I strolled through Cambridge this morning, headed towards the “Nature Action Dialogues” for which Darwin’s Alma Mater clearly qualifies as a venue. I walked down the same streets as John Maynard Keynes did when he pondered what forces destabilize the human journey towards more prosperity. His seminal work ended our belief in stable market equilibria, gifted us Brettonwoods, and sparked Hyman Minsky to describe “Theory of Systemic Fragility” 1977.
Ever since, a Minsky Moment refers to a tipping point when hidden risks explode into a sudden asset collapse after a period of calm. Today we are recognizing that the global financial system is teetering on the edge of a “Nature’s Minsky Moment” triggered by our planet’s rapidly degrading ecosystems. We have built an economic boom on underpriced natural capital – fertile soil, clean water, pollination, stable climate – and treated ecological stability as an infinite freebie.
Now the environmental foundation of that growth is cracking. Like subprime mortgages in 2008, nature-related risks have accumulated off balance sheet. A disorderly repricing of assets looms as nature’s vital services break down. The moment of abrupt market correction – “Nature’s Minsky Moment” – is approaching fast. The economic and social shake-up will be immense and in its course we may – if we are lucky – find the vigour to construe a new form of – natural – capitalism and draft a Brettonwoods_2.0.
A Ticking Time-Bomb of Unpriced Nature Risk. For decades, markets have failed to price natural capital, fueling ecological degradation and leaving us in a mounting “ecological debt bubble.” Since the 1970s, humanity’s resource use has exceeded Earth’s capacity to regenerate, effectively drawing down natural stocks each year. We continue liquidating forests, fisheries, and groundwater for short-term gain while ignoring the accumulation of “hidden debt” to nature.
According to the WEF, over half of global GDP—about $44 trillion—is moderately or highly dependent on ecosystem services such as pollination, water filtration, and climate regulation.[1] Agriculture, construction, and food and beverage sectors are especially vulnerable, but hidden dependencies are embedded across nearly every industry. Nature’s decline jeopardizes entire economies. Developing nations reliant on sectors like forestry, fisheries, or agriculture face acute exposure if pollinators crash or water sources dry up. Wealthy countries are not insulated either: massive absolute GDP depends on nature’s stability, and global supply chains transmit shocks far and wide.
Once ecosystems breach tipping points, these dependencies will turn into abrupt disruptions. Yet incentives to address this risk at scale remain weak—markets treat nature loss as an externality. By overshooting Earth’s regenerative capacity, we are operating a classic Ponzi scheme that relies on future resources to service present consumption. Without urgent reforms, nature’s collapse will undermine the foundations of production, trade, and finance. Our complacency is setting us up for a potential market crash—Nature’s Minsky Moment—on a global scale.
The scale of the economy’s nature-dependence is often underappreciated. According to the World Economic Forum, over half of global GDP – about $44 trillion of value – is moderately or highly dependent on nature’s services. Industries like construction, agriculture, and food and beverages (together ~$8 trillion in value) rely heavily on resources and services from ecosystems. These sectors alone are roughly twice the size of Germany’s economy. They directly extract timber, fish, or freshwater, or depend on ecosystem functions such as pollination, flood control, and soil fertility.
As nature loses its capacity to provide these services, entire industries face disruption. Even sectors that appear removed from nature have “hidden dependencies.” Six major industries – chemicals/materials, aviation/travel, real estate, mining/metals, transport, and retail/consumer goods – each have less than 15% direct value add from nature, but over half of their supply chain value is highly or moderately dependent on ecosystems. In other words, a factory or retailer may seem unrelated to biodiversity on the surface, but its upstream suppliers (farms, mines, shippers) are deeply exposed to nature loss. This interdependence creates an intricate web of risk.
Crucially, some of the fastest-growing economies are most at risk. Nature-intensive sectors generate about 33% of India’s GDP and 32% of Indonesia’s. Across Africa, about 23% of GDP comes from highly nature-dependent industries. These regions face immense exposure if ecosystems degrade – for example, if pollinators decline or water sources dry up. Yet wealthy economies are not spared: in absolute terms, China has $2.7 trillion, the EU $2.4 trillion, and the U.S. $2.1 trillion of GDP in nature-dependent sectors. Even if the share of their economy directly tied to nature is smaller, the sheer scale means they hold a large chunk of global nature risk. No country or market can be truly “complacent,” as the WEF warns. We are all invested in nature, whether we realize it or not.
