Biodiversity loss is an overlooked risk to the financial system and central banks need to build their understanding of the issue and establish supervisory expectations for commercial banks to tackle it, a report found on Thursday.

 

While climate change has shot up the agenda, the related issue of lost biodiversity has been neglected even though it too can have a major economic impact, a report by the Network for Greening the Financial System (NGFS) and the International Network for Sustainable Financial Policy Insights showed.

 

"We are eroding this biodiversity at a pace that is severely damaging the natural ecosystems that provide us with food, water and clean air," said Ravi Menon, the head of the NGFS, a group that include the world's top central banks. "This in turn could pose significant risks to economic, financial and social stability."

 

"Central banks and bank supervisors should therefore build capacity to understand the issue and assess the risk related to biodiversity loss," the NGFS said.

 

They should also "explore options" for supervisory expectations related to banks' governance, risk management, strategies, disclosure and financial conduct in relation to biodiversity-related financial risks. (Reuters)