Nature can be understood through a construct of four realms – Land, Ocean, Freshwater, and Atmosphere. These are major components of the natural world that differ fundamentally in their organisation and function. Atmosphere is included in the framework to reflect the close association between climate- and nature-related risks and opportunities, while also acknowledging that links with climate mitigation and adaptation occur across all realms.
Society interacts with and across all four realms and therefore sits at the centre. People, including corporates and financial institutions, both depend on, and have impacts on, nature. As such, society both contributes to – and is affected by – the main drivers of nature change.
The four realms provide an entry point for understanding how organisations and people depend on, and have impacts on, the natural capital that provides the resources and services from which business and societies benefit.
The complex interplay of nature-related dependencies and impacts over multiple time periods can result in earning and cashflow vulnerability. This can transmit into a broader range of financial risks, including market, credit and liquidity risks. These transmission channels include both micro-channels (such as supply chain uncertainty due to disruptions to production activities and value chains imposing unexpected costs; changes in profitability and asset values; and increased litigation) and macro-channels (such as changing demand and raw material price volatility).