Nature-related financial risks in corporate bonds: Testing the TNFD Framework

About this LEAP Use Case

Insight Investment tested the TNFD Framework using a sample of corporate bonds. This use case explains how the financial institution implemented LEAP and the lessons learnt from each phase of the assessment approach, which are relevant to a wide range of investors.

Key outcomes

• Nature-related risks are diverse and could present meaningful risks for investment portfolios.
• Insight Investment was able to identify key risks across its sample of corporate bonds, based on sectoral allocation and the locations of specific assets. Water risks were consistently the most material sources of nature-related risk across the sample.
• Measuring these risks and setting targets to mitigate them is hindered by data gaps and there is reliance on averages or proxy data.
• Insight Investment’s use case demonstrates that it will take some time for investors to fully recognise nature risks and respond to them in their corporate bond portfolios – but the trajectory towards greater disclosures of nature-related risks is clear.

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