Article de Lucie Lambreth (MS EnvIM 2023-24)

Introduction

The world is facing a biodiversity crisis of unprecedented magnitude. Biodiversity, encompasses ecosystems, species, and genetic diversity. It has been declining globally at an unprecedented rate in human history, and projections for next decades are alarming. In its recent report [1], the WWF outlines a catastrophic decline of 73% in the average size of monitored wildlife populations over just 50 years. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) warns that nearly one million species are at risk of extinction. [2]

The main threats impacting biodiversity are all related to human activities as demonstrated by the IPBES: land-use change, natural resource use and exploitation, pollution, climate change and invasive species.

This alarming loss of biodiversity is not only an environmental issue. It is a profound threat to economic stability and even to the sustainability of the human civilisation over the upcoming decades. As stated by EY [3], “With nature declining at unprecedented rates across the world, biodiversity risks are as serious as climate change risks for our civilization.”

Biodiversity underpins essential services such as food and water provisioning, all of which are vital for sustaining life and supporting global economies. Addressing this crisis requires immediate and ambitious actions from all sectors, including finance.

 

How is the global economy and more specifically the financial sector linked to biodiversity ?

Human life and human activities depend on biodiversity’s ecosystem services which are defined  as “the benefits people obtain from ecosystems”[4], such as crop provisioning, global climate regulation, water flow regulation, recreation-related services, …  For instance, more than 2 billion people rely on wood fuel as their primary energy source, and 70% of drugs used for cancer are either derived from natural sources or are synthetic products inspired by nature [2]. The economic consequences of biodiversity loss are immense, as ecosystems provide essential services that support global economic activities. These services are crucial: they are valued at over $150 trillion annually—double the world’s GDP— [5]. For instance, agriculture, which heavily depends on pollinators, could face catastrophic declines in productivity without healthy ecosystems. Despite their critical importance, ecosystem services are globally in decline as revealed by the 2019 IPBES report [2] .

The decline in biodiversity poses substantial threats to companies and to the overall economy. In its 2024 report, the World Economic Forum ranked biodiversity as the 3^rd risk to the global economy on the long term [6].

Financial institutions are intrinsically linked to biodiversity. Banks, investment funds, and insurance companies financially support and rely on economic sectors such as agriculture, fisheries, and infrastructure, which depend on ecosystem services. At the same time, the financed activities often contribute to biodiversity loss, creating a feedback loop that exacerbates long-term environmental degradation and economical losses. Thus, financial actors have indirect but significant dependencies and impacts on biodiversity.

A survey from the ECB (European Central Bank) [7] reveals that 75% of corporate bank loans in the euro area are granted to companies with a high dependency on at least one ecosystem service. To illustrate the materiality of the financial sector’s impacts, Banque de France’s “Silent Spring” study [8] assesses the French financial system’s biodiversity footprint, showing that it equates to a loss of at least 130,000 km² of pristine nature—a level of impact comparable to the complete artificialization of 24% of metropolitan France. Thus, the financial sector has a big responsibility in the continuous decline of biodiversity.

This interconnectedness exposes the financial sector to significant risks that the TNFD (Taskforce on Nature-related Financial Disclosures) [9] classified into three categories:

• Physical risks : they arise from exposure to the degradation of ecosystem services.
• Transition risks : they arise from the process of transitioning to a nature-positive economy. These risks emerge due to changes in market dynamics, regulatory frameworks, consumer preferences, or technological advancements aimed at addressing nature-related challenges.
• Systemic risks : they arise from the breakdown of the entire system. An example is the financial stability risk which can result from a cascading effect as described by the NGFS(Network for Greening the Financial System, established at the Paris “One Planet Summit” in December 2017) [10], like a “domino effect”.

With big risks come big opportunities. The financial sector has an extraordinary opportunity to drive positive change. By redirecting capital away from environmentally harmful activities and towards nature-positive solutions, financial institutions can help mitigate biodiversity loss while unlocking new opportunities for sustainable growth: for instance, by investing in nature-based solutions. Moreover, the financial sector’s influence on industries and markets positions is a powerful catalyst for aligning economic activities with global biodiversity goals.

