Barclays Bank has released research showing that mining companies in Europe could suffer earnings losses of up to 25 percent over five years because of damage to nature, while power sector firms face smaller but still meaningful declines. The warning emerges from a novel stress-test that puts nature-related risks—such as environmental degradation, regulatory tightening, and extreme weather—at the center of financial exposure for heavy industries long considered insulated.
How Barclays Assessed Nature-Related Risk
Barclays conducted an exploratory stress test focusing on two sectors especially exposed to natural and regulatory risks: mining and power generation. For mining, the test examined operations at roughly 250 mines tied to about 30 mining clients. For power, it looked at about 9,000 electricity generation facilities associated with around 40 power firms in Europe. The bank developed its own methodology to measure both direct dependencies (water use, land use, ecosystem services) and exposure to transition and physical risks driven by nature loss.
In shaping its approach, Barclays built on existing frameworks, particularly the LEAP method from a global initiative focused on nature-related financial disclosure. LEAP stands for Locate, Evaluate, Assess, Prepare, and it helps map how companies both impact nature (for example through pollution, land conversion, water withdrawal) and depend upon it (for instance clean water, biodiversity, flood regulation). Barclays’ team spent a year collecting site-level data: watershed stress, ecosystem condition, overlapping protected areas, air and water pollution, historical droughts and floods, and regulatory trends.
Barclays differentiated between two main types of risks: **transition risks** and **physical risks**. Transition risks include stricter pollution controls, rising costs of water, expansion of protected natural areas, tighter land-use regulation, and compliance costs. Physical risks come from environmental degradation making landscapes more prone to droughts, flooding, and biodiversity collapse, which damage infrastructure, interrupt operations, or raise insurance and maintenance costs. Mining is particularly sensitive to transition risks, while power generation is heavily exposed to physical risks in degraded ecosystems.
Why Nature Loss Specifically Threatens Mining and Power Profits
Mining firms are projected to face steeper profit erosion—up to one quarter over five years—because their operations are deeply tied to land, water, and biodiversity. Mines need stable water sources, access to land not compromised by ecological degradation or regulation, and clear environmental permissions. As nature loss accelerates in many parts of Europe, water shortages and rising water prices, stricter pollution laws, expanding protected areas, and enforcement of environmental boundaries are becoming more frequent. All of these increase costs—either directly through inputs (water, remediation, fines) or indirectly via regulatory compliance, permitting delays, or lost access to land.
For power companies, the losses are smaller but by no means negligible. Barclays projects earnings could fall by roughly 10 percent over five years for many power operators. Physical risks dominate here: droughts reduce water available for cooling or hydro generation; floods damage infrastructures; land degradation and deforestation reduce natural protections against extreme weather, increasing vulnerability. Degraded landscapes also reduce ecosystem resilience, making power plants more exposed to supply disruptions or extreme weather downtime. These impacts compound with regulatory shifts: governments are increasingly mandating environmental protection, water efficiency, pollution limits, and restrictions around siting plants in or near protected ecosystems.
Moreover, nature loss has knock-on effects upstream and downstream. For mining, if ecosystems around mines are damaged, tailings management becomes harder; runoff and pollution liabilities increase; community opposition or indigenous rights claims may slow operations. For power, degradation of watersheds reduces hydropower potential; drying of cooling sources increases thermal power costs; supply chains for fuel may become more volatile. Companies also increasingly face scrutiny from investors, lenders, insurers whose risk assessments now factor in biodiversity and nature-related exposures.
Implications for Industry, Policy, and Investment
Barclays argues that these risks are “systemic” rather than niche: nature loss doesn’t just pose isolated disruption but threatens the stability of the broader economy, supply chains, and infrastructure. More than half of global GDP depends on nature—services like pollination, water purification, climate regulation, flood control, and soil health. When these fail, it ripples into cost inflation, supply insecurity, and legal or regulatory challenges.
For mining, the implication is that companies must invest far more in environmental management, water efficiency, biodiversity conservation, land restoration, and adaptive resilience. They may need to redesign operations, shift investment away from more fragile geographies, and engage more proactively with regulators and communities. Firms that fail to anticipate these risks may face declining margins or even stranded assets if regulations cut off access to land or water, or if they cannot meet stricter pollution or biodiversity requirements.
For power generators, particularly those using water-based cooling or hydroelectric generation, planning for resilience to physical risk becomes crucial. Some plants may need relocation, elevated protection, better flood defenses; grid infrastructure may need redesign; alternative cooling technologies may be required. Regulators in many European countries are tightening environmental impact assessments, setting rules for siting near protected ecosystems, and increasing scrutiny of water usage. Companies not aligned with these shifts may face fines, restrictions, or loss of social license to operate.
From a financial sector angle, the research underscores a widening expectation among investors, insurers, lenders that nature-related risk must be quantified, disclosed, and managed. Barclays itself sees opportunities: bridging the biodiversity financing gap (estimated in industry analysis to be hundreds of billions annually) by helping companies invest in nature protection, restoration, or integrating natural capital into planning. Nature risk is now considered part of credit risk, operational risk, and regulatory risk for heavy industry.
