Frank Elderson has warned that accelerating nature loss is creating material risks for economies and financial systems, arguing that international cooperation is essential to identify, measure and manage nature-related exposures that can transmit across borders.
Frank Elderson said the decline of nature is increasingly relevant to economic stability, describing nature-related risks as capable of affecting growth, inflation dynamics, asset values and the resilience of financial institutions. He framed the issue as extending beyond environmental policy into the core responsibilities of economic and financial authorities, particularly where disruptions to ecosystems can impair production, supply chains and the availability of key inputs.
Elderson’s remarks, delivered under the theme “Nature in decline, economy on the line,” focused on the need for coordinated approaches among jurisdictions. He argued that nature-related risks do not respect national boundaries and can be amplified through trade, cross-border investment and globally integrated financial markets. In that context, he said fragmented standards and uneven data availability can hinder effective risk assessment and lead to blind spots for both supervisors and market participants.
The intervention comes as policymakers and financial institutions broaden their focus from climate-related risks to a wider set of nature-related dependencies and impacts, including those linked to land use, water systems and biodiversity. Elderson emphasized that the economic consequences of ecosystem degradation can be complex and non-linear, and that the financial system may be exposed through multiple channels at once.
## Nature-related risks and financial stability
Elderson said nature underpins economic activity through ecosystem services that support agriculture, forestry, fisheries, water availability and other sectors. When those services are degraded, the effects can cascade into higher costs, reduced output and increased volatility. He highlighted that such pressures can translate into credit risk for lenders, market risk for investors and operational risk for firms dependent on stable natural conditions.
He also pointed to the possibility that nature-related shocks could interact with other stressors, including extreme weather and broader environmental change, complicating risk management. In his view, the financial system’s exposure is not limited to firms directly operating in nature-intensive sectors; it can also arise through downstream industries, consumer prices and macroeconomic conditions.
Elderson argued that supervisors and central banks need to ensure that financial institutions are able to identify and manage these exposures. That includes understanding where portfolios depend on ecosystem services, where business models may contribute to nature degradation, and how regulatory or market responses could affect valuations. He said that without clearer information and consistent approaches, risks may be mispriced and vulnerabilities could build.
## Data, disclosure and common frameworks
A central theme of Elderson’s remarks was the challenge of measurement. He said nature-related risks are difficult to quantify because they involve location-specific factors, varying ecological baselines and limited historical data. He called for improved data infrastructure and more comparable disclosures to help institutions assess exposures across geographies and sectors.
Elderson stressed that international cooperation can support the development of shared concepts, metrics and reporting practices. He said that common frameworks can reduce fragmentation and help ensure that disclosures are decision-useful for investors, lenders and supervisors. He also noted that consistent approaches can help avoid duplicative reporting burdens for firms operating across multiple jurisdictions.
He described scenario analysis and stress testing as tools that can help institutions explore how nature-related degradation could affect portfolios and the broader economy. However, he cautioned that such exercises depend on assumptions and data that are still evolving, reinforcing the need for collaboration among public authorities, researchers and market participants.
## Cross-border coordination and policy alignment
Elderson said international coordination is particularly important because nature-related risks can be transmitted through global supply chains and financial linkages. He argued that a disruption in one region—such as reduced water availability or ecosystem decline affecting agricultural output—can have consequences for prices, trade flows and corporate earnings elsewhere.
He also highlighted the role of policy alignment in managing transition-related aspects of nature risk. Differences in regulatory approaches, land-use rules and environmental enforcement can create uncertainty for firms and investors, he said, while clearer and more predictable policy pathways can support risk management and capital allocation.
Elderson’s comments underscored a broader push among financial authorities to integrate nature-related considerations into existing risk frameworks rather than treating them as a separate category. He said that the objective is not to replace established prudential tools, but to ensure they remain fit for purpose as environmental degradation increasingly affects economic outcomes.
While he did not set out specific measures in his remarks, Elderson’s message centered on urgency and coordination: nature loss, he said, is not only an ecological concern but a source of economic risk that requires shared methods, better information and cross-border cooperation to manage effectively.
