International Stocktake of Regulatory and Supervisory Initiatives on Nature-Related Financial Risks

The Financial Stability Board has published a stocktake of its member financial authorities' initiatives related to the identification and assessment of nature-related financial risks. The stocktake, which will be delivered to the July 25-26 meeting of G20 Finance Ministers and Central Bank Governors, describes both supervisory and regulatory initiatives, and also central banks' and supervisors' analytical work on whether and how nature degradation, including loss of biodiversity, is a financial risk.

The findings include:

• Financial authorities are at different stages of evaluating the relevance of biodiversity loss and other nature-related risks as a financial risk, with approaches varying, in part due to differing mandates.
• Financial authorities categorize nature-related risks into the same two types of risks typically used in climate-related financial risk analysis: physical and transition risks. However, analytical work faces major data and modelling challenges. Authorities' work to date indicates that financial institutions face large exposures to physical risk via their investments and financing activities, but that analytical work needs to be further developed to better translate estimates of financial exposures into measures of risk. Authorities recognize the strong connections between climate risk and nature, and that more needs to be done to develop a more holistic approach that considers interdependencies between climate- and nature-related financial risks.
• Regulatory and supervisory work is also at an early stage globally, and approaches differ considerably across jurisdictions and institutions. The stocktake highlights examples of approaches taken by international organizations and authorities. There is a general recognition that more expertise is needed in the supervisory community, in central banks, and in the private sector to understand and, where needed, address nature-related risks.

Return to main website.