Signals of a Coming Repricing Shock. For now, markets continue to largely treat environmental degradation as an externality – effectively ignoring it in asset prices and corporate valuations. This lack of nature accounting is leading to distorted markets, much as hiding bad debts led to the 2008 financial crisis. “Damage to nature from economic activity can no longer be considered an ‘externality’,” the World Economic Forum admonished in a report, noting that nature loss is a material and urgent, non-linear risk to economic security. In practice, however, most companies and investors still do not adequately disclose or price nature-related risks. Corporate balance sheets don’t reflect dwindling water supplies or eroding topsoil. Bank loan models don’t factor in the collapse of fisheries or pollinator losses. This blind spot means capital is misallocated into activities that undermine the very ecological foundations of future wealth.
The cost of inaction is becoming frighteningly clear. The World Bank estimates that if key ecosystem services collapse – such as wild pollination, fisheries, and timber from native forests – it could shave $2.7 trillion off global GDP annually by 2030. That scenario is not far-fetched: under a business-as-usual path, fish stocks are projected to continuously decline and tens of millions of hectares of natural land could be lost by 2030. Those losses would send cascading shocks through supply chains and commodity markets. Already, farmers are struggling with pollinator declines; ocean fisheries are under immense strain. If these trends reach a tipping point, market adjustments could be sudden and severe – akin to a financial market crash, but driven by nature. We could witness food companies’ stocks plummet due to crop failures, or building firms suffer surging costs because forests can no longer provide timber at past rates. These are the kinds of repricing events a Nature Minsky Moment would entail.
Some impacts are no longer theoretical – they are happening now, particularly in the insurance sector. Physical climate and ecological risks are making entire asset classes uninsurable, acting as the first domino in a potential financial collapse. As Allianz executive Günther Thallinger linger notes, we are fast approaching global warming thresholds (1.5°C and beyond) where insurers simply cannot price coverage for certain risks. In many regions, that threshold has been reached. “Entire regions are becoming uninsurable,” Thallinger observes, citing major insurers withdrawing from California’s home insurance market due to wildfire losses. This is not a routine market fluctuation but a systemic threat: “If insurance is no longer available, other financial services become unavailable too. A house that cannot be insured cannot be mortgaged. Credit markets freeze. This is a climate-induced credit crunch.” In other words, when nature-related risk (wildfire, flood, drought) makes insurance inviable, property values can collapse and lending halts, triggering a broader financial seizure. We’re already seeing hints of this in wildfire-prone California and flood-prone Florida, and the trend could spread as climate impacts intensify.
The insurance retreat is a glaring market signal of rapid repricing underway. The economic value of entire regions – coastal areas, arid farmland, fire-prone forests – could “vanish from financial ledgers” as climate impacts render them unlivable or uninsurable. Thallinger describes it bluntly: “Markets will reprice, rapidly and brutally. This is what a climate-driven market failure looks like.” Nature’s unravelling can translate to an overnight collapse in asset values – real estate, infrastructure, agricultural land – that once seemed rock-solid. Unlike the gradual, linear assumptions of most financial models, these changes can be abrupt and non-linear. Coral reef collapse, for example, is not a slow erosion but a potential cliff: at 2°C of warming, an estimated 99% of coral reefs will die off. Reefs currently provide about $36 billion per year in global tourism value (snorkeling, diving, etc.), plus coastal protection worth another ~$10 billion+ in insurance savings. Lose the reefs, and a $36B tourism industry and billions in coastal real estate protection could disappear within years. Such an event would send shockwaves through travel companies, property markets, and insurance portfolios, especially in countries like Australia, Indonesia, or island nations in the Caribbean.
Critically, the financial sector itself is deeply exposed to nature risk in ways that have yet to be fully acknowledged. In Europe, for instance, the European Central Bank found that 72% of banks’ corporate clients are highly dependent on at least one ecosystem service – things like water availability, healthy soils or stable weather. As a result, 75% of all corporate loans in the euro area are to companies with critical nature dependencies. This is startling: three-quarters of bank loan books are entangled with nature risk. If environmental degradation continues unchecked, defaults and credit losses could soar. What happens when agribusiness borrowers face consecutive crop failures, or when mining companies are hit with water shortages halting operations? Without ecosystem stability, those borrowers become much riskier. Yet today, these exposures are not priced into banks’ capital cushions or borrowers’ credit ratings. It is a huge blind spot. The Taskforce on Nature-related Financial Disclosures (TNFD) – building on the climate-focused TCFD – is developing frameworks for firms to identify, disclose and then such risks. "We need to be planning, testing and managing the resilience of our supply chains, operations and critical systems", says TNFD co-chair David Craig ig reflecting on the recent Heathrow fire.