(Source:www.marketscreener.com)
How Barclays Assessed Nature-Related Risk
Barclays conducted an exploratory stress test focusing on two sectors especially exposed to natural and regulatory risks: mining and power generation. For mining, the test examined operations at roughly 250 mines tied to about 30 mining clients. For power, it looked at about 9,000 electricity generation facilities associated with around 40 power firms in Europe. The bank developed its own methodology to measure both direct dependencies (water use, land use, ecosystem services) and exposure to transition and physical risks driven by nature loss.
In shaping its approach, Barclays built on existing frameworks, particularly the LEAP method from a global initiative focused on nature-related financial disclosure. LEAP stands for Locate, Evaluate, Assess, Prepare, and it helps map how companies both impact nature (for example through pollution, land conversion, water withdrawal) and depend upon it (for instance clean water, biodiversity, flood regulation). Barclays’ team spent a year collecting site-level data: watershed stress, ecosystem condition, overlapping protected areas, air and water pollution, historical droughts and floods, and regulatory trends.
Barclays differentiated between two main types of risks: **transition risks** and **physical risks**. Transition risks include stricter pollution controls, rising costs of water, expansion of protected natural areas, tighter land-use regulation, and compliance costs. Physical risks come from environmental degradation making landscapes more prone to droughts, flooding, and biodiversity collapse, which damage infrastructure, interrupt operations, or raise insurance and maintenance costs. Mining is particularly sensitive to transition risks, while power generation is heavily exposed to physical risks in degraded ecosystems.
Why Nature Loss Specifically Threatens Mining and Power Profits
Mining firms are projected to face steeper profit erosion—up to one quarter over five years—because their operations are deeply tied to land, water, and biodiversity. Mines need stable water sources, access to land not compromised by ecological degradation or regulation, and clear environmental permissions. As nature loss accelerates in many parts of Europe, water shortages and rising water prices, stricter pollution laws, expanding protected areas, and enforcement of environmental boundaries are becoming more frequent. All of these increase costs—either directly through inputs (water, remediation, fines) or indirectly via regulatory compliance, permitting delays, or lost access to land.
For power companies, the losses are smaller but by no means negligible. Barclays projects earnings could fall by roughly 10 percent over five years for many power operators. Physical risks dominate here: droughts reduce water available for cooling or hydro generation; floods damage infrastructures; land degradation and deforestation reduce natural protections against extreme weather, increasing vulnerability. Degraded landscapes also reduce ecosystem resilience, making power plants more exposed to supply disruptions or extreme weather downtime. These impacts compound with regulatory shifts: governments are increasingly mandating environmental protection, water efficiency, pollution limits, and restrictions around siting plants in or near protected ecosystems.
Moreover, nature loss has knock-on effects upstream and downstream. For mining, if ecosystems around mines are damaged, tailings management becomes harder; runoff and pollution liabilities increase; community opposition or indigenous rights claims may slow operations. For power, degradation of watersheds reduces hydropower potential; drying of cooling sources increases thermal power costs; supply chains for fuel may become more volatile. Companies also increasingly face scrutiny from investors, lenders, insurers whose risk assessments now factor in biodiversity and nature-related exposures.
Implications for Industry, Policy, and Investment
Barclays argues that these risks are “systemic” rather than niche: nature loss doesn’t just pose isolated disruption but threatens the stability of the broader economy, supply chains, and infrastructure. More than half of global GDP depends on nature—services like pollination, water purification, climate regulation, flood control, and soil health. When these fail, it ripples into cost inflation, supply insecurity, and legal or regulatory challenges.
For mining, the implication is that companies must invest far more in environmental management, water efficiency, biodiversity conservation, land restoration, and adaptive resilience. They may need to redesign operations, shift investment away from more fragile geographies, and engage more proactively with regulators and communities. Firms that fail to anticipate these risks may face declining margins or even stranded assets if regulations cut off access to land or water, or if they cannot meet stricter pollution or biodiversity requirements.
For power generators, particularly those using water-based cooling or hydroelectric generation, planning for resilience to physical risk becomes crucial. Some plants may need relocation, elevated protection, better flood defenses; grid infrastructure may need redesign; alternative cooling technologies may be required. Regulators in many European countries are tightening environmental impact assessments, setting rules for siting near protected ecosystems, and increasing scrutiny of water usage. Companies not aligned with these shifts may face fines, restrictions, or loss of social license to operate.
From a financial sector angle, the research underscores a widening expectation among investors, insurers, lenders that nature-related risk must be quantified, disclosed, and managed. Barclays itself sees opportunities: bridging the biodiversity financing gap (estimated in industry analysis to be hundreds of billions annually) by helping companies invest in nature protection, restoration, or integrating natural capital into planning. Nature risk is now considered part of credit risk, operational risk, and regulatory risk for heavy industry.
(Source:www.marketscreener.com)