Biodiversity loss is an underappreciated risk to the financial system, according to a report released on Thursday. Central banks must improve their understanding of the issue and set supervisory expectations for commercial banks to address it.
While climate change has risen to the top of the agenda, the related issue of lost biodiversity has been overlooked, despite the fact that it, too, can have a significant economic impact, according to a report by the Network for Greening the Financial System (NGFS) and the International Network for Sustainable Financial Policy Insights.
"We are eroding this biodiversity at a rate that is severely damaging the natural ecosystems that provide us with food, water, and clean air," Ravi Menon, the head of the NGFS, a group comprised of the world's top central banks, said. "As a result, significant risks to economic, financial, and social stability may arise."
"As a result, central banks and bank supervisors should build capacity to understand the issue and assess the risk associated with biodiversity loss," the NGFS stated.
They should also "explore options" for supervisory expectations regarding banks' governance, risk management, strategies, disclosure, and financial behaviour in relation to biodiversity-related financial risks.
Causes of Biodiversity Loss
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Changes in land use (e.g. deforestation, intensive monoculture, urbanization)
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Direct exploitation such as hunting and over-fishing
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Climate change
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Invasive alien species
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Pollution
Solutions to Biodiversity Loss:
Audrey Azoulay, Director-General of the United Nations Educational, Scientific, and Cultural Organization (UNESCO), urged action during the presentation of the UN report in 2019: "We can no longer eliminate life's diversity. We owe it to future generations to do so ". Here are some of the UN's own Sustainable Development Goals (SDGs) commitments:
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SDG 14 aims to manage and protect marine, coastal, terrestrial, and inland freshwater ecosystems in a sustainable manner, while also addressing the effects of ocean acidification and regulating fishing to promote sustainable fisheries.
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SDG 15 aims to protect, restore, and promote the sustainable use of terrestrial ecosystems, forest management, land degradation, desertification, and biodiversity loss.
Beyond UN commitments, we can all do our part on a personal level to combat biodiversity loss. By prioritizing sustainable mobility and food, responsible consumption and recycling practices, reducing polluting small actions, assisting in raising awareness of the smallest actions through environmental education, and ultimately supporting any action aimed at biodiversity protection.
