Horn, M, Dabbous, A., Oehler, A., 2025, The Benefits of Nature Risk Mitigation: Increasing Ecological Budget, Biodiversity, and Economic Growth; efs 2025: 8th Edition of the Ethical Finance & Sustainability, 8-9 May, Edinburgh.

Abstract
The world's ecosystem services are under pressure from two major threats: the climate crisis and the loss of biodiversity, both of which increase nature risk. This poses a significant threat to human well-being and economic development, as nations' economic activities depend on ecosystem services. However, not all countries will be similarly affected by these risks due to their specific characteristics. This study assesses and groups countries according to their nature risk position, which is a function of their ecological budget and ecosystem dependence. It examines the main factors influencing the components of nature risk. The analysis uses a panel dataset of 45 countries for the period 2014-2021.The results show a positive relationship between nature risk and risks to future economic growth, measured as GDP risk. The results also show that green bond volume, stringent environmental policy, and higher environmental awareness can mitigate nature risk by increasing ecological budget and biodiversity while reducing the ecological footprint. More specifically, these three mitigating factors reduce nature risk through two essential channels, by increasing renewable energy and by decreasing energy intensity. The results show that an active risk management approach can mitigate countries' exposure to the climate crisis and biodiversity loss. Furthermore, we derive implications for policy makers to help them design appropriate nature risk mitigation policies.

Keywords

Nature Risk; Green Bond; Technological Innovation; Environmental Policy Stringency; Biodiversity; Biocapacity; Ecological Footprint

JEL Classifications

Q01, Q50, Q57, Q58