How can businesses respond to the biodiversity crisis

Health, wellbeing and prosperity depend on biodiversity. Its decline poses a systemic risk for businesses, society and the economy.

Biodiversity-related risks share several characteristics with climate change. Both are far-reaching in breadth and magnitude, and contain tipping points beyond which it may be impossible to recover. They are uncertain yet also foreseeable, with an impact that will be determined by our short-term actions.

This paper, written by EY and Microsoft in collaboration with Earth Knowledge, addresses how the loss of nature translates into losses for financial services, ways to understand nature-related risks, how exposed financial services are to the risks, and why there is an urgent need for them to act.

Download the report: Waking up to nature – the biodiversity imperative in financial services

“In the last 50 years, we have lost 50% of our ecosystem. Regulators, customers and investors are increasingly seeing that this is also affecting businesses, which will have a large impact going forward through new regulations and new technologies that help us limit this impact on nature,” says Hanne Thornam, Head of Climate Change and Sustainability Services, EY Nordics.

While the return on investment is far from assured, a failure to act at pace and scale will come at a cost. With biosphere integrity having crossed beyond the zone of uncertainty for planetary boundaries, biodiversity loss is a material financial risk for the financial services industry. Financial services cannot continue to behave as if it is isolated from nature, because it provides ecosystem services that have significant economic value. Natural wellbeing is closely interlinked with human and economic wellbeing.

Financial services can play a part by strongly including biodiversity and nature-positive outcomes in sustainable finance strategies. Firms can start the evaluation of biodiversity risks in lending, insurance and investment portfolios and work with stakeholders to prioritize and overcome these risks. They can begin to explore and develop data-driven solutions and draw appropriate parallels to efforts to date on climate change. Using its influence, the financial service sector can be a driver for robust regulations that protect ecosystems as well as help achieve global sustainable development goals.