On 24 March 2022, the Network for Greening the Financial System (NGFS) issued a statement on nature-related financial risks.
Among other things the statement notes that on the basis of available scientific evidence, the NGFS is of the view that nature-related risks, including those associated with biodiversity loss, could have significant macro-economic implications, and that failure to account for, mitigate, and adapt to these implications is a source of risk for individual financial institutions as well as for financial stability.
The statement adds that a key task ahead for central banks, financial supervisors and financial institutions are:
- Building a scientifically-grounded analytical framework to assess the interactions between nature, the macro-economy and the financial system, in a way that is both comprehensive and actionable.
- Bridging the likely data gaps that will emerge from such a framework.
- Using this new framework and data sets to align policies with environmental sustainability and inform the assessment of nature-related financial risks.
In the meantime, central banks and financial supervisors should take stock of the growing evidence base, run preliminary assessments of financial risks stemming from dependencies and impacts on nature and encourage the development of risk assessment and management practices by financial institutions.