Financial institutions, specifically banks, play a crucial role in the proliferation of climate-related issues. Despite this, they continue to fund unsustainable projects, primarily contributing to the biodiversity crisis through financing the fossil fuel industry and transportation. 

Whilst banks may contribute positively to climate change, as they begin to finance more sustainable endeavours such as low-carbon projects, this paper employs a quantitative approach to determine the extent of their ethical investing policies. The report analyses the loans and underwritings provided by the world’s 50 largest banks in 2019 to provide greater clarity on their most damaging investments, inadequate regulation, and poor awareness of biodiversity issues. 

The quantitative analysis uses Thomson’s Reuter’s Business Classification (TRBC), which includes the economic sector, business sector and industry group, to establish a link between finance and biodiversity risk. 

There are a series of key findings and recommendations that can be derived from this report. The general observations are listed below, whilst recommendations can be found in ‘Key Insights’. 

Key findings:

• Size of banks is not a determinant of their contribution to pollution. 
• Each of the 50 banks in the research were linked to finance with biodiversity risk, at an average of USD 52 billion per bank.
• The analysis indicates that banks have a lack of knowledge and understanding to reduce the impact their lending portfolios have on biodiversity risk
• Although all banks performed poorly, North American banks were particularly careless in their consideration of biodiversity risk.
• All of the banks assessed failed to demonstrate sufficient systems that measure the impact on biodiversity of their lending decisions. 
• The banks failed to report biodiversity risk adequately, focusing far more on broader environmental risk. 
• Regarding customers, none of the banks provided an option for the customers to choose how their money is being invested, failing to disclose high risk loans and stress-testing of balance sheets. 
• Although 70% of banks adopted the Equator Principles (a framework designed to monitor environmental and social risk), they demonstrated no public support for biodiversity initiatives such as the Aichi Biodiversity Targets. 

Sector specific findings:

The study explores the link between finance and biodiversity risk by identifying primary sectors of issue.    

• Food System (Fisheries and Aquaculture): The analysed banks issued more than USD 380 billion of finance to the food sector (including fisheries), a sector broadly recognised as a primary driver of biodiversity loss.
• Agriculture: Bank loans have been found to drive deforestation through forestry companies, and financing industries along the supply chain. 
• Mining: 49 (of the 50) banks assessed are at risk of financing biodiversity through the wider mining sector. 
• Fossil Fuels: Banks were linked to 57% of all loans in the fossil fuel sector. 
• Infrastructure: USD 800 billion in loans to this sector, linked to direct and indirect biodiversity loss. 
• Tourism: Potential link between bank loans and biodiversity unclear. 
• Movements of Goods and People: The banks account for 58 percent of all loans in this sector, driving biodiversity loss through oil, distribution and gas transportation services. 

1. It is essential that banks disclose relevant information surrounding their exposure to high risk biodiversity investments. Further, banks should measure and continue to disclose the positive impact they have made in achieving societal and global environmental goals.
2. Banks must act to drastically reduce their impact on nature by denying loans to new deforestation, overfishing and fossil fuel ventures.
3. Government bodies need to regulate and create new policy surrounding bank loans - stop protecting banks from funding harmful initiatives and hold them accountable.
4. Retail customers must have input in the dissemination of their money. They have a right to request that banks stop funding destructive projects caused by their lending protocols.
   
5. Banks must display public support and adopt biodiversity practices as part of their lending protocol such as the Aichi Biodiversity Targets.
6. Financial institutions should prioritise the long-term implications of their loans and develop a greater understanding of the biodiversity impacts caused by their lending activities.
   
7. The report highlights other groups and organisations that are actively finding solutions and frameworks to overhaul the financial sector's investment in companies that harm biodiversity. For example, The Dasgupta Review, ShareAction's report on biodiversity loss, and the framework developed through the Finance for Biodiversity (F4B).