
Central banking and supervision in the biosphere: An agenda for action on biodiversity loss, financial risk and system stability
This report explores the role central banks and financial regulators can play to mitigate biodiversity loss risks. The report establishes that biodiversity loss poses a financial risk to the economy and makes recommendations for action.
Please login or join for free to read more.

OVERVIEW
This report puts forward recommendations on the contribution central banks and financial supervisors can make to address the risks posed by biodiversity loss to the global economy.
The report states that biodiversity loss poses a significant financial risk which can affect many sectors and lists a set of policy options that can be adopted by central bankers and other financial supervisors.
Assessment of biodiversity loss and its macroeconomic impacts
The report establishes that the loss of biodiversity poses a financial risk, highlighting that biodiversity is central to several economic sectors, including water, agriculture, and tourism. Quantitative assessments also show that these economic sectors generate significant global revenue, and their disruption from biodiversity loss could prove to be costly. The authors, therefore, underscore the need for immediate action.
Global gaps in knowledge and understanding
The report identified gaps in knowledge and understanding in terms of impact assessment methodologies. The approaches which exist have not been customised for the financial sector and are generally lacking in scientific robustness, transparency, and consistency. The authors recommend that central bankers and supervisors establish coherence within and among global financial authorities to develop and implement nature-related definitions, terminologies, measurement methodologies, and indicators.
Policy options for central banks and supervisors
The report lists several recommendations for a policy framework to be adopted by central banks and supervisors:
- The report urges the integration of biodiversity and nature-related considerations into decision-making frameworks for investments, lending and insurance underwriting.
- Transparency and credibility in disclosures and supervisory reporting should be promoted in the interest of risk assessment.
- Regulation should be strengthened to ensure the accurate measurement of biodiversity loss impacts, and to limit greenwashing in the financial sector.
- The report recommends that monetary and prudential instruments should be calibrated to scale up biodiversity and nature-related initiatives.
- Central banks and supervisors should promote the establishment of risk-based classifications to identify the sectors and assets with the greatest biodiversity loss risks.
- The report also highlights that for these recommendations to be effective, global coordination and coherence in biodiversity-related definitions, measurements, and data are essential.
Financial regulation and market conduct
The report stresses the importance of financial conduct in terms of managing biodiversity loss risks. The authors call for central banks, and supervisors to establish clear, transparent, and credible criteria and standards for a biodiversity dimension in ESG ratings and sustainable financial products. In this regard, the report recommends that an interdisciplinary consultation process be established to define the terms ‘biodiversity-positive’ and ‘biodiversity-harmful’ activities. The report also calls for the promotion of transparent and credible data, including mandatory disclosure requirements to ensure that investors understand sustainability-related risks for all products, and not just for those that are sustainability-focused.