---
title: follow the supply chain and the number climbs
canonical_url: https://ensurance.app/guide/follow-the-supply-chain-and-the-number-climbs
markdown_url: https://ensurance.app/guide/follow-the-supply-chain-and-the-number-climbs.md
subtitle: the ecb counted four million borrowers and their suppliers. almost three quarters of corporate lending landed on firms highly dependent on at least one ecosystem service.
category: nature-finance
---

# follow the supply chain and the number climbs

*the ecb counted four million borrowers and their suppliers. almost three quarters of corporate lending landed on firms highly dependent on at least one ecosystem service.*

Almost three quarters of corporate bank lending in the euro area goes to firms that are highly dependent on at least one ecosystem service, once their supply chains are counted. The European Central Bank reached that reading in 2023 by scoring 4.2 million borrowers and €4.3 trillion of loans: 72% of the firms, and almost 75% of the loans, cleared a dependency score of 0.7 or more on at least one service. The water, soil, pollination and climate regulation under those borrowers are the same living systems the headline figures rate at the sector level; the ECB simply used a shorter ruler.

**Nature dependency of bank loans** is the phrase a supervisor uses for the question a lender actually faces: not which sectors depend on nature, but how much of my book is lent to firms that do, including through what they buy. [*Ensurance*](/natural-assets?from=guide) funds the places those firms depend on at a named parcel; it is not a risk model and does not score anyone. This post reads the ECB's method and sets it beside the others.

:::johnson
**count the supply chain and the reading climbs.** — Different denominator, different threshold, same direction. The direction is the finding.

[next: why it is total by construction →](/guide/the-economy-is-a-subsystem?from=guide)
:::

## what the ecb did

The paper is Occasional Paper 333, *Living in a world of disappearing nature: physical risk and the implications for financial stability*, by Boldrini, Ceglar, Lelli, Parisi and Heemskerk, published in November 2023; the ECB had described the analysis in a blog post on 8 June 2023. It starts where the WEF method starts, with ENCORE's dependency ratings, and then does two things the sector headline does not.

First, it scores firms, not sectors, using AnaCredit loan-level data for December 2021: about 4.2 million euro-area non-financial corporations and €4.3 trillion of corporate loans. Second, it adds the supply chain. Section 3.1 of the paper: "We complement ENCORE with the input-output table EXIOBASE to account for indirect dependencies on other ecosystem services through supply chains and assign to each borrower a total dependency score." The combination rule in section 3.2 is total dependency equals direct dependency plus the remaining headroom times indirect dependency, so a firm with a low direct score can still score high once what it buys is counted, and the two scores are never simply added.

A firm is labelled highly dependent if its score is equal to or greater than 0.7 on a scale of 0 to 1 for at least one ecosystem service. The executive summary reports the result: "approximately 72% of NFCs (corresponding to around 3 million individual NFCs) are highly dependent on at least one ecosystem service", and "almost 75% of corporate bank loans in the euro area are granted to NFCs with a high dependency on at least one ecosystem service."

## why "at least one" matters, and why it does not weaken the point

The threshold is applied per service. A brewery that scores high on groundwater and low on pollination counts as highly dependent. That is the right test for a lender: the borrower's cash flow is at risk if the one service it cannot replace fails. It does mean the 72% is not comparable with a share of GDP built on sector classes, and this series does not compare them as if it were. What it does say is that when you ask the question the way a credit officer would, of each borrower, including what it buys, about any one service it cannot do without, almost three quarters of the euro area's corporate lending is to firms that depend on nature that way.

