How does biodiversity loss impact financial stability?

This article entitled “Exploring the links between biodiversity loss and financial stability” from Ma Jun and Nick Robin describes the need for a systematic approach by central banks and financial supervisors to biodiversity. Here’s an excerpt:

To drive this forward, a new study group on Biodiversity and Financial Stability has been launched by the Network for Greening the Financial System (NGFS) and one of its research stakeholders, the International Network for Sustainable Financial Policy Insights, Research, and Exchange (INSPIRE).

The study group will comprise researchers from both NGFS members and the INSPIRE community. Its goal is to establish an evidence-based approach to how central banks and supervisory authorities could fulfil their mandates in the context of biodiversity loss, with an initial focus on land use and deforestation. Over the next year, the study group will conduct a programme of research and dialogue to address these challenges and propose recommendations for action and further inquiry.

The impacts of biodiversity loss on the macroeconomy and financial system are still poorly understood. Much clearer delineation of the transmission channels between ecological, economic and financial systems is needed. The study group will examine both the dependency of financial stability on biodiversity as well as the ways in which financial practices impact on the health of ecosystems. It will then explore how central banks and supervisors can take action based on their mandates to respond to the risks posed by biodiversity loss. This will cover micro- and macro-prudential supervision, monetary policy and actions to scale up nature-based financial solutions.