Regulatory requirements for nature-related financial risk disclosure are moving fast. The Taskforce on Nature-related Financial Disclosures (TNFD) published its final recommendations in 2023, and the EU Corporate Sustainability Reporting Directive (CSRD) requires large companies to report against the European Sustainability Reporting Standards (ESRS), including ESRS E4 (biodiversity and ecosystems), from 2025 onwards. Both frameworks create specific data demands that most financial institutions and corporate sustainability teams currently lack the tools to meet:
- Asset-level nature dependency data is missing: TNFD’s LEAP (Locate, Evaluate, Assess, Prepare) methodology requires institutions to assess the nature-related dependencies and impacts of their operations and portfolios at the level of specific business locations. Most institutions do not hold this spatial data.
- CSRD requires site-level biodiversity disclosure: ESRS E4 requires large companies to report on their impacts on biodiversity and ecosystems at site level. For companies with extensive physical footprints or complex supply chains, this is beyond what traditional ESG data providers can supply.
- Supply-chain risks are invisible without spatial data: Deforestation, land conversion, and habitat degradation driven by commodity supply chains are a significant and growing source of financial risk. Most institutions cannot currently see what is happening in their borrowers’ or investees’ supply sheds.
- ESG data providers do not cover nature at asset level: Existing ESG ratings and scores are based primarily on company disclosures and industry averages, not on spatial data. They cannot answer where specific nature risks are occurring and how severe they are.
- Portfolio screening at scale requires consistent spatial coverage: Aggregating nature risk across a large investment or lending portfolio requires comparable data across geographies and sectors — something field-based or disclosure-based approaches cannot provide.
How EO can help
Satellite data provides the spatial, asset-level, and supply-chain coverage that TNFD and CSRD disclosure requires:
- Deforestation and land conversion detection: Sentinel-2 time-series and SAR data detect forest loss and land use change near business locations and in commodity supply sheds, at near-real-time frequency. This enables financial institutions to identify where deforestation risk is materialising in their portfolios.
- Habitat condition at asset footprint: EO-derived habitat maps can be overlaid on the locations of physical assets — factories, farms, ports, energy infrastructure — to assess proximity to and impact on sensitive ecosystems, directly supporting the TNFD LEAP “Locate” and “Evaluate” steps.
- Portfolio screening: Standardised, gridded EO products allow portfolio managers to screen entire lending and investment books for nature risk exposure using consistent spatial criteria, without visiting each site.
- Supply-chain monitoring: EO-based deforestation and land use alerts can be linked to known commodity supply chains to identify sourcing risk at origin, before it becomes a financial or reputational event.
- Independent verification for disclosure: Satellite data provides an independently produced, auditable record of environmental change at specific sites — supporting third-party verification of CSRD disclosures and TNFD LEAP self-assessments.
Key examples
1- LEON — Pilot 3: EO for nature-related financial risk
LEON (Leveraging Earth Observation for Nature Finance) Pilot 3 is developing a toolbox for quantifying nature-related financial risks at asset and portfolio level, in collaboration with TNFD, UNEP Finance Initiative, and financial sector stakeholders from the energy and manufacturing sectors. The toolbox integrates EO-derived data on ecosystem extent, condition, and change with financial risk modelling to produce sector-specific risk metrics aligned with TNFD recommendations and CSRD reporting requirements.
2- Kanop — satellite MRV for nature-based projects and corporate reporting
Kanop uses optical and radar satellite data combined with AI to provide due diligence, baseline analysis, and Monitoring, Reporting and Verification (MRV) for nature-based projects and corporate sustainability reporting. At site level, the platform quantifies FLAG emissions, tracks land use change, and monitors flora biodiversity changes. Its reporting outputs are designed to meet GHG Protocol Land Sector and Removals Standard, TNFD, CSRD, and EU Deforestation Regulatio n (EUDR) requirements.
Figure: Satellite-based monitoring that quantifies FLAG emissions, tracks deforestation risk, and generates audit-ready reporting for GHG Protocol LSRS, SBTi FLAG, TNFD, and EUDR compliance. (Source: Kanop.io)
3- ENCORE — portfolio risk screening
ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) is a free tool developed by Global Canopy, UNEP Finance Initiative, and UNEP-WCMC that links environmental change to financial portfolio risk. The tool includes a biodiversity module that allows banks and asset managers to assess nature-related risk exposure across sectors including mining, agriculture, and energy — based on spatial data on ecosystem condition and species extinction risk. ENCORE is widely used by financial institutions beginning their TNFD implementation.
Figure: Explore hotspots of natural capital depletion using the map (Source: encorenature.org)
4- Iceberg Data Lab — Corporate Biodiversity Footprint
Iceberg Data Lab offers a Corporate Biodiversity Footprint metric and Mean Species Abundance (MSA) scoring for investment portfolios. The methodology integrates satellite monitoring, species distribution data, and supply-chain databases to produce TNFD- and CSRD-aligned biodiversity impact scores for companies and portfolios — enabling asset managers to identify which holdings drive the largest biodiversity footprint.
Figure: Iceberg Data Lab's Corporate Biodiversity Footprint (Source: icebergdatalab.com)
Further resources
Relevant resources:
- TNFD Framework — Taskforce on Nature-related Financial Disclosures recommendations and LEAP methodology
- CSRD / ESRS E4 — EU Corporate Sustainability Reporting Directive and ESRS E4