## the rulers side by side

| method | what it counts | threshold | reading |
|---|---|---|---|
| Banque de France, 2021 | French financial institutions' securities, by issuer, direct dependence | high or very high on at least one service | 42% of market value |
| WEF and PwC, 2020 | 163 sectors, direct operations, share of world GDP | consolidated sector score above 2.0 | 51% of GDP |
| PwC, 2023 | 163 sectors, one step into value chains | same classes | 55% of GDP; every sector has a highly dependent portion |
| ECB, 2023 | 4.2 million borrowers, direct plus supply chain | 0.7 or more on at least one service | 72% of non-financial corporations, almost 75% of corporate bank loans |

Different denominators, different thresholds, one direction. The WEF row is the floor and sits second only because this table is ordered by what each method counted; no row is a re-measurement of another. The ECB's blog on the analysis puts the conclusion in a sentence: the economy and banks need nature to survive.

## what a lender does with this

Three things. Stop treating the "low dependence" sectors as a safe harbour; the ECB, counting supply chains, found 72% of all euro-area non-financial corporations highly dependent on at least one ecosystem service, and PwC found a highly dependent portion in every one of the 163 sectors. Read the book by place as well as by sector, because a borrower's dependence lands on named watersheds and soils, not on an industry code; [the missing object is the graph](/guide/the-missing-object-is-the-graph?from=guide) is about that object, and [what systemic risk actually is](/guide/what-systemic-risk-actually-is?from=guide) is about why it does not diversify. And then ask the question the rest of this series asks: if three quarters is the reading at this ruler, what is the reading at the limit? [The economy is a subsystem](/guide/the-economy-is-a-subsystem?from=guide) answers it, and [the places those borrowers stand on](/explore?from=guide) are on the map.

This is research, not investment, legal or tax advice.

## frequently asked

### how much bank lending depends on nature?

In the euro area, almost 75% of corporate bank loans are to firms highly dependent on at least one ecosystem service once supply chains are counted, and 72% of non-financial firms meet that test, by the ECB's 2023 scoring of 4.2 million borrowers. On direct dependence alone, the Banque de France read 42% of French institutions' securities holdings in 2021.

### what threshold did the ecb use for nature dependency of bank loans?

A total dependency score equal to or greater than 0.7 on a scale of 0 to 1, for at least one ecosystem service, where total dependency combines a borrower's direct ENCORE score with its supply-chain dependence from the EXIOBASE input-output tables.

### why is the ecb's number higher than the wef's?

Because it uses a shorter ruler: firms rather than sectors, supply chains rather than direct operations only, and a test on any one ecosystem service. Each step counts dependence the sector headline left out. The two numbers measure different things and should not be compared on one scale; the direction between them is the finding.

## sources

[ECB Occasional Paper 333, 2023](https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op333~1b97e436be.en.pdf) — executive summary p. 3; §3.1 p. 12; §3.2 p. 15; §3.3.1. [ECB blog, 8 June 2023](https://www.ecb.europa.eu/press/blog/date/2023/html/ecb.blog230608~5cffb7c349.en.html). Locators are from the founder's check of 9 November 2026; the sandbox this was drafted in cannot reach the source hosts. [Banque de France WP 826, 2021](https://publications.banque-france.fr/en/silent-spring-financial-system-exploring-biodiversity-related-financial-risks-france). [WEF and PwC, 2020](https://www.weforum.org/publications/new-nature-economy-report-series/nature-risk-rising/). [PwC, 2023](https://www.pwc.com/gx/en/issues/esg/nature-and-biodiversity/managing-nature-risks-from-understanding-to-action.html).

## the series

1. [the trillion dollar ruler](/guide/the-trillion-dollar-ruler?from=guide)
2. [what the $44 trillion actually counts](/guide/what-the-44-trillion-actually-counts?from=guide)
3. [follow the supply chain and the number climbs](/guide/follow-the-supply-chain-and-the-number-climbs?from=guide)
4. [the economy is a subsystem](/guide/the-economy-is-a-subsystem?from=guide)
5. [the economy is the smaller number](/guide/the-economy-is-the-smaller-number?from=guide)
6. [you cannot diversify out of the plate](/guide/you-cannot-diversify-out-of-the-plate?from=guide)