Green Finance Institute and Defra to analyse scale of nature-related financial risks to UK economy
Analysis led by the Green Finance Institute, backed by Defra and the Bank of England, will quantify UK financial and economic risks from exposure to nature degradation.
Analysis led by the Green Finance Institute, backed by Defra and the Bank of England, will quantify UK financial and economic risks from exposure to nature degradation.
New analysis led by the Green Finance Institute, supported by Defra and the Bank of England, and alongside the UN Environment Programme World Conservation Monitoring Centre and the Universities of Oxford and Reading, will estimate the scale of nature-related financial risks to the UK economy for the first time.
In a report to be published later this year, this first-of-its-kind analysis will reveal the materiality of nature-related financial risks and the potential financial impact of biodiversity loss and ecosystem degradation on UK business and financial institutions.
This builds on work carried out by the Banque de France and De Nederlandsche Bank to understand and quantify their portfolio exposure to nature degradation.
Dr Rhian Mari-Thomas OBE, CEO, Green Finance Institute said: “When the costs of neglecting nature are revealed through this analysis, we will be able to see for the first time, the impact this will have on the UK economy, making it clear that conserving and enhancing the natural environment is the only intellectually coherent path to growth."
The UK economic system depends on the natural world with three-quarters of UK FTSE All-Share firms ‘highly dependent’ on natural capital and resources, including water and soil. Examples of highly dependent sectors include agriculture, forestry, utilities, and mining, which risk facing economic disruption as nature is continuously depleted. The UK’s stock of natural capital assets (upon which benefits are based) were estimated in 2019 to be worth £1.2 trillion.
Understanding the potential financial impact of nature-related risks is fundamental to preventing the further destruction of nature, and creating a resilient economy. These new insights will add to the growing recognition that a reallocation of capital to nature-positive investment is needed in order to support a thriving, sustainable environment, and in turn a sustainable economy.
The analysis will build on the UK Government’s support for the Taskforce on Nature-related Financial Disclosures (TNFD). The TNFD is developing a nature-related risk management and disclosure framework, launching in September, which will enable organisations around the world to report and act on evolving nature-related risks in a credible, clear and consistent way.
The Green Finance Institute played a pivotal role in setting up the TNFD and now hosts the global secretariat and convenes the UK National Consultation Group.
David Craig, Co-Chair of the Taskforce on Nature-related Financial Disclosures, said: “As the increasing effects of climate change and negative practices degrade our natural systems, it is critical we understand and mitigate financial risks to UK banks and the economy. Complementary to and building on the work of the Taskforce on Nature-related Financial Disclosures, this analysis will help shed light on the reality that our economic system is dependent on nature.”
Find out more here.
Want to explore how the finance industry can transform current practices, which rewards growth at the expense of biodiversity, to a new model which accurately captures and attaches an economic value to the nature-positive quality? Join the Sustainable Investment Forum Europe that takes place on the 9th May in Paris with Official Event Partner UNEP FI by registering now.
