Presentation by Beccy Wilebore natcap research OECD INSPIRE Workshop Bio Risks impacts and dependencies in the financial sector

1. Assessing Biodiversity-Related Risks, Impacts and
Dependencies for the Financial Sector:
Scene Setting
Beccy Wilebore, natcap

2. Letʼs start with some definitions…
● Biodiversity describes the variety of life
on earth. It underpins the goods and
services that nature generates -
affecting their quality, quantity, and
resilience.
● Ecosystem services are the flows of
services that are provided by nature
that yield a benefit. Carbon storage and
its benefits for climate mitigation is one
example.
Biodiversity related financial risks
Ecosystem services related financial risks
Climate related financial risks…
…are all types of Nature-related financial risks

3. The economic system is completely dependent on
biodiversity
Half of global GDP (~$44 trillion) is moderately or
highly dependent on nature (WEF, 2020). 100% is
dependent on nature to some degree
Credit: AECOM
Industries that are highly dependent on nature
generate 15% of global GDP ($13 trillion)
Moderately dependent industries generate 37%
($31 trillion)
Together, the three largest sectors that are
highly dependent on nature generate close to $8
trillion of gross value added (GVA)
1. Construction ($4 trillion)
2. Agriculture ($2.5 trillion)
3. Food and beverages ($1.4 trillion)

4. Biodiversity is in decline
Global Living Planet Index (1970-2018)
Source: WWF/ZSL (2022)
In the last 50 years, the global economy has grown by a factor of 5
Meanwhile, wildlife has declined by 69%
● 50% of the worldʼs coral reef system
has been destroyed
● 33% of fish stocks are overfished
● 1/3 of the worldʼs topsoil has been
degraded
● More than 85% of wetlands have
been lost
● The Amazon has lost 17% of its size
in the past 50 years
WEF, 2020. IPBES, 2019

5. Risks of biodiversity loss rival those of climate change
Biodiversity related risks are different from climate risks in 5 key ways

6. 1. There are multiple interacting drivers and threats to
tackle
Risks to biodiversity come from multiple, interconnected threats, which are the result of
diverse anthropogenic drivers acting from local to planetary scales

7. 2. There is no universal measurement unit for biodiversity
Unlike carbon, there is no single unit
for biodiversity
Multiple metrics and targets are
needed to capture elements of nature
at different scales

8. 3. Biodiversity / ecosystem services are
non-substitutable
Example: Monoculture tree cropping for GHG
removal at the expense of biodiversity and
water supply
Unlike carbon, biodiversity units are not
equivalent.
Loss of one habitat or species cannot be
ameliorated by increases in another.
Decreases in one ecosystem service (e.g. soil
quality) cannot be alleviated by increases in
another ecosystem service (e.g. water supply)

9. 4. Location matters: biodiversity and ecosystem
services are highly spatially dependent
Unlike carbon emissions, location is critical to
understanding impacts and dependencies on
nature
Locating assets is one of the largest challenges
FIs and corporates face in disclosing their impacts
and dependencies Kronvang et al. 2020
Pollinators only
fly up to 1-2 km
from their nesting
sites
Hydrological
processes are
directional:
upstream to
downstream
Migratory routes
of some species
can be +1000 kms
local
global

10. 5. Nature responds to disturbances in non-linear ways
North atlantic cod
population collapse.
Catch numbers
between 1960 and
2020.
Coral bleaching
events due to
increasing sea
temperatures
Natural systems can have thresholds or
tipping points, beyond which a small
increase in disturbance has a large impact
on state
Examples of tipping points in natural systems
1
2

11. Hazards / shocks
Physical shocks
Loss of ecosystem
services. Acute e.g.
pandemics,
chronic e.g. soil
degradation
Transition
shocks
Changes in policies,
business processes
and preferences
Transmission of risks
Microeconomic impacts
Impacts on businesses (physical damage,
stranded assets) or households (lost
income and transition hazards)
Macroeconomics impacts
For example, changes in inflation,
government revenues, aggregate
investments
Materialisation
of financial risks
Credit risk
Liquidity risk
Market risk
Underwriting risk
Operational risk
Feedbacks
Financial
contagion
Double materiality (FIs contribute to the risks from which they are exposed)
Adapted from Romain et al. Banque de France 2021
Propagation of biodiversity-related financial risks

12. What can the finance industry do about this?
2. Improve
financial models for nature
Improve methods to better capture
unique features of biodiversity
and ecosystem related risks:
● Multiple impact drivers
● Non-substitutability
between ecosystem services
or natural assets
● No single measurement unit
● Spatially specific nature
● Non-linear responses to
disruption
1. Quantify and disclose
● Quantify impacts and
dependencies on biodiversity,
risks and opportunities
● Align with emerging disclosure
frameworks such as TNFD and
SBTN
● Increasing transition risks over
the next the next 2-5 years
● Locate your assets and close the
data gap in supply chains
3. Identify new investment
opportunities
● Demand for nature-positive
investment products is only
expected to increase
● Emerging asset classes such as
land and resource use
● Nature tech, expected to be 1% of
public and 2% private NbS
funding - market size of $2 billion
● Thematic equities such as nature
or natural capital funds
How can we approach the challenge of biodiversity related financial risks?

13. nature intelligence.
Questions?
beccy.wilebore@natcapresearch.com