Financial Institutions Exposed to Nature-Related Risks

A guide to the processes and actions that financial institutions can take to benefit nature was released last month by the Convention on Biological Diversity (CBD). The Financial Sector Guide for the Convention on Biological Diversity highlights the increasing awareness on nature’s importance for the financial sector.

The guide said more than half the world’s total Gross Domestic Product, $44 trillion, is moderately or highly dependent on nature and its benefits or services according to the World Economic Forum.

Elizabeth Maruma Mrema, Executive Secretary, CBD.

Elizabeth Maruma Mrema, CBD Executive Secretary, said in a statement: “The financial community has a critical leveraging role to pivot economic sectors towards more positive impacts on nature. The call for the financial community to act will become ever louder—as the world strengthens its nature goals and builds new techniques to measure nature loss.”

Financial institutions are exposed to nature-related financial risks including loss due to credit, market and operations risks resulting from negative impacts on nature, through regulation, market access. These can also include ‘transition risks’ from new costs related to inevitable policy responses on nature, and ‘physical risks’ from the effects of loss of certain species, genetic variety and key ecosystem services on which their clients’ operations depend.

However a nature-based transition could generate $10 trillion in business opportunity and create 395 million jobs by 2030.

Marisa Drew, Chief Sustainability Officer & Global Head Sustainability Strategy, Advisory and Finance, Credit Suisse.

Marisa Drew, Chief Sustainability Officer & Global Head Sustainability Strategy, Advisory and Finance at Credit Suisse, said in the report: “Global biodiversity finance makes up just 0.1% of global GDP. Without a clear investment case for biodiversity, and the creation of investible and structured opportunities for investors to deploy their capital, we cannot address the problem.”

Financial institutions including 55 banks, insurers and investors have signed up to the Finance for Biodiversity Pledge.

In addition, the Taskforce on Nature-related Financial Disclosures was launched last month to develop a draft framework by 2022 which will complement the Task Force on Climate-related Financial Disclosures. The TCFD’s framework has been adopted by companies with a market cap of nearly $23 trillion and nearly 1,000 financial firms responsible for over $180 trillion in assets.

The guide has been published as negotiations take place for the the post-2020 global biodiversity framework which is due for adoption later this year in Kunming, China. It is geared towards all financial institutions, stakeholders and partners, and has been produced by the CBD and four partners – Business for Nature; Finance for Biodiversity Pledge; UN PRI and the UN Environment Programme’s Finance Initiative  (UNEP FI).

©Markets Media Europe 2021

ESG stocks have become more expensive over time

Stocks considered as “more ESG” or environmental, social and governance have been persistently more...

One third of asset owners not embedding responsible investment contracts

Nearly one third of asset owners do not contractually require fund managers to follow...

Greener equities take a hit

‘Greener’ equities, such as those in the FTSE Russell Environmental Technologies 100 index, and...

ESG stocks have become more expensive over time

Stocks considered as “more ESG” or environmental, social and governance have been persistently more...

One third of asset owners not embedding responsible investment contracts

Nearly one third of asset owners do not contractually require fund managers to follow...

Greener equities take a hit

‘Greener’ equities, such as those in the FTSE Russell Environmental Technologies 100 index, and...