Link: Investors grapple with complexities of biodiversity | Financial Times (ft.com)
Date: October 26, 2022
Media: FINANCIAL TIMES.
What happened?
“Irreversible consequences for the environment, humankind, and economic activity, and a permanent destruction of natural capital.” That is how the World Economic Forum characterises biodiversity loss in its 2022 Global Risks Report. The main reason is because humans are growing more crops, using more water and cutting down forests.
Who and where it affects?
It affects the biodiversity of planet earth. This mean that it affects humanity, natural capital, animals, the enviroment, etc. About 1 million animal and plant species are at risk of extinction, according to the UN.
What sort of public or private institution are involved?
In addition to TNFD’s (Taskforce for Nature-related Financial Disclosure) framework, other initiatives are under way to set targets and provide guidance for business and investors. Among them is a global biodiversity framework (GBF) that the UN is developing. Meanwhile, almost 100 investors with collective assets totalling €14tn have signed the Finance for Biodiversity pledge, which was launched in 2020. Signatories commit to five steps: to share knowledge; to engage with companies; to assess impact; to set targets; and to report publicly on the biodiversity impact of their investments.
Why is it important for banking and finances?
It is important for finances because not taking into account the effect of the loss of biodiversity can mean a significant risk in the portfolios, that is, they may not be setting the appropriate prices, which could mean a great loss. In short, it is a possible financial impact that is difficult to quantify.
What do you think will be the consequences in the foreseeable future?
The consequences are undefined, but as we said in question 4, it could mean a significant risk to portfolios, as they may not be priced appropriately, which could mean a big loss. In addition, if investors and companies engage as set out in the targets, it would help climate change.
SDG: 14. Underwater life, 15. Terrestrial ecosystem life.