Measuring nature‑related risks: why data is the hard part
The saying “the road to hell is paved with good intentions” is a reminder that even well‑meant actions can produce unintended harm. As more companies aim to operate sustainably, this tension becomes especially visible: actions taken to address one environmental problem can inadvertently create another.
Dr Tommaso Palermo, Associate Professor in the Department of Accounting at LSE, offers a concrete example: “Consider a consumer goods company under pressure to reduce its carbon footprint. After months of research, its sustainability team proposes replacing the petroleum-based plastics in some of its products with a natural alternative. A ‘nature-friendly’ product is launched and carbon metrics drop. At this point, things look good.
“But what if the natural product replacing the plastics comes from a fragile biodiverse source? As production scales up and more land is cleared, new pollutants are introduced to the landscape, the habitat is disrupted and soil degrades. What began as a well-intentioned climate win turns out to have carried a hidden cost and is a growing harm to nature.”
When companies try to assess their impacts on nature, this kind of unexpected – and sometimes counter-productive – result is not uncommon. Protecting biodiversity in one place can increase emissions in another; reducing water use in one region can shift pressures elsewhere. “There is no optimal solution,” he says. “You’re dealing with effects that differ by location and time. Anyone claiming a simple answer is missing the interdependencies.”
But the deeper challenge, Dr Palermo has found, is not that companies make poor choices. It is that the data needed to make any choice at all is unevenly distributed, defined differently by different actors, and difficult to assemble into anything resembling a single picture of what nature risks are. The same underlying data is asked to do several incompatible jobs at once – be granular enough to inform site-level decisions, comparable enough for portfolios, and scientifically credible enough to satisfy the ecologists whose work sits behind it.
Information that is useful to a portfolio manager ... is rarely the same information that is useful to a sustainability lead trying to make operational decisions at a single site.
Understanding nature-related risks
Funded by LSE’s Global School of Sustainability (GSoS), Dr Palermo has been exploring the difficulties of translating nature data into risk measures – an area that is a central challenge for companies and society. He interviewed a range of actors across different groups such as standard-setters, data providers and analytics specialists, corporate sustainability and environmental teams, staff at financial institutions, and independent experts and consultants.
Interviews suggest a data landscape in which what counts as "decision-useful" depends heavily on who is asking and for what purpose. Some are required to report nature-related risks under EU sustainability regulations; others are preparing voluntarily, often in expectation of future mandates. A smaller group – particularly those with in-house biodiversity expertise – are genuinely committed to understanding their impacts on ecosystems.
"Information that is useful to a portfolio manager looking across hundreds of companies is rarely the same information that is useful to a sustainability lead trying to make operational decisions at a single site," Dr Palermo says. "And neither is the same as what an ecologist would call evidence about the state of nature."
What complicates this further is that different actors are looking for different things from the same data. Data providers see themselves as translators, turning ecological complexity into analytics that financial institutions and corporates can use. Corporate sustainability teams want operational, site-level information that can guide procurement, design and risk decisions. Financial institutions want portfolio-level signals that can support stewardship – engagement, voting, occasionally divestment – without committing them to acting as de facto regulators.
One interviewee said that it wasn't their job to police companies' environmental behaviour, Dr Palermo notes. "If they start excluding firms based on certain impacts, it can look like they're enforcing standards rather than assessing risk.”
Nature ... doesn’t have just one metric. A company’s impact can depend on local biodiversity, water scarcity, soil quality or protected habitats. You can’t collapse that into one global number.
Climate versus nature: similarities and differences
Much of Palermo’s project focuses on the Taskforce on Nature‑related Financial Disclosures (TNFD), which has developed a standardised approach for companies to assess their impacts and dependencies on natural ecosystems. TNFD is modelled on the Task Force on Climate‑related Financial Disclosures (TCFD). But while climate frameworks have benefited from more than a decade of development, clear quantitative targets and an emphasis on a single global metric (temperature rise), nature risk is far more location‑specific and harder to capture.
“Climate had a single focal point: reducing emissions to limit global warming,” says Dr Palermo. “Nature, however, doesn’t have just one metric. A company’s impact can depend on local biodiversity, water scarcity, soil quality or protected habitats. You can’t collapse that into one global number.”
With nature, it is hard to measure harm; it is also hard to measure improvement. Several interviewees described the frustration of trying to quantify positive impact in a way that travels beyond the site where the work is done. "If a company restores two hectares of habitat for a particular bird species, how do you sum that up across a portfolio?" Dr Palermo asks. "What does it add up to for an investor screening a hundred companies? There isn't an obvious answer, and people are aware of that."
Even very large organisations struggle to map where their facilities actually are.
Why the LEAP framework starts with the hardest step
These measurement and aggregation problems sit at the centre of the frameworks now being developed. One of the core frameworks developed by TNFD is the LEAP approach, which helps organisations evaluate their nature-related risks by following four steps: Locate; Evaluate; Assess; Prepare. The first step – Locate – asks companies to identify precisely where their operations and suppliers sit in relation to nature‑sensitive areas.
This sounds simple, a task every organisation should be able to meet. In practice, however, Dr Palermo found “Locate” to be the most difficult step for many he interviewed. The size and complexity of many organisations, and the depth of the supplier networks they rely on, mean that specific locations of factories and plants are often unknown.
“I was surprised that even very large organisations struggle to map where their facilities actually are,” he says. Global firms with hundreds of subsidiaries may manage location data inconsistently; newly acquired sites may not be captured in central systems; and suppliers several tiers down may be invisible in official records.
Yet without precise location data, nothing else works: companies cannot know whether they depend on local natural resources, whether their activities disturb sensitive habitats, or how to quantify risks related to biodiversity or water. The challenge grows when protected areas are involved. Firms often dispute whether their facilities sit just inside or just outside a key biodiversity zone, with significant implications for reporting.
Nature data: what gets measured, and what matters
One contrast that surfaced repeatedly across Dr Palermo's interviews is the gap between how environmental advocates and sustainability teams approach the same problem. Advocates often start with a visible environmental problem – pollution, deforestation, habitat loss – and ask how to address it. Sustainability teams, working within reporting frameworks, may start from what is measurable or disclosable, which can change priorities. The two starting points do not always converge.
Closing that gap will require looking at the entire nature data landscape, from the ecologists and conservation databases that produce raw evidence about the state of nature to the dashboards used by investors. Whether such ‘‘data-work’’ can resolve the tension underlying the translation of nature data into ‘‘useful’’ risk measures is, based on the evidence so far, an open question. The road from good intentions to good outcomes runs through the data – and the data, for now, points in several directions at once.
Translating nature into risk: preliminary insights and further questions is by Dr Tommaso Palermo and Lorenzo Pirozzi.
Dr Tommaso Palermo was speaking to Jess Winterstein, Deputy Head of Media Relations at LSE.
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