Biodiversity is the living fabric of our planet. By eroding it at a pace that is unprecedented in human history, we are threatening the ability of Earth to support complex life. In order to avoid these potentially catastrophic outcomes, “transformative changes” (Díaz et al. 2019) are required in our social, economic and financial systems. It is my hope that the 15th meeting of the Conference of the Parties (COP 15) to the Convention on Biological Diversity will contribute to delivering such transformations, with the adoption of an ambitious global biodiversity framework (GBF) for the 2021-2030 period.
While the primary responsibility for triggering such transformative changes to revert biodiversity loss rests, above all in democracies, with accountable governments (e.g. by introducing sector- and location-specific regulations, protecting certain areas and removing harmful subsidies), all players are concerned. In fact, one of the pillars of the post-2020 GBF will consist precisely in mainstreaming biodiversity, which means among other things that all economic agents should more systematically account for biodiversity-related criteria in their decision-making processes.
This could have many implications for the financial community, including central banks and financial supervisors. For financial institutions, this could mean that the assessment of nature-related risks and opportunities increasingly becomes part of financial risk analysis, as promoted by the recently launched private-led Taskforce on Nature-related Financial Disclosures (TNFD). From a financial regulation perspective, this could imply that disclosing on biodiversity-related dependencies, impacts and risks becomes mandatory, as will be the case in France following the article 29 of the 2019 Energy and Climate Act.
For central banks and financial supervisors, the above could mean that they will increasingly have to recognize biodiversity loss as a source of financial risk and to integrate the management of such risks within the remit of their mandates, including for the purpose of financial supervision and monetary policy.
In order to make progress on all these fronts, the development of analytical approaches that can help assess the impacts that financial institutions have on the natural environment through their portfolio allocation will be critical. In this context, tools such as the Global Biodiversity Score (GBS) are invaluable. By enabling financial institutions to better understand how the firms in portfolio impact biodiversity directly and indirectly (i.e. through their value chains) and by translating these impacts into a single metric (the Mean Species Abundance, MSA), such tools can contribute to better inform financial institutions’ decision-making processes in the face of biodiversity loss.
The GBS tool was used, for instance, in a Banque de France Working Paper (Svartzman et al. 2021) to estimate the impacts on terrestrial and freshwater (i.e. not marine) biodiversity of economic activities financed by French financial institutions. The authors found, among others, that the accumulated terrestrial biodiversity footprint of the French financial system is comparable to the loss of at least 130 000 km² of ‘pristine’ nature, which corresponds to the complete artificialization of 24% of the area of metropolitan France.
Of course, the complexity of ecosystems and the uncertainty at stake call for humility and for learning-by-doing approaches, including by comparing the results obtained through different methods and metrics. Moreover, it will be essential to develop approaches that can address biodiversity loss and climate change jointly rather than in silo.
In short, we are only at the beginning of the learning curve when it comes to understanding the complex links between the natural environmental, the economy and the financial system. The authors of this report help us speed up the learning process. The latter will be critical if we are to live up to the urgent ecological challenges ahead of us. We do not have too much time.
Deputy Governor of the Banque de France
A WORD FROM THE CHAIRMAN
1. Key concepts of the GBS and its ecosystems
1.1 Brief history of the Global Biodiversity Score®
1.2 The GBS ecosystem
1.3 Pressures covered by the GBS
1.4 Accounting for stocks and flows of impacts
1.5 Key data companies should report
1.6 Linkages of the GBS with the EU taxonomy
2. Update on methodological developments
2.1 Consolidation approaches and Scopes
2.2 Oil & gas CommoTool
2.4 Impacts combination
2.5 Dependencies to biodiversity
3. Case studies
3.2 Schneider Electric
4.1 How to interpret results by data quality tier provided by the GBS?
4.2 Do I need a GBS licence to use the tool?
4.3 Do I need to be trained to use the GBS?