Who Will Feel the Shock? If a Nature Minsky Moment is triggered, which sectors and regions will feel the pain first? Likely it will strike where ecological degradation meets financial over-extension. Agriculture and food companies are obvious ground zero; they directly rely on pollination, soil, water, and stable climates. A collapse of insect populations or a permanent shift in rainfall could bankrupt many farming operations and send food prices skyrocketing. Forestry and fisheries industries face similar existential risks from overharvesting and climate stress, threatening not just companies but also national economies that export timber or seafood. Tourism in biodiversity-rich areas (coral reefs, rainforests, wildlife reserves) could implode if those natural attractions deteriorate – impacting airlines, hotels, and local economies from the Maldives to the Amazon. The construction sector could suffer as key inputs (like timber) become scarce or expensive, and as natural risk makes certain geographies unbuildable. Real estate in vulnerable areas – coastal properties, drought-prone farmland, mountain regions reliant on glacial water – could see abrupt valuation drops as environmental realities set in.
Geographically, developing countries with nature-intensive economies are highly vulnerable, as noted. If Southeast Asia’s fisheries collapse or West Africa’s forests are wiped out, local communities and industries will be devastated, and sovereign debt stress could follow. Paradoxically, many of these countries also hold the largest stocks of the world’s remaining natural capital (tropical forests, coral reefs, etc.). Their fate is a linchpin for global ecological and financial stability.
In turn, wealthy nations cannot shield themselves either. A shock to global commodity supplies – say, a sudden crash in crop yields or fish catch – would transmit through trade networks, causing inflation and instability in import-dependent regions like the Middle East or Europe. Financial hubs like London or New York, though far from the frontlines of deforestation or species extinction, are exposed via their investment portfolios around the world. Insurance losses from natural catastrophes already cost tens of billions annually, and a cluster of severe events can hit even well-capitalized insurers. Swiss Re reported a $120 billion global “natural catastrophe protection gap” in recent years – economic losses not covered by insurance. Increasingly, governments shoulder those losses; but public budgets are straining under the burden of back-to-back disasters. There is a limit to how much shock absorption even rich states can provide. In short, no sector or country is truly safe from nature’s destabilization. The risk is systemic and pervasive – “risk is everywhere, resilience is not,” as one industry advisor put it.
Integrating Nature into Financial Systems: Reform or Collapse. Averting Nature’s Minsky Moment demands that ecology be deeply woven into the fabric of our financial systems. Innovations such as digital ecological assets or nature-backed currencies. Successfully integrating natural capital into financial frameworks involves five interconnected steps, each building upon the others to create a robust and coherent approach.
The first essential step is the comprehensive assessment of natural capital. This requires global standard-setters to collaboratively define and agree upon clear metrics, standardized methodologies, and reliable verification processes. Data providers must significantly expand and enhance the quality and accessibility of ecological data sources, such as through initiatives like the TNFD Data Facility. At the same time, corporate leaders should pilot and actively adopt natural capital assessments, employing frameworks such as TNFD’s LEAP approach. Achieving this will result in widespread adoption of credible and consistent natural capital metrics, enabling informed, strategic decision-making across industries and markets.
The second step involves the formal preparation of Natural Capital Accounts (NCAs). Standard-setting organizations must define and agree on standardized value factors, drawing on frameworks like the Impact-Weighted Financial Accounts Initiative (IFVI) and the Value Balancing Alliance. Early-adopter corporations should lead the way by publishing audited NCAs, transparently demonstrating the quantifiable value that nature provides to their operations and broader society. As these practices become mainstream, assured and audited corporate NCAs will serve as trusted tools, facilitating strategic discussions with investors and key stakeholders, and embedding ecological insights directly into corporate decision-making.
In the third phase, financial and accounting systems must formally recognize natural capital within audited financial statements. Regulatory bodies, including the International Organization for Standardization (ISO) and the International Accounting Standards Board (IASB), need to define clear methodologies and valuation standards to integrate ecological assets and liabilities into official financial accounting practices. Concurrently, lawmakers and regulators must expand fiduciary duties explicitly to encompass ecological considerations and establish legal frameworks enabling clear ownership and transaction rights for natural capital assets. As natural capital assets and liabilities appear transparently on audited financial statements, their tangible financial value will become evident, driving strategic and financial recognition of ecological integrity as central to corporate health and sustainability.
The fourth step focuses on embedding natural capital insights directly into financial analysis and risk pricing. Key institutions such as the Financial Stability Board, global rating agencies, and central banks must systematically incorporate natural capital considerations into balance-sheet evaluations, stress tests, credit ratings, and lending frameworks. Insurers and investors need to revise pricing and valuation models to factor in ecological risks and opportunities accurately. This systemic integration will fundamentally alter how financial risks and rewards are calculated, enabling the establishment of dynamic markets for natural capital assets and effectively unveiling their true economic value.
