Ecological crisis and economic crisis go hand in hand. According to a report (link in English) published Thursday, March 24 and developed by researchers in collaboration with the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), central banks underestimate the significant threat posed by the loss of biodiversity and its wealth, on which businesses and financial institutions depend.
If the impacts of climate change are increasingly integrated into the assessment of economic risks, this is much less the case for similar threats from the destruction of nature, finds this study. “We are eroding biodiversity at a rate that is harming the ecosystems that provide us with food, water and clean air. This could cause significant risks to economic, financial and social stability,” commented Ravi Menon, president of NGFS, recalling that “Biodiversity is the basis of life on our planet”.
The report insists that threats to nature should be incorporated into central banks’ risk assessments, noting the dependence of economic and financial systems on functioning and healthy ecosystems. For example, agricultural yields are threatened by the reduction of the populations of pollinators victims of pesticides or the reduction of their habitats. “Loss of biodiversity is a threat to financial stability”, explains to AFP Nick Robins, of the London School of Economics, who co-directed this report. Gold, “perhaps current investments by businesses and financial institutions are not consistent with a healthy ecosystem”he points.
The Inter-American Development Bank, for its part, has estimated that policies aimed at preventing the Amazon from reaching the tipping point that could eventually turn it into a savannah (curb deforestation, invest in sustainable agriculture, improve fire management) could generate around 340 billion in additional wealth.
Successfully transitioning to a global economy that protects nature is a challenge, notes the report. Some countries have begun to take action, notes the study, which nonetheless calls on central banks to develop a coordinated approach to respond to the global biodiversity crisis.
Published at a time when delegations from nearly 200 countries are meeting in Geneva as part of negotiations aimed at establishing an agreement by the end of the year to better protect biodiversity, the report finally underlines the impact that the system financial may have on the nature, in particular via the choices of loans, investments and insurance.