Biodiversity and financial stability: exploring the case for action

Biodiversity and financial stability: exploring the case for action

The Study Group on Biodiversity and Financial Stability established by the Network for Greening the Financial System (NGFS) and the Network for Sustainable Financial Policy Insights, Research, and Exchange (INSPIRE) has published a vision paper entitled “Biodiversity and financial stability: exploring the case for action.” It states that central banks and prudential supervisory authorities are increasingly recognising the potential for biodiversity loss to threaten macroeconomy stability as well as the stability of the financial systems that they oversee. But the complexity of the issue, the lack of regulations and policy guidance, and limited tools to measure, disclose and manage nature-related financial risks create a range of challenges to overcome, according to the report.

The report sets out the links between biodiversity loss and the macroeconomic and financial systems. It considers both the dependency of the financial sector on ecosystem services, and the impact of the financial sector in exacerbating the degradation of natural systems. It then poses a series of questions regarding whether and how central bankers and supervisors should, in the context of pursuing their mandates, address the issue of biodiversity loss.

This Vision Paper sets out the rationale for the work of the Study Group and proposes an initial agenda and a research focus. It is to be followed by an Interim Report, to be published ahead of the critical meeting of the parties to the Convention on Biological Diversity, in Kunming, China, in October 2021. That meeting is expected to agree on a post-2020 global biodiversity framework, which aims to halt and reverse biodiversity loss.

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