In response to the biodiversity crisis, there has been a recent and rapid development of strategic framework at international level (e.g.  Kunming-Montreal Global Biodiversity Framework, or GBF, agreed in December 2022 at the 15th meeting of the Conference of Parties (COP15) to the UN Convention on Biological Diversity) and voluntary frameworks for companies have also developed to address biodiversity as a critical component of their operations. Regulatory frameworks are increasingly pushing financial actors to take responsibility for their impacts on biodiversity. Regulations such as the CSRD in the EU and the “article 29 de la loi Energie Climat” in France set clear expectations for financial actors, regarding the measurement and disclosure of their impacts, their dependencies and their risks related to biodiversity. It also requires them to integrate biodiversity into their strategies.

Therefore, financial actors need to define visionary biodiversity strategies to answer regulatory pressures, to preserve their own sustainability on the long term but more importantly to tackle the biodiversity crisis. Despite the growing awareness of biodiversity issues, the financial sector’s maturity on this topic remains limited [11], with few institutions implementing structured and ambitious strategies.

How Financial Actors Can Develop a Biodiversity Strategy ?

Financial actors need to adopt a strategic approach by developing a comprehensive biodiversity strategy. However, this is a complex process that requires financial institutions to identify their biodiversity-related stakes and define objectives all while ensuring compliance with evolving regulations such as the CSRD and the Article 29 LEC (Article 29 of the French Energy and Climate Law – Loi Énergie-Climat). Despite these challenges, proactive biodiversity strategies can deliver significant benefits, including risk mitigation, the creation of new investment opportunities, and driving alignment with global conservation goals.

Developing a biodiversity strategy for a financial actor requires a structured approach that balances ambition with practicality. BL Evolution, a consulting firm specialized in ecological transitions, has developed a methodology designed to guide its client through this process [12]. This methodology is structured around four key steps :

1. Biodiversity Assessment: To understand the dependencies, impacts, risks and opportunities related to biodiversity and to assess their materiality. This assessment can be qualitative or quantitative using specific tools.
2. Strategy Development: Once the assessment is completed, the financial actor defines its ambitions and sets its objectives. This involves setting measurable targets that align with global frameworks like the Kunming-Montreal GBF. Indicators and biodiversity management systems also need to be defined and implemented.
3. Strategy Position: The third step is to define the appropriate governance, integrate biodiversity risks into the company’s risk strategy and articulate the biodiversity strategy with the CSR strategy and climate strategy.
4. Strategy Promotion:Financial actors should engage in initiatives which allow to validate and enhance the strategy. They should also communicate on their strategy to demonstrate the commitment and progress made. This can help to promote pro-biodiversity initiatives, creating a positive movement within the financial industry.

Each of these steps is designed to be adaptable, enabling financial actors to tailor their strategies to their unique context. This structured approach also ensures that biodiversity becomes an integral part of the activities.

What are the main challenges and the key success factors ?

Challenges and key success factors have been identified through reviews of available literature, case studies, and interviews with experts. They focus on biodiversity assessment and strategy development (steps 1 and 2) as the others steps currently lack data to analyse and comment.

Implementing a biodiversity strategy does not come without challenges. One of the primary difficulties lies in the biodiversity assessment process, which faces limitations related to the current tools available. These tools often lack precision; for instance, the tool ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) relies on sectoral averages that fail to capture the specificity of the activities being assessed. Moreover, many tools have limited adaptability, provide only partial coverage of financial activities, or exhibit a “black box” effect, making their methodologies opaque to users.

The absence of a unified biodiversity metric is another contested issue. While some view this as an obstacle, others argue that metrics diversity is beneficial. Moreover, there is a general lack of maturity in the methods, particularly regarding risk assessments and an insufficient standardization across tools and approaches. Thus, currently, financial actors willing to change suffer from these barriers to perform their biodiversity assessments.

Another major obstacle comes from extra-financial data availability and quality, which are both critical for conducting robust biodiversity assessment: financial actors often face a lack of available data, insufficient precision and granularity, and a scarcity of location-specific information. These shortcomings make it difficult to accurately evaluate biodiversity impact, dependencies and risks. Addressing this challenge requires financial actors to develop the collection of extra-financial data and to implement quality control processes to ensure the reliability of the information measured.

When it comes to strategy development, few additional challenges arise. Many financial actors lack maturity on the topic of biodiversity and fail to prioritize it during meetings or when making strategic decisions. Complex organizational structures can also be a barrier for coordinating efforts, further complicating the development of comprehensive strategies. Moreover, financial institutions often struggle to reconcile financial performance goals with the need to protect the environment.

More broadly, the complexity of biodiversity as a subject, combined with the constraints on resources dedicated to it, hinders the ability of financial actors to tackle these issues effectively and implement biodiversity strategies.

