Financial issues and the reduction of subsidies harmful to nature were at the heart of international negotiations which ended on Tuesday in Geneva, ahead of COP15 biodiversity in China.
Nick Robins participated in a report published recently by the network of central banks NGFS (Network of Central Banks and Supervisors for Greening the Financial System).
Q: What is the potential impact of biodiversity loss on economies?
A: Biodiversity loss threatens financial stability.
People are beginning to realize that biodiversity loss and nature degradation is an important issue on its own, but also deeply interconnected with climate change.
It's important to start thinking about how these two threats converge, if only because some of the drivers are the same - land use change and deforestation - but also because healthy ecosystems are really important to be resilient to shocks.
Q: How should central banks and financial institutions change their approach?
A: For central banks, the approach is caution.
Being careful means looking at the evidence and acting in time to avoid irreversible risks that you cannot manage.
We need to invest in climate and nature, otherwise, at some point, ecosystem services will be disrupted.
The key idea is that we are undermining the resource base of our prosperity.
Many people assume that soils, drinking water, oceans are inexhaustible, but (...) they depend on the protection of biodiversity.
Q: What are the structural problems in the financial system that are destroying nature?
A: A series of systemic failures - political, market, institutional - lead to this degradation.
With climate change and environmental issues, we need to ensure that the products we buy from markets are based on a sustainable use of nature, with prices reflecting ecological reality.
Gross Domestic Product (GDP) is not always a useful measure because it is not rooted in the physical realities of our planet.
Q: What are financial institutions looking at in the UN process for a new agreement protecting biodiversity?
A: The subject is rising in political, scientific, conservation terms and we all hope that this year, a big step will be taken in terms of the response of governments with this global framework for biodiversity.
All this makes biodiversity a priority financial issue.
We have a negotiating text, with different objectives, one of which emphasizes the need to align financial flows with what they call biodiversity values.
(...) We also need companies and the financial sector to measure, report and communicate their impacts and their dependence on biodiversity.
A third point concerns impacts.
How to ensure that financial institutions allocate capital, loans, invest with a positive impact?
We also need to ensure that financial institutions reduce their negative impacts on biodiversity.
Q: What have central banks learned from climate risk analysis?
A: The NGFS Central Bank Network's commitment to dealing with nature's financial risks is historic.
With the work done over the last five years on climate risks, I think the response of the financial system to biodiversity loss can be faster.
Biodiversity is clearly a very complicated issue.
But we have a toolbox, we are not starting from scratch.
© 2022 AFP