Nature risk in infrastructure portfolios is not a future concern. It is already embedded in your assets — in their locations, their supply chains, and their operating dependencies. Most funds don't yet have a systematic way to see it.
Infrastructure is nature-exposed by design
Infrastructure assets occupy space, consume resources, and interact with ecosystems in ways that no other asset class does. A water treatment facility depends on upstream catchment health. A road network cuts through coastal wetlands. A data centre draws on constrained water supplies for cooling.
This is not incidental. It is structural. Infrastructure funds are, by definition, investors in physical systems that sit inside natural systems. That makes nature risk not a peripheral ESG consideration: it is a core feature of the asset class.
Yet most infrastructure funds today have no systematic way to identify, measure, or manage it. Nature screening, where it exists, is typically confined to the permitting phase of individual assets. It rarely covers operating portfolios, supply chain exposure, or forward-looking scenario analysis. And it almost never produces outputs that can be aggregated across a fund. That gap is becoming expensive.
3 channels through which nature risk enters infrastructure portfolios
1. Permitting and litigation risk. Infrastructure assets are land- and permit-intensive by design. Routing decisions, habitat adjacency, and proximity to protected areas create exposure to permitting delays and — increasingly — litigation. In the solar energy sector alone, nearly 2/3 of major projects requiring environmental review in the US have faced litigation, with wind at 38% and transmission lines at 31% (Source: Environmental Law Reporter, 2023). In the EU, the Nature Restoration Law entered into force in 2024, requiring member states to establish national restoration plans — a regulatory shift that will progressively tighten site selection standards for new infrastructure development across the continent.
2. Operational dependency risk. Many infrastructure assets depend directly on ecosystem services to function. Hydropower depends on river flow and snowpack. Agricultural infrastructure depends on soil health and pollinators. And so on… These dependencies create exposure to physical risk. Not from a single extreme weather event, but from the slow, compounding degradation of the natural systems that underpin operations. A hydropower asset in a water-stressed basin carries risk that a standard climate model will underestimate, because climate models capture temperature and precipitation trends but not the compound effect of upstream land use change, sediment load, and ecosystem degradation.
3. Supply chain and materials risk. This is the most underappreciated channel and the largest. The majority of an infrastructure asset's nature footprint does not sit at the asset itself. It sits upstream, in the production of the materials used to build it. Steel, cement, copper, aluminium, and rare earth metals all carry significant embedded nature impacts through extraction and processing. Research consistently finds that more than 50% of biodiversity losses associated with construction and infrastructure occur upstream in the supply chain — in mines, quarries, and processing facilities (Source: Environmental Science & Technology).
In a nutshell, infrastructure funds are subjected to both physical and transition risks: an asset that degrades an ecosystem (transition risk exposure) often also depends on that same ecosystem for its operations (physical risk exposure).
The regulatory moment for infrastructure funds
3 overlapping regulatory developments are converging in 2026 that directly affect how infrastructure asset managers must approach nature risk.
SFDR and PAI disclosures. PAI (Principal Adverse Impact) reporting has been mandatory for EU fund managers with >500 employees since June 2023. Smaller managers who previously opted out with an explanation are now facing increasing LP pressure and regulatory scrutiny to comply in practice. On the reform front, SFDR 2.0 — currently under discussion — proposes to remove entity-level PAI statements in their current form and replace the Article 6/8/9 classification system with new product categories. However, the direction of travel for nature-related disclosure at product level is more granular, not less. Funds should be building data capability now.
CSRD and double materiality. Large portfolio companies held by infrastructure funds — utilities, water companies, energy operators — are increasingly subject to CSRD. These companies must conduct double materiality assessments under ESRS E4 (Biodiversity) and ESRS E3 (Water), covering both financial risks from nature degradation and the company's own impacts on nature. For infrastructure funds, this means their portfolio companies will be generating CSRD-compliant nature disclosures and fund managers will increasingly be expected to engage with, aggregate, and respond to that data at the portfolio level.
EU Taxonomy DNSH and Article 29 LEC. For infrastructure projects seeking Taxonomy alignment — required for EIB financing or an increasing share of green bond frameworks — demonstrating Do No Significant Harm compliance across all 6 environmental objectives, including biodiversity and ecosystems, is non-negotiable. French infrastructure funds are also subject to Article 29 of the French Energy-Climate Law, which goes beyond SFDR by requiring institutional investors to publish a biodiversity strategy with explicit objectives for 2030.
Why nature risk is structurally harder to manage for infrastructure funds than climate risk alone
Infrastructure funds face compounding challenges.
