FINMA circular 26/1 on nature-related financial risks
A practical guide for banks and insurers on how to ensure financial stability through robust risk management and governance of nature-related risks.
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Environmental challenges such as climate change, biodiversity loss, and ecosystem degradation become increasingly prevalent, their impact on the global economy and financial markets is profound and tangible. For financial sector players, recognising and addressing these risks is not just a matter of regulatory compliance or reputation management but essential to ensuring long-term stability, sustainability, and resilience. Nature-related financial risks present multifaceted challenges that can affect asset values, disrupt supply chains, and alter market dynamics. Banks and insurance companies must adapt their strategies to identify and mitigate these risks effectively. This adaptation is not only crucial to maintaining financial stability but also offers them unique opportunities to improve their resilience, adapt their business model in a timely way and better reflect the risks and rewards associated with it.
The Swiss Financial Market Supervisory Authority (FINMA) along with European regulators has recognised the increasing relevance of nature-related risks for the financial sector. In response FINMA has developed its circular 26/1 on nature-related financial risks with the aim of raising awareness of the topic and providing greater clarity and guidance to banks and insurers. The circular, issued on 12 December 2024 and effective from 1 January 2026, aims to equip these institutions with the tools needed to effectively identify, assess, manage, and control all the material risks they may encounter, ensuring robust risk management and sustainable operations.
Despite the phased approach adopted by FINMA, banks and insurance companies should make a start now and ensure progressive compliance with the requirements.
To support banks and insurers in this endeavour, we have created this article series providing practical guidance on integrating nature-related risks into risk management processes. While the importance of nature-related risks is widely acknowledged, their impacts are not yet fully understood or measured. Our article series aims to bridge this gap, providing valuable insights and practical advice.
FINMA aims to guide banks and insurers in their efforts to improve their resilience to climate- and nature-related risks — and to adequately reflect these risks associated with their business models. The requirements of the circular are summarised in the four pillars shown below.
Our articles cover each of the pillars and outline the key considerations institutions need to tackle today to allow sufficient time for the preparation of the implementation and integration of the new requirements.
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How can Deloitte help you?
- Performing an as-is assessment of your current framework for nature-related financial risk management (including governance, risk identification and materiality assessment, scenario analysis, risk monitoring and remediation, and the risk management process) and provide recommendations for improvement (including actions to ensure full compliance with the FINMA circular).
- Support you with vulnerability analysis to identify and analyse your major risks and exposures.
- Facilitate, through workshops, cross-departmental collaboration and provide tailored training programmes to enhance knowledge and skills
- Supporting your other control functions with the implementation of their new responsibilities, e.g. upskilling or supporting your Internal Audit teams.
- Support with the integration of nature-related risks into your risk management process.
- Supporting the definition of your stress testing approach and its execution.
- Support with the creation of risks dashboards and/or risk reporting templates to summarise exposures to nature-related financial risks.
Contributors
Thank you to the key contributors to this article:
- Greta Cenotti, Manager, Sustainable Finance
- Cederic van Renterghem, Manager, Financial Risk Management
