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Financial Risks of Biodiversity Loss and Land Degradation

Scientific evidence shows that the deterioration in biodiversity and land quality is exacerbated by climate change and accelerating towards irreversible tipping points.1 With an estimated US$ 44 trillion of annual economic output reliant on nature, the acceleration of biodiversity loss and land degradation towards these tipping points holds catastrophic economic consequences, as well as for nature and society.2

 

Biodiversity Loss and Land Degradation

Whilst financial institutions are receiving more investor and client queries on biodiversity, industry opinion is largely that biodiversity and land degradation are not yet a matter of financial risk and materiality. Subsequently, nature-related topics are largely excluded from accounting and risk management considerations and while some existing tools aim to classify the materiality of biodiversity loss and land-degradation-related risks, few translate these into financial risks.

The University of Cambridge Institute for Sustainability Leadership is seeking to address these challenges, leading research through their Centre for Sustainable Finance in collaboration with the Business & Nature team. The research will provide financial institutions with a framework for how biodiversity loss and land degradation correlates to financial risk, supported with sector specific case studies.


The first report from this research project maps out the existing methods and tools that can be used to derive the materiality of biodiversity loss and land degradation.

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We welcome feedback on this study from stakeholders in the financial community and beyond - please get in touch .

Acknowledgements

CISL would like to thank members of the Banking Environment Initiative and Investment Leaders Group for their support of this report and our ongoing project on the Financial Risks of Biodiversity Loss and Land Degradation

Citing this report

Please refer to this report as: University of Cambridge Institute for Sustainability Leadership (CISL 2020). Biodiversity Loss and Land Degradation: An Overview of the Financial Materiality.


Find out more about CISL's Centre for Sustainable Finance

 

1 For example, the extent of Amazon deforestation is dangerously close to causing the local rainfall cycle to degrade to such an extent that parts of the region cannot support tropical rainforest. See: Lovejoy, T. E. and Nobre, C. (2018) ‘Amazon tipping point’, Science Advances. doi: 10.1126/sciadv.aat2340; de Bolle, M. (2019) ‘The Amazon Is a Carbon Bomb: How Can Brazil and the World Work Together to Avoid Setting It Off?’ Peterson Institute for Internal Economics. Retrieved from: https://www.piie.com/sites/default/files/documents/pb19-15.pdf

2 World Economic Forum (WEF). (2020, January), Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy, p. 8. Retrieved from: https://www.weforum.org/reports/nature-risk-rising-why-the-crisis-engulfing-nature-matters-for-business-and-the-economy


 

Measuring business impacts on nature: A framework to support better stewardship of biodiversity in global supply chains

17 April 2020 – A new report from The Natural Capital Impact Group introduces a Biodiversity Impact Metric to help businesses manage their supply chain risks associated with nature. Highlighting the important role of the private sector in protecting and restoring biodiversity, the report is published in the midst of a global pandemic which has, in part, been caused by the breakdown of our relationship with nature. This report has been designed to help companies increase their resilience to such shocks by understanding the impacts they are responsible for and considering the benefits of restoring biodiversity and nature.

Measuring business impacts on nature: A framework to support better stewardship of biodiversity in global supply chains - Read More…

 


The Banking Environment Initiative (BEI) comprises eight global banks. It is a member-led, not-for-profit leadership group for banks, convened by CISL. The BEI’s mission is to ensure pioneering sustainability leadership for the banking sector. 

The Investment Leaders Group (ILG) is a global network of pension funds, insurers and asset managers, with over £15 trillion under management and advice, committed to advancing the practice of responsible investment. The ILG's vision is an investment chain in which economic, social and environmental sustainability are delivered as an outcome of the investment process as investors go about generating robust, long-term returns. It is convened by CISL.

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We welcome feedback from stakeholders in the financial community and beyond - .