Regulators Overlook Biodiversity Risks Amid Climate Focus: FSB Report

A Financial Stability Board report reveals some G20 regulators neglect biodiversity risks, focusing on climate instead. The report highlights nature-related financial risks like credit losses and price corrections, and calls for better data and capacities. The World Bank warns of significant GDP impact from ecosystem collapse.

A report by the G20's financial watchdog, the Financial Stability Board (FSB), reveals that financial regulators in several G20 countries are overlooking the risks posed by biodiversity loss and deforestation, focusing instead on climate risks. The report indicates that while some regulators have assessed nature-related risks, others are yet to do so.

The FSB found that biodiversity and nature loss could lead to credit losses, defaults, and sudden price corrections posing financial risks to banks and other institutions. Financial institutions are exposed to these risks through their investments and financing in nature-related sectors such as food production. However, more work is needed to translate these financial exposures into measures of risk, particularly regarding physical risks like declining pollinator populations and degrading agricultural land.

The World Bank estimates that a partial ecosystem collapse could reduce global GDP by 2.3% in 2030, severely impacting poorer countries. Brazil, the current G20 president, tasked the FSB to assess global regulatory responses to nature-related financial risks. The findings show varying stages of action among financial authorities, with some already implementing policies and others lacking the data and capacity. This report feeds into the upcoming COP16 biodiversity conference in Colombia.

(With inputs from agencies.)