UK and banking giants spearhead drive to combat nature-related financial risks
AXA, BNP Paribas, World Bank and others back plans for new Task Force for Nature-related Financial Disclosures framework
The UK and Swiss governments alongside 10 major banks have thrown their weight behind a new initiative announced today aimed at creating a global framework to measure and publicly report the financial risks posed by nature, biodiversity and habitat degradation.
AXA, BNP Paribas, DBS Bank, Rabobank, Standard Chartered, Storebrand, Yes Bank and the World Bank are among the 10 financial institutions backing the drive, which aims to create a Task Force for Nature-related Financial Disclosures (TNFD).
Spearheaded by the UK and Switzerland alongside WWF, Global Canopy, the UN Development Programme (UNDP), and the UN Environment Programme's Finance Initiative (UNEP FI), an informal working group has been established with a view to publishing a TNFD risk reporting framework next year.
The UK government is funding the initiative, and Lord Goldsmith - the UK's Environment Minister for Pacific, International, Climate and Forests - said he was "really pleased" to see efforts to tackle nature-related financial risks gathering pace.
"The rapid loss of nature to our economy poses large, unprecedented risks for the finance sector," he warned. "The new Task Force will complement the reporting recommendations that already exist for climate-related risks, to give investors, lenders and insurers a complete picture of their environmental risks."
The initiative looks set to forge a similar path to that of the global framework for disclosing climate-related risks, known as the Taskforce on Climate-related Financial Disclosures (TCFDs). Initially led by then-Bank of England Governor Mark Carney, among others, the TCFDs have rapidly attracted support since its voluntary guidelines for reporting risks posed to business, investments and loans by physical and transitional climate risks were published in 2017.
More than 1,000 companies and financial institutions, organisations worth a combined market capitalisation of $12tr have so far given their support to the TCFDs and commit to measuring, disclosing and tackling the growing risks posed by the transition to a low carbon economy.
Emine Isciel, head of climate and environment at Norwegian financial service provider Storebrand Asset Management, said it was "vital" for financial institutions to also be able to assess, manage and mitigate nature-related risk within their portfolios.
"It is vital that we have a process like TNFD to resolve the reporting, metrics, and data needs of financial institutions that will enable them to better understand their risks, dependencies and impacts on nature," she said. "It is estimated that ecosystem services provide an estimated $125tr-$140tr annually in global benefits, over 1.5 times global GDP. The deterioration of nature, and society's response to this therefore creates large and material risks for financial institutions."
Midori Paxton, head of ecosystems and biodiversity at UNDP, said the Covid-19 crisis underlined the threat posed by nature-related risks to the global economy.
"We need to safeguard nature to overcome risk to human society and our economy," she said. "To do this, we have to redirect financing away from destroying nature to nature positive. The roles of both private and public financial institutions are pivotal in order to realise this, and nature-related financial disclosure is one critical piece of work that will catalyse shifting of financial flows at scale."
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