A new report by WWF highlights the urgency for central banks and financial supervisors to act on the risk of unprecedented nature loss. With biodiversity loss not only compounding climate-related risks but a global crisis in its own right, the new report “Nature‘s next stewards: Why central bankers need to take action on biodiversity risk” warns that current practices of only integrating climate-related risks and impacts in existing mandates of central banks and financial supervisors, and not including risks from nature loss, fall short in ensuring a sustainable financial system.
Based on the findings of the report, WWF recommends to central banks and financial supervisors:
- The burden of proof should be reversed. Central bankers must assume that environmental degradation, including biodiversity loss, poses macroeconomic and financial risks in their jurisdictions unless it can be shown otherwise.
- Preventive measures should be taken to mitigate forecasted risks from biodiversity loss alongside climate change-related risks. The current regulatory framework provides the tools to do so, across microprudential supervision, macroprudential supervision and monetary policy. Central bankers should also address environmental risks in their own portfolios and should promote the necessary research.
- Central banks and financial supervisors should act consistently with internationally and nationally stated environmental objectives. They should advocate for common international financial regulation that includes environmental dimensions.
