Since 1970, the world has lost 68% of mammal, reptile, bird, fish, and amphibian populations, mostly due to habitat loss and resulting species die-off over time. This degree of biodiversity loss is concerning for the health of ecosystems worldwide, and a new study reports that it could also pose a significant threat to economic stability. The report comes amid negotiations with world leaders and central banks in Geneva to create a new global biodiversity framework that proposes to protect 30% of the world’s habitats.

Ravi Menon, chairman of the Central Banks and Supervisors' Network for Greening the Financial System (NGFS), states, "we are eroding this biodiversity at a pace that is severely damaging the natural ecosystems that provide us with food, water, and clean air. This in turn could pose significant risks to economic, financial and social stability."

Why This Matters

Banks and other financial institutions rely heavily on healthy ecosystems and the monetary value of their resources and without, central banks face financial risks and instability that could undermine the global economy. The report argues that the financial sector can address biodiversity loss and its threats by ensuring that lending, investment, and insurance are applied to create a "nature-positive financial system.” In doing so, the Inter-American Development Bank estimates $339.3 billion could be generated from investing in climate change solutions and reversing biodiversity loss.

Reversing Banking's Role in Climate Change

According to a 2020 report by the Rainforest Action Network, 35 of the world’s major banks have provided $2.7 trillion in funding to fossil fuel companies since the formation of the Paris Agreement in 2015. Ironically, these investments are contributing to their own demise by promoting financial instability and global insecurity. The NGFS report is the first assessment of how central banks can respond to financial risks posed by biodiversity loss and reverse their roles in climate change. It recommends developing response strategies to biodiversity-related risk scenarios; integrating green finance with climate change threats that could affect financial and price stability; and building the proper financial architecture to facilitate investment that helps conserve biodiversity. While it will be challenging for the financial sector to divest from fossil fuels and reinvest in climate-friendly solutions, shareholders and consumers can help hold banks accountable by filing resolutions to phase out fossil fuel investments.