Biodiversity and the Financial Sector – Part 3: Policy Perspective

  • Date: 17/09/2020

Webinar highlights

Previous webinars illustrated a failure of the market to effectively address loss of biodiversity. Asset managers struggle with having a mandate to embed biodiversity in investment decisions, and even if they do then it is not clear cut how to measure the biodiversity footprint of investments and loans. However, the public sector has the opportunity to catalyze this process.

This third webinar of the biodiversity series, discusses the role of the public sector to address the failure of the market in putting a stop to the loss of biodiversity.

The Dutch Ministry of Agriculture and Nature (LNV) supports research and initiatives in the financial sector, to stimulate the catalyzing effect of the financial sector in driving change towards a more inclusive economy. In order to accelerate the transformation of the current system, LNV uses transition thinking as their theory of change.

LNV recognizes four steps in this transition thinking; (1) supporting first movers with the development of metrics, (2) creating awareness with mainstream parties (knowledge), (3) investing with positive impact and (4) systemic change together with finance. In practice this means that LNV does the following; for step 1, they support PBAF with research and networking. For step 2, they are actively participating in the Sustainable Finance Platform working group on biodiversity. Regarding step 3, LNV currently supports the ‘1.000 landscape’ platform and their investor task force to accelerate landscape restoration. Finally, for the 4th step, LNV supports the ministry of finance with input on various topics such as the Green taxonomy of the EU.

In the second part of the webinar the Dutch Central Bank’s (DNB) perspective on the relationship between the financial sector and biodiversity was shared. In the first place, the economy and the financial sector depend on biodiversity as it provides ecosystem services, such as animal pollination and coastal protection. When biodiversity is put under pressure nature’s benefits to society might no longer be delivered. This leads to physical risks for the financial sector. In the webinar this is illustrated in an overview of the indirect dependencies of the financial sector on ecosystem services. For example, 510 billion euros held by Dutch banks, pension funds and insurers is (very) highly dependent on one or more ecosystem services. If the balance within ecosystems is further disturbed this can lead to the manifestation of physical risks.

Besides that, companies have an (often negative) impact on biodiversity. Financial institutions financing these companies run transition and reputational risks. Reputational risk when the negative impact can be directly related to a company funded by a financial institution. Transition risk when companies financed by the financial sector need to transform their operations so as limit its negative impact on biodiversity.

Presentation slides

You can find the webinar presentation slides here.