Finally, governments must play an active and decisive role in steering and incentivizing natural capital. Policymakers need to create robust regulatory frameworks and financial incentives that support nature-positive decision-making across all economic sectors. Central banks and national authorities should incorporate natural capital into macroeconomic strategies, national planning, and capital allocation decisions, including the strategic redirection of environmentally harmful subsidies and responsible management of inter-governmental lending. Crucially, this stage requires a significant shift in governmental financial management—from exclusively budget-centric frameworks to comprehensive sovereign balance sheets that account for all forms of capital: financial, social, human, and natural. Such an integrated approach ensures ecological considerations become embedded in all aspects of economic and financial policy, reinforcing long-term sustainability and economic resilience.
These five steps are like a ladder where some steps have to be taken bottom up whilst are taken top down synchronourly. They represent a coherent, interconnected strategy to integrate nature into financial systems, enabling markets, businesses, and governments to avert ecological collapse by making natural capital a cornerstone of financial and economic stability.
From Crisis to Stability – Time is running short. If we fail to integrate natural capital into finance and public policy now, the repercussions could dwarf those of 2008. The systemic nature-related risks that are quietly accumulating within our global economy demand immediate, decisive action. This requires a profound shift, ensuring that nature risk permeates every corner of economic decision-making—from detailed corporate disclosures and supply chain assessments to rigorous central bank stress tests and investment analyses. Transparent and comprehensive recognition of ecological dependencies and risks must become the new normal.
As David Craig emphasizes, transformational leadership across business, finance, and government sectors is crucial. These leaders must collaboratively redefine how we value, account for, and invest in nature. What is needed is nothing short of a paradigm shift toward recognizing natural capital not as an externality, but as fundamental to our continued economic prosperity and societal well-being. Enlightened self-interest and collective benefit align in preserving ecosystems, as the stability of financial markets and national economies directly depends on healthy natural systems.
To catalyze a swift, orderly transition, multiple strategic actions must be prioritized. First, we urgently need innovative technological infrastructure—a new generation of "naturefin" solutions. At The Landbanking Group we are working hard to anable precise, real-time measurement, valuation, and capitalization of nature. By leveraging cutting-edge technology—satellites, sensors, blockchain verification—we can reliably quantify ecological benefits and losses, facilitating robust decision-making in boardrooms, investment committees, and policymaking chambers worldwide.
Governments also have a central role to play by fundamentally rethinking national accounting. Sovereign balance sheets must evolve beyond traditional financial measures to reflect a nation's comprehensive net worth, explicitly integrating social, human, and natural capital. By transparently capturing ecological assets and liabilities, governments can better guide macroeconomic decisions and enhance long-term resilience. Additionally, central banks and regulators must recalibrate monetary and regulatory instruments to incentivize investments in natural capital explicitly. Adjusting lending criteria, capital adequacy rules, and risk weightings to reward ecological stewardship can redirect financial flows toward nature-positive outcomes, aligning financial incentives with ecological sustainability.
Ultimately, responding effectively to nature’s looming Minsky Moment necessitates a Bretton Woods-level transformation—an ambitious restructuring of global financial frameworks in which ecological integrity becomes foundational to monetary and economic stability. Cambridge stands for the human journey. It feels like a good genius loci to inform our next step.
References:
- Open Earth Foundation (Wainstein et al., 2023). Nature Based Currencies: Integrating natural capital in advanced monetary systems.
- World Bank (2021). The Economic Case for Nature: Ecosystem collapse could cost $2.7 trillion in annual GDP by 2030 (Cost of nature inaction.docx).
- European Central Bank (2022). Analysis of euro-area banks’ exposure to nature-related risks (Cost of nature inaction.docx) (Cost of nature inaction.docx).
- World Economic Forum (2020). New Nature Economy Report: Over half of global GDP ($44 trillion) is dependent on nature, with hidden supply chain risks.
- Thallinger, G. (2025). Climate, Risk, Insurance: The Future of Capitalism: on uninsurability and climate-induced credit crunch (Thallinger.docx) (Thallinger.docx).
- World Economic Forum (2020). Nature Risk Rising: Coral reef loss and wetland destruction pose multi-billion dollar risks to tourism and insurance.
- Nature4Climate (2020). The global value of nature: Recognition of nature’s trillions in value and the need to count it as a public good.
- Taskforce on Nature-related Financial Disclosures (2023). Framework for corporate nature risk reporting (TNFD beta release).
- Network for Greening the Financial System (2022). Nature-Related Financial Risks: Call to integrate biodiversity loss in central bank scenarios.
- Open Earth/Regen Network (2023). On blockchain-based ecological credits and dynamic monitoring for nature markets.