Despite these obstacles, key success factors can guide financial actors in their efforts.

For biodiversity assessment, the choice of the right tool is essential, as is maintaining a focus on tangible and pragmatic results. These assessments should provide actionable insights that directly inform the strategy development process.

For strategy development, success depends on building upon the results of the assessment, prioritizing issues and actions, and focusing more on reducing pressures on biodiversity, before moving on to restoration efforts. Financial actors need to build a true strategic approach and implement it operationally through a detailed action plan and roadmap that clearly outline the steps to be taken. Allocating sufficient human and financial resources is critical to ensure the strategy’s success. Engaging stakeholders plays a central role in achieving effective outcomes. Integrating the biodiversity strategy into existing frameworks and aligning it with the overall business strategy of the financial institution ensures coherence and long-term sustainability.

Beyond these specific actions, it is vital to develop internal knowledge through training and awareness-raising sessions. This builds capacity within the organization and ensures that employees understand the importance of biodiversity and their role in addressing related challenges. Adopting a pragmatic approach, coupled with a commitment to continuous improvement, allows institutions to adapt their strategies as tools and methodologies evolve.

Finally, financial institutions have several levers at their disposal to drive change. Integrating biodiversity considerations into exclusion and investment policies, as well as into risk management frameworks, is a critical step. Supporting the companies they finance or invest in through shareholder engagement and constructive dialogue further amplifies their impact. Collaboration among financial actors, who are inherently interconnected, is another powerful lever, enabling systemic progress. Lastly, grounding strategies in local contexts through territorial anchoring ensures that initiatives are tailored to the specific challenges and opportunities of the regions in which they operate.

Conclusion

The biodiversity crisis stands as one of the most urgent challenges of our time, with profound consequences for both the environment and the global economy. Financial actors have a big responsibility they need to assume and hold a pivotal role in addressing this crisis. By adopting structured, ambitious, and pragmatic biodiversity strategies, they can be powerful drivers of change. While limitations in data, methods, and tools present undeniable challenges, this should not be viewed as a barrier to action as what is currently available is sufficient for providing a solid foundation to begin the transformation with. Waiting is not an option.

Reconciling finance with planetary boundaries and reversing biodiversity loss will require significant and collective efforts. However, it is possible and, above all, essential to our future existence. The ecological transition depends heavily on the proactive commitment of the financial sector. With their engagement and support, this transformation can happen; without them, it will remain out of reach.

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References

[1] WWF, “Living Planet Report 2024 – A System in Peril,” Gland, Switzerland, 2024.

[2] E. S. Brondízio, J. Settele, S. Díaz, and H. T. Ngo, Eds., The global assessment report of the intergovernmental science-policy platform on biodiversity and ecosystem services. Bonn: Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), 2019.

[3] W. Hedrich and V. Kraus, “How financial  institutions can  help solve the  biodiversity crisis,” EY, May 2023.

[4] Millennium Ecosystem Assessment (Program), Ed., Ecosystems and human well-being: synthesis. Washington, DC: Island Press, 2005.

[5] T. Kurth, G. Wübbels, A. Portafaix, A. Meyer zum Felde, and S. Zielcke, “The Biodiversity Crisis Is a Business Crisis,” BCG, Mar. 2021.

[6] World Economic Forum, “The Global Risks Report 2024.” 2024.

[7] S. Boldrini, A. Ceglar, C. Lelli, L. Parisi, and I. Heemskerk, “Living in a World of Disappearing Nature: Physical Risk and the Implications for Financial Stability,” SSRN Journal, 2023, doi: 10.2139/ssrn.4630721.

[8] R. Svartzman et al., “A ‘Silent Spring’ for the Financial System? Exploring Biodiversity-Related Financial Risks in France,” Aug. 2021.

[9] TNFD, “Recommendations of the Taskforce on Nature-related Financial Disclosures,” Sep. 2023. [Online]. Available: https://tnfd.global/publication/recommendations-of-the-taskforce-on-nature-related-financial-disclosures/#publication-content

[10] “Nature-related Financial Risks:  a Conceptual Framework to guide Action by Central Banks and Supervisors,” NGFS, Jul. 2024.

[11] “Panorama de l’engagement des acteurs financiers pour la biodiversité,” ORSE, BL Evolution, Oct. 2024.

[12] BL Evolution, “Construire sa stratégie biodiversité après la COP15 Biodiversité,” Jan. 2023.