? Higher operational costs, reduced productivity, increased health liabilities, and, in extreme cases, asset write-downs or relocations.Platforms like NatureAlpha’s Geoverse 2.0 help identify and mitigate these risks at scale, using geospatial and environmental data to enable smarter, nature-aware investment decisions that safeguard both people and capital.

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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.