New research in the UK has found that damage to the natural environment could lead to a 12% reduction in GDP in the years ahead. This stark insight highlights the economic stakes and underscores the increasing relevance of nature-related risks in sectors such as life and health insurance.
The 2024 Climate Risk Landscape Report by UNEP FI sheds light on an essential truth: our journey to a net-zero future is intrinsically linked to our efforts to restore nature. This report provides an overview of the climate risk landscape, offering financial institutions a range of tools to navigate the complexities of climate-related physical and transitional risks, ensuring they’re prepared for what lies ahead.
Understanding the synergy between climate and nature is crucial. Earlier this year, UNEP FI and UNEP World Conservation Monitoring Centre (UNEP-WCMC), released the “Accountability for Nature” report. This report aligns methodological and conceptual frameworks for nature, aiming to clear the fog for the private sector on nature-related issues. It highlights the remarkable convergence of climate and nature strategies, promising even greater clarity in 2024 as new guidance emerges.
In the past, it was pointed out that there is a gap in nature-related data for financial decision-making. We’ve come a long way since then. Tools like the ENCORE platform and UNEP’s Nature Risk Profile are revolutionizing how we understand nature’s impact on finance, turning abstract risks into concrete impacts by focusing on critical areas like freshwater and soil health. Initiatives like the Net-Zero Data Public Utility are integrating nature data into climate risk assessments, empowering financial institutions with the knowledge to make informed decisions.
Countries rich in biodiversity often in emerging market economies, home to much of the world’s biodiversity, faces unique challenges. The scarcity of data infrastructure in these biodiversity-rich areas necessitates innovative data collection methods, such as remote sensing and e-DNA, to ensure no region is left behind. Unlike the global strategies often applied to climate change, combating nature loss demands a localized approach. Each ecosystem has its unique vulnerabilities, requiring tailored strategies that reflect the specific needs and conditions of these environments.
Nature-related risk assessments are still in their infancy compared to their climate counterparts. The diversity of metrics needed to gauge nature’s health demands a more nuanced approach to risk assessment. Financial institutions must therefore delve deeper, developing sophisticated methodologies that can integrate these varied metrics into their decision-making processes.
As we face the dual challenges of climate change and biodiversity loss, financial institutions must lead the way. Equipped with advanced tools and comprehensive knowledge, they can drive significant change by implementing nature-positive strategies and investing in innovative technologies. By taking decisive action today, we can pave the way towards a sustainable, net-zero future. The time to act is now.
UNEP FI actively supports financial institutions in implementing the Principles for Responsible Banking (PRB) and the Principles for Sustainable Insurance (PSI) by providing essential tools and frameworks. These resources help institutions integrate nature-related risks and opportunities into their operations and decision-making processes. By leveraging UNEP FI’s guidance, financial institutions can better assess and manage the complex interplay between climate and nature, thereby driving meaningful progress towards sustainability goals.
About the Risk Centre
The Risk Centre is a comprehensive hub for financial risk professionals, addressing the complex sustainability risks of climate change, environmental degradation, and social issues. It offers UNEP FI members cutting-edge tools, technical skill-building workshops, and expert sessions to enhance risk assessment and disclosure capabilities. Building on UNEP FI’s respected climate and nature risk programs, the Centre provides centralized resources, access to leading experts, and a vast library of publications. These resources support the implementation of sustainability frameworks like the Principles for Responsible Banking and the Principles for Sustainable Insurance, all included in the annual membership fee. Read more about how the UNEP FI risk centre is pioneering holistic sustainability risk management for financial institutions.