Location is everything but the challenge is data homogeneity, not data existence. Infrastructure funds generally know where their assets are. The real challenge is that spatial data quality and coverage is deeply uneven across a portfolio. A wind farm in France may have detailed impact assessment data from the permitting process. A telecoms asset acquired through a secondary transaction may have almost none. Across a portfolio of 100+ assets spanning multiple geographies and asset types, the absence of a homogeneous data layer (e.g. consistent spatial coordinates) makes portfolio-level nature risk aggregation genuinely hard. And materiality assessments built on uneven inputs produce uneven outputs.
The footprint is upstream and invisible. Standard ESG due diligence focuses on the direct operational impacts of assets. But as mentioned, for infrastructure, the largest nature impacts are embedded in the supply chain — in the cement, steel, copper, and polymers used during construction.
Hard to operationalise results. A biodiversity sensitivity heatmap across a portfolio is useful for reporting. Knowing what it means for a specific asset's CAPEX planning, permitting timeline, or availability guarantee is a different question entirely. Most risk maps remain disconnected from the variables infrastructure teams actually manage — construction budgets, O&M contracts, insurance terms, and permitting milestones.
Hold periods amplify the stakes. Infrastructure assets are typically held for 10 to 30 years. Nature-related risks — water scarcity intensification, tightening pollution constraints, ecosystem degradation in catchment areas — are likely to materialise and compound over exactly that timeframe. A risk that appears immaterial at acquisition can become a stranded asset risk by mid-hold, when refinancing or exit valuations are determined. It is thus key to apply nature scenarios / stress tests into assets.
What a proportionate approach looks like in practice
A scalable nature risk assessment framework for infrastructure does not require ecological surveys for every asset. The starting point is sector/technology and geography — 2 data inputs that funds already have.
Portfolio-wide screening. Using asset type (wind, solar, roads, utilities, digital infrastructure, water) combined with geographic location, it is possible to generate a rapid materiality map across a full portfolio — identifying hotspots by pressure type (land use, water dependency, pollution, biodiversity sensitivity) and flagging the assets most likely to require deeper analysis. This is the infrastructure equivalent of the sectoral materiality screening.
Asset-level deep dives, tiered by priority. For assets that emerge as high-priority, more granular analysis is warranted — zooming into specific spatial layers (e.g. protected area proximity, water stress indices, sensitive species ranges, flood protection dependency) and estimating the supply chain footprint based on the asset's bill of materials data. This analysis is most valuable when conducted at due diligence, establishing a baseline that can be tracked through the hold period. Nature risk assessed at acquisition becomes portfolio data.
Reporting aligned to LP and regulatory expectations. The output needs to be usable: for SFDR PAI disclosures, for CSRD double materiality assessments, for Taxonomy DNSH documentation, and for LP reporting packs. Funds that build their methodology once, aligned to all 3 frameworks, avoid doing the same analytical work 3 times — and produce an audit-ready evidence trail rather than a patchwork of one-off assessments.
The commercial case for moving first
Nature risk management in infrastructure is not only a compliance exercise. Funds that build this capability early have a real commercial advantage.
LP expectations are shifting rapidly. Pension funds or large asset managers are increasingly asking for nature-related disclosures as part of their own SFDR, CSRD, and Article 29 LEC obligations. Funds that can provide credible, asset-level nature risk data will be better positioned in fundraising. Beyond risk management, funds that can quantify their avoided impacts — comparing a renewable energy asset against a fossil fuel baseline, or a water-efficient utility against a business-as-usual scenario — have a powerful tool for LP engagement and green finance positioning. Avoided impact claims that are built on a solid reference scenario and traceable methodology are increasingly what differentiates credible green infrastructure from greenwashing.
Biodiversity Net Gain requirements (relevant for any fund with UK greenfield exposure), already mandatory for developments in England and expanding across Europe, are also creating value creation opportunities for funds that can demonstrate positive nature outcomes. A solar asset that actively manages its land for biodiversity can command higher tariffs in some markets. A water infrastructure asset with a documented catchment protection programme carries lower regulatory risk and stronger social licence to operate.
The financing gap for nature-positive infrastructure is significant. Nature-based flood defence, water efficiency infrastructure, sustainable land management, and ecosystem restoration all represent growing asset classes as regulatory frameworks create demand. Funds with the analytical infrastructure to assess and price nature risk are better positioned to originate and structure these deals credibly.
The window to act is now
Infrastructure funds have a structural advantage that other funds do not: they own and operate physical assets directly, which means they can access operational data that is simply unavailable to managers of listed equities. That data is the raw material for nature risk assessment.
The challenge is not access to information. It is building the analytical capability to translate it into risk signals that are portfolio-level, repeatable, and audit-ready — before regulators, LPs, or a mid-hold permitting dispute force the issue.
At Darwin, we help infrastructure and real asset funds assess nature-related risks across their portfolios — from portfolio-wide screening using sector and geography inputs, to asset-level analysis aligned to SFDR, CSRD, and EU Taxonomy DNSH requirements. Book a demo to learn more.