Towards a financial system that extends its focus from climate change to the challenges of addressing nature-related risks

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The Network for Greening the Financial System (NGFS) and the International Network for Sustainable Financial Policy Insights, Research, and Exchange (INSPIRE) have launched a joint Study Group on ‘Biodiversity and Financial Stability’. The objective is respond to the need identified by central banks and supervisors consisted in extending their focus from climate change to the challenges of addressing the implications of broader nature-related risks and the conservation of nature and biodiversity. Doing this will involve understanding the impact of finance on the provision of key ecosystem services as well as the consequences of biodiversity loss for financial stability. To respond to this emerging agenda, the Study Group will conduct a programme of research and dialogue to address these challenges and propose recommendations for action and further inquiry. The goal of the research initiative is to establish an evidence-based approach to how central banks and supervisory authorities could fulfil their mandates in the context of biodiversity loss, with a focus on land-use and deforestation.

“Companies are highly dependent on the services that ecosystems provide, but may at the same time have a harmful impact on the environment. The financial risks that stem from a loss in biodiversity are a serious threat to the financial sector that urgently require better understanding by policy makers and regulators to which the new NGFS/INSPIRE Study Group will provide an important contribution.”

Frank Elderson, Chair of the NGFS and member of the ECB’s Executive Board

“Of systematic importance but poorly understood is the impact of biodiversity loss on the economy and financial system. The joint NGFS/INSPIRE research initiative on ‘Biodiversity and Financial Stability’ is formed to improve this understanding, by exploring the dependencies among and impact transmission through the ecological systems, economic activities, and financial stability.”

Dr Ma Jun, Chair of the NGFS Research Workstream, co-Chair of the G20 Sustainable Finance Study Group, and Chairman of China Green Finance Committee

“2021 is a crucial year with the Biodiversity COP as well as the Climate COP. The Study Group will complement existing initiatives by setting out recommendations that financial authorities can take in the near-term as well as produce a long-term research agenda on biodiversity.”

Professor Nick Robins, Grantham Research Institute on Climate Change and the Environment

Read on at NGFS

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