A new report recently presented looks at the feasibility of find a path with respect for nature, even when it comes to finances. The idea is to inform how central banks and financial regulators can take actions that prevent their activities from impacting nature.
In this document, prepared by WWF together with the Sustainable Finance Laboratory (SFL) of the Netherlands underlines the need for central banks and financial regulators to gain an integrated view of climate and nature-related risks, and offers practical solutions to address them.
Nature always counts
COP29, already known as “the Climate Finance Summit”, represents an opportunity to adopt a new collective quantified target that will government funding to alleviate the climate crisispromote adaptation and curb losses and damage in developing countries. Moreover, this summit should be a before and after for financial institutions – both public and private – to make a strong commitment to deploying capital for climate finance.
The risks and consequences of nature loss have important consequences for people, the economy and financial stability. However, the latest SUSREG Tracker 2024, published by the NGO in October, shows that these risks are often underestimated and not considered in an integrated manner alongside climate risks by central banks and financial sector regulators.
There is a significant gap between harmful investments – such as direct payments, tax breaks and subsidies that worsen the climate crisis, loss of biodiversity and degradation of ecosystems – estimated at almost $7 trillion per year, and investments in nature-based solutions amount to only $200 billion.
The ‘Finding a Way with Nature’ report goes a step further than diagnosis and provides guidance for taking action. To do this it is based on the premise that central banks and financial supervisors, given their mandate, can adopt policies preventive and proactive approachand making a difference and leading the transition to a net-zero emissions and nature-positive economy, on which global financial stability depends.
The challenge is to get rid of it awareness and involvement in the implementation of policy and concrete actions to manage nature-related risks. The report thus identifies the main challenges and available tools and proposes a short, medium and long-term agenda of solutions. The goal is that over the next five years, central banks and financial regulators will help reverse the course of nature loss that increasingly threatens global financial stability.
Among the measures proposed between now and 2030, the following stand out: adopting an integrated approach to climate and biodiversity, promoting a perspective of precaution and proactivity before it is too late, tackle environmentally harmful activities first -such as fossil fuel extraction, deforestation or pesticides- and demand greater impacts as capital is replenished. Furthermore, the environmental organization encourages these actors to set a good example and publish their transition plans, which draw a direct link between biodiversity loss and climate change.
Loose risks and consequences of nature loss They have important consequences for financial stability, the economy and the population, and can therefore increase the impact of climate change. The worrying thing is that central banks and financial sector regulators now take virtually no account of it.