Biodiversity, the next challenge for financial institutions? A scoping study to assess exposure of financial institutions to biodiversity business risks and identifying options for business opportunities.
31 / 08 / 2007, Eldis Biodiversity
This study assesses what evidence there is of the biodiversity business case from a financial sector’s perspective and what types of biodiversity business risks financial institutions can be exposed to. It also addresses what opportunities are available for financial institutions to address and mitigate these risks, and what biodiversity business opportunities they can provide.
The study examines to what extent biodiversity has been addressed by business operations of financial institutions so far:
on a sector-wide level, biodiversity is hardly recognised at present
some banks have started to go beyond the Equator Principles for project finance to develop sector-specific guidelines, and the banks apply these new guidelines to an increasing number of credit products and some investment products
the most noteworthy development for biodiversity for the insurance sector is new legislation in the EU as of 30 April 2007 to hold operators liable for damage to water resources, soil, fauna, flora and natural habitats and at making the polluters pay whenever damage cannot be avoided
The study highlights a number of existing tools which financial institutions can use to integrate biodiversity into their risk management procedures:
a number of NGOs have developed (spatial) tools which can help toidentify important biodiversity areas
tools have been developed for the private sector that factor-in biodiversity, which can also be used by FIs, both in their own risk management or as indicators for their clients to assess their ability to address biodiversity
The study concludes that despite the fact that there is greater interest in biodiversity in the financial sector, a huge effort is needed to build the biodiversity business case. Recommendations that can contribute to this include:
continue to build the biodiversity business case for financial institutions
diversify communication & raise awareness of the materiality of biodiversity to financial institutions
focus on the entire financial sector.