Alexandre Garel, Arthur Romec, Zacharias Sautner, and Alexander Wagner
Review of Finance, Volume 30, Issue 1, January 2026, Pages 231–272, https://doi.org/10.1093/rof/rfaf069
Our paper develops, analyzes, and applies new firm-level measures of the extent to which a firm’s business activities depend on ecosystem services. Labelled NatureDep scores, the measures capture exposure to physical nature risks, with risk realizations additionally depending on the deterioration of ecosystem services. The NatureDep scores are constructed by combining firm-level revenue data at the segment level with Dependency Materiality Ratings from the ENCORE database, which quantify the reliance of economic activities on 25 ecosystem services.
We create two aggregate NatureDep scores for a sample of 31,772 firms from 117 countries between 2010 and 2023. NatureDepOverall is the revenue-weighted average dependence of a firm’s economic activities across economically relevant ecosystem services—those where disruptions would lead to functionality loss and/or financial adaptation costs. NatureDepHigh captures the number of high dependencies across ecosystem services, after revenue-weighting the dependence on individual ecosystems.
Our new scores show that firms in Pharmaceutical, Biotechnology & Life Sciences; Food, Beverage & Tobacco; and Household & Personal Products are the most nature-dependent. This reflects these sectors’ high dependencies on a few key ecosystem services, such as water purification and supply for Food, Beverage & Tobacco or genetic material for Pharmaceutical, Biotechnology & Life Sciences. Despite a sizeable industry component, about half of the variation in both scores plays out at the firm level.
The NatureDep scores are positively associated with the corporate biodiversity footprint (CBF), a metric of firms’ impact on mean species abundance (MSA). By contrast, they show little relation to nature-related actions disclosed in the CDP survey. These low correlations are not surprising given that most firms only recently began addressing nature risks. Firms with higher NatureDep scores do not discuss nature topics more extensively in their earnings calls. However, NatureDep scores predict the likelihood of being targeted by BlackRock’s biodiversity engagements, suggesting that some investors already treat nature dependence as financially material.
We use our NatureDep scores in two finance applications. In our first application, we show that NatureDepHigh—the score that emphasizes strong reliance on a few critical ecosystem services—positively correlates with downside risk measures (value at risk and lower partial moment); this risk effect is driven by firms’ high dependencies on water-related ecosystem services. In our second application, we show that NatureDep scores are related to real outcomes as reflected in nature-related incidents. The reason is that intensive use of ecosystem services can heighten the likelihood of environmental damage or overuse of natural resources and may also trigger disputes with local communities. This implies that the likelihood of causing harm increases with greater nature dependence, which in turn raises the risk of litigation, remediation costs, reputational damage, or operational disruption.
We conclude that investors have begun to pay attention to nature dependence, while corporate action and disclosure remain limited.