The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) published the annual report for 2021, a statement on nature-related financial risks, and a report on action taken on biodiversity loss.
The NGFS statement acknowledges that nature-related risks, including those associated with biodiversity loss, could have significant macroeconomic implications, and that failure to account for, mitigate, and adapt to these implications is a source of risks relevant for financial stability. NGFS also published a report on action by central bankers and financial supervisors on biodiversity loss, financial risk, and system stability. The report analyzes different approaches to the design of nature-related scenarios, considers gaps in knowledge, sets out a research agenda, identifies near-term policy options, and makes recommendations for action by central bankers and financial supervisors to address financial risks associated with biodiversity loss and to support investments that are positive for the preservation of nature. The report was prepared by the Study Group on Biodiversity and Financial Stability, which the NGFS and the International Network for Sustainable Financial Policy Insights, Research, and Exchange (INSPIRE) established. Building on the work of the Study Group on Biodiversity and Financial Stability, The report sets out five recommendations to central banks and financial supervisors to help them fulfill their mandates in the face of biodiversity loss:
- Recognize biodiversity loss as a potential source of economic and financial risk and commit to developing a response strategy to maintain financial and price stability
- Build the skills and capacity among central bank and supervisory staff as well as market participants to analyze and address biodiversity-related financial risks
- Assess the degree to which financial systems are exposed to biodiversity loss, by, for example, conducting assessments of impact and dependency, developing biodiversity-related scenario analysis and stress-tests
- Explore options for supervisory expectations for financial institutions’ governance, risk management, strategy, disclosure, and financial conduct in relation to biodiversity-related financial risks and opportunities
- Help build the necessary financial architecture for mobilizing investment for a biodiversity-positive economy, including by considering how central banks’ monetary policy operations and non-monetary policy portfolio management should be conducted in the context of biodiversity loss
NGFS will create a task force to mainstream the consideration of nature-related financial risks across its activities. The task force will act as an incubator that explores, develops, and harmonizes relevant nature-related considerations and efforts in collaboration with the NGFS workstreams, expert networks, and members.
- Press Release on Nature-Related Risks
- Statement on Nature-Related Risks (PDF)
- Report on Nature-Related Risks (PDF)
- Annual Report of NGFS (PDF)
Keywords: International, Banking, Insurance, Securities, Climate Change Risk, ESG, Biodiversity Loss, Financial Stability, NGFS
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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