FS providers 'must work together to protect planet'

The financial sector risks damage to itself and its customers if it doesn't do enough to protect the planet, according to a report from EY, Microsoft and Earth Knowledge.

As a core part of global economies, banks, investment firms and insurers have a “great responsibility” to ensure they support activities that are “nature positive” and which protect the air, land, water and animals, says the report.

The “Waking up to Nature – the biodiversity imperative in financial services” report estimates the world’s largest investment banks provided $2.6 trillion of loans and underwriting services linked to the “destruction of nature in 2019 alone”.

A “failure to act at pace and scale to rectify this” will create a “material financial risk for the financial services industry”. There will be “market, credit, reputational, regulatory, supply chain, operational, employee engagement and underwriting risks” if nothing changes, the report says.

It is said as much as half of global GDP ($44 trillion) is dependent on ecosystems and 13 of the 18 sectors that comprise the FTSE 100 - representing $1.6 trillion in market capitalisation - are associated with production processes that have high or very high material dependence on nature.

Despite the current situation though, the report points to significant and untapped financial opportunities for the financial services sector around conservation, sustainability and biodiversity.

By supporting nature’s resiliency, productivity and adaptability, the financial sector can take advantage of an estimated $800 billion a year biodiversity finance gap. This investment will need to triple in real terms by 2030 and increase four-fold by 2050 if the world is to meet its climate change, biodiversity and land degradation targets.

Sandy Trust, who leads the UK financial services sustainable finance consulting team at EY, said: “Ecosystems across the world are on life support, driven to the brink of extinction by short-term decision-making and investments. But the banks, insurers and investment funds which have helped create this biodiversity crisis are also best placed to create a solution.

“They can ensure that their investments, capital allocation, loans and insurance support ‘nature positive’ activities by companies across the world.”

Julia Armstrong D’Agnese, CEO of Earth Knowledge, added: “Our digital tools, along with today’s research paper, create a foundation on which companies can start to build an effective response to some of the biggest challenges mankind has ever seen.”

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