Nature Risks - Expected Financial Loss

Expected Financial Loss

The financial Loss is calculated at each site by multiplying the risk’s probability of occurrence and financial impact:

where

• EFL_r,i = site-level expected financial loss for risk r and site i
• p_r,i = annual probability for risk r at site i (derived from the Likelihood category)
• FI_r,i = monetary financial impact if the risk materialises at site i

Loss of Water Supply, Loss of Freshwater Quality, Loss of Biodiversity-Dependent Ecosystem Services, and Land Use Restriction

The company-level Expected Financial Loss for the risks Loss of Water Supply, Loss of Freshwater Quality, Loss of biodiversity-dependent Ecosystem Services, Land Use Restriction is calculated by summing the site-level expected loss to estimate the total expected annual financial loss from this risk across all analysed sites.

where

• EFL_r^company = company-level expected financial loss for risk r
• EFL_r,i = site-level expected financial loss for risk r and site i

Pollution Risk and Deforestation Risk

For Pollution risk and Deforestation risk, the financial impact is estimated at the company level, as such risks typically materialize through company-wide events such as fines, regulatory action, or reputational damage. The company-level likelihood is derived from all site-level probabilities using a survival product approach, which reflects the probability of the risk occurring at least once across all sites. This aggregated likelihood is then multiplied by the estimated financial impact to calculate the total annual Expected Financial Loss.

This calculation estimates the company-level expected loss based on the probability that a company-level event (e.g. fine, reputational impact) occurs at least once across all sites.

where

• FI_r = financial impact of risk r expressed as a share of total company revenue.
• P_r^company = company-level probability of risk occurring at least at one site (see calculation below)

where

• p_r,i = annual probability for risk r at site i (derived from the Likelihood category)

Overall Company Level Expected Financial Loss

The overall company-level expected financial loss is obtained by summing the expected losses across all risk types.

where

• EFL_r^company = company-level expected financial loss for risk r
• EFL^total represents the total expected annual financial loss for the company.

The calculation methodology assumes that the individual risks are independent, meaning that the likelihood of one risk occurring does not influence the likelihood of another. Under this assumption, each risk’s expected loss can be added directly, providing an estimate of the average annual loss exposure for the site. This assumption is a simplification and may underestimate total exposure when risks are positively correlated, however, it provides a transparent and consistent baseline for comparing exposure across sites and risk categories.