A group of financial institutions and consultancies have joined forces with a research institute to improve the assessment of biodiversity-related risks and opportunities to the financial sector, including estimating the economic impact of nature loss.
Researchers at Netherlands-based Wageningen University and Research (WUR) launched the project with insurer Allianz Group, pension investment company APG, banks Commerzbank and ING, and consultancies Ortec Finance and Deloitte.
“The financial sector needs to quantify biodiversity-related risks and opportunities, like what has been done for climate change,” said Haki Pamuk, the scientific lead of the project at WUR.
“This requires the development of a model and data platform, including quantified monetary estimates for the risks related to ecosystem services loss, as well as costs and benefits of abatement measures.”
The project, which will run until Dec. 2027, aims to bridge current data gaps by providing the financial sector with information on the monetary effects of losing ecosystem services, like pollination and soil quality, as well as measures to protect biodiversity, including implementation costs, capital investment requirements, and economic benefits.
Partly funded by the Netherlands’ Ministry of Agriculture, Nature, and Food Quality, it will leverage the Magnet model developed by WUR researchers to simulate financial scenarios across different sectors and countries worldwide.
INTEGRATING BIODIVERSITY DATA
Financial institutions will run pilots, with the first results expected to be released by the end of this year.
“To serve the demand of supervisors, regulators, investors, and the public, science-based biodiversity data and scenarios need to quickly be integrated into current risk and stress tests, strategy, market and reporting processes of financial service institutions,” said Nicole Rottmer, FSI methodology lead of the project at Deloitte.
Deloitte said the initiative aligns with the EU’s Corporate Sustainability Reporting Directive, which will require over 50,000 organisations to report on their environmental, social, and governance practices from 2025.
It also intends to support financial institutions in bolstering nature-related reporting within voluntary frameworks, such as the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations.
“I am excited about the data and scenario contribution this consortium will create at the intersection of the Network for Greening the Financial System (NGFS), Science Based Targets Network, and TNFD,” added Rottmer.
Under the TNFD, financial institutions are required to look at where they invest and assess whether this affects sensitive locations when it comes to biodiversity, though they have often cited the lack of data on investees’ nature-related impacts as hampering their efforts.
Last week, the task force released guidance to steer financial institutions in implementing its recommendations, including specific metrics for banks, insurance companies, asset managers and owners, and development finance institutions.
By Sergio Colombo – sergio@carbon-pulse.com
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