Kedward, Katie;
Ryan-Collins, Josh;
Chenet, Hugues;
(2022)
Biodiversity loss and climate change interactions: financial stability implications for central banks and financial supervisors.
Climate Policy
10.1080/14693062.2022.2107475.
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Abstract
Financial risks related to climate change and biodiversity loss are currently being addressed in a largely siloed manner. Neglecting their interconnections, however, may lead to ‘blind spots’ and misestimations of systemic financial risk, potentially undermining progress on both climate finance policy and emerging policy on biodiversity-related financial risks (BRFR). In particular, the ‘risk measurement–based’ approach dominating climate finance policy, which is now being taken up to address BRFR, is poorly equipped to address the radical uncertainty that characterises both types of risks. Furthermore, many BRFR may materalise over a more immediate horizon than climate risks. In this paper, we examine how central banks and financial supervisors are approaching the topic of BRFR in relation to climate-related financial risk. We argue that policymakers should focus upon the broader concept of systemic environmental-financial risks to account for the interactions and trade-offs between both domains of biodiversity and climate change. Instead of seeking evidence of financial materiality before acting, focusing on how the financial system is actively facilitating direct drivers of environmental damage offers a way for financial policymakers to assess potential sources of such risks on the basis of information available today. In turn, policy interventions should aim to reduce harmful flows of finance that may lead to the crossing of dangerous ecological tipping points.
| Type: | Article |
|---|---|
| Title: | Biodiversity loss and climate change interactions: financial stability implications for central banks and financial supervisors |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1080/14693062.2022.2107475 |
| Publisher version: | https://doi.org/10.1080/14693062.2022.2107475 |
| Language: | English |
| Additional information: | © 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons. org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way |
| Keywords: | Sustainable finance, financial risk, climate change, biodiversity loss, central banks, tipping points |
| UCL classification: | UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Inst for Innovation and Public Purpose UCL > Provost and Vice Provost Offices > UCL BEAMS UCL |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/10154221 |
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