IFLR
February 21, 2022
While climate change concerns have so far dominated ESG thinking, awareness of nature risk is catching up fast and already being integrated into sustainability frameworks, according to sources.
The biodiversity-related principal adverse indicators in the Sustainable Finance Disclosure Regulation, the planned update to the EU Taxonomy to incorporate biodiversity risk, the Network for Greening the Financial System's own biodiversity study group, along with the meteoric rise of the Taskforce on Nature-related Financial Disclosures (TNFD), represent well the momentum building behind regulatory attempts to transform nature risk awareness into concrete impact in financial markets.
The World Economic Forum estimates that more than half of the world’s economic output ($44 trillion) is at least moderately or highly dependent on nature, meaning that if natural systems collapse, so will the world’s economic and financial systems.
Due to the sheer scale of the risk – together with scientific studies that show the world has already entered the sixth mass extinction phase – sources say that considerations around nature or biodiversity risk, which have traditionally been excluded from financial decision making, can no longer be relegated to the margins.