Banks linked to $ 800 billion in annual destruction of nature, report warns

A new report has warned that the lending activities of public development banks are linked to around $ 800 billion in annual damage to nature and ecosystems, according to a new report that calls on banks to carry out stress tests on risks financial resources linked to nature.

Over 40% of the $ 11.6 billion total assets in PDBs are “heavily dependent on vulnerable ecosystems”

A new report, published Wednesday October 6 by Finance for Biodiversity (F4B), estimates that the value of the potential damage to nature caused by the lending activities of public development banks (PDBs) around the world is around $ 800 billion per year .

The report finds that the value of “endangered nature” currently equals 7 for every dollar invested. PBDs – of which there are more than 450 worldwide – are therefore exposed to a dependence on natural services which are threatened by a series of disruptive trends, including climate change and a growing population.

More than 40% of the $ 11.6 billion in total assets in PDBs are “heavily dependent on vulnerable ecosystems” such as fishermen who depend on declining fish stocks, the report notes.

F4B Ambassador Jeremy Eppel said: “These public banks should fulfill their mandate to foster development in a way that protects the environment. But without adequate measurement and reporting of biodiversity risks, how can their shareholder governments or citizens know that development banks are not damaging the biodiversity and other natural resources they are committed to protecting?

“Many development banks have been slow to assess the risks associated with nature, citing a lack of data on biodiversity and nature. Our published methodology shows that any financial institution can stress test its credible, first-pass, biodiversity-related balance sheet.

PBDs are public financial institutions and the report notes that the G20 is therefore particularly exposed to nature-related risks.

G20 countries have collective holdings in 28 development banks worth nearly $ 7 billion, the report notes. In addition, these countries hold the majority of votes on the boards of seven of the eight largest multilateral development banks. They also have significant stakes in the World Bank (42%), the European Bank for Reconstruction and Development (56%) and the Asian Development Bank (47%).

Separate research has revealed that G20 member countries collectively allocated subsidies exceeding $ 3.3 billion to the oil, coal, gas and fossil fuel-based power generation sectors between 2015 and 2019. , a level incompatible with the Paris Agreement.

It was according to a report by Bloomberg NEF and Bloomberg Philanthropies, titled “Climate Policy Factbook”. The report highlights the fact that direct support for fossil fuels from G20 governments in 2019 exceeded $ 636 billion, a decline of just 10% since the ratification of the Paris Agreement in 2015.

As such, the F4B report calls on PDBs to better integrate natural risks into their planning. The report calls on banks to publish a stress test of the full balance sheet of nature-related financial risks and impacts over the next 12 months.

The report comes just days after the French Development Agency (AFD) confirmed that it would lead a “development finance center” as part of the larger network supporting the working group on financial disclosures related to nature (TNFD).

High-ranking figures from global banking giants including BlackRock, HSBC and Bank of America have been selected to help shape a new global framework from TNFD.

The finalized framework is scheduled for release at the end of 2023. However, TNFD aims to release a draft early next year, which will be tested through an open innovation approach with a selection of market players.

A total of 30 new members will sit on at least one of the five working groups which will each focus on defining nature risks; Data availability; landscape of standards and measures; development of a beta framework; and pilot testing and integration.

More than 100 institutions have also agreed to assist the working group through a wider consultation forum.

Matt Masse

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