Financial sector has the power to stop biodiversity loss

The financial sector risks inflicting significant damage on itself and companies across the world if it fails to use its “great power” to stop actions that harm the planet, a new report by EY, Microsoft and Earth Knowledge has said.

As a core part of global economies, banks, investment firms and insurers have a “great responsibility” to ensure they support activities that are “nature positive” and protect the air, land, water and animals in the Earth’s unique and delicate ecosystems.

Waking up to Nature – the biodiversity imperative in financial services, estimates that the world’s largest investment banks provided $2.6tr of loans and underwriting services linked to the destruction of nature in 2019 alone, and a failure to act at pace and scale to rectify this will create a “material financial risk for the financial services industry”. This will manifest in “market, credit, reputational, regulatory, supply chain, operational, employee engagement and underwriting risk”, the report states.

Sandy Trust, who leads the UK Financial Services Sustainable Finance Consulting team at EY, said: “Our report lays bare the full scale of the challenge facing the financial sector today. Ecosystems across the world are on life support, driven to the brink of extinction by short-term decision-making and investments. But the banks, insurers and investment funds which have helped create this biodiversity crisis are also best placed to create a solution. They can ensure that their investments, capital allocation, loans and insurance support ‘nature positive’ activities by companies across the world.”

The report urges financial companies to take four immediate actions to tackle biodiversity loss: First, they must publicly commit to playing an active role in delivering nature positive outcomes and embed it into their strategies and governance alongside climate change. Second, They must also use their influence to engage with companies on priority biodiversity issues and leverage stewardship and engagement mechanisms established through efforts on climate change; understand the biodiversity risks in lending, insurance and investment portfolios and work with stakeholders to prioritise and overcome these; add new biodiversity expertise to existing best practices for carbon and climate change to accelerate execution; and use global biodiversity frameworks and targets to determine where red lines should be drawn if improvements cannot be evidenced.

They must collaborate and engage on biodiversity at the policy level to accelerate the evolution of regulation that protects ecosystems and design communication plans that feed information learned into the organisation and finally, they must measure, manage and report on their progress, while considering how to augment existing climate risk models with new biodiversity data sets, and new tools such as land mapping and planning tools.

While climate change and biodiversity loss are interconnected, the report says companies typically address them as separate issues, and most lack a strategy to address the latter. A Share Action survey of 70 of the world’s largest global insurers revealed only 10 per cent had publicly available industry-specific investment or engagement guidelines that integrate biodiversity considerations, and only a third engage with companies on biodiversity loss.

    Share Story:

Recent Stories