Finance News

From bees to balancing act: BIODIVERSITY LOSS SHAKES UP FINANCIAL SECTOR AND HITS HOME IN ZUIDAS

BIODIVERSITY encompasses every Over the last fifty years there’s been a 68% decline in global species populations1, and according to the most recent count, ecosystems in one in five countries are on the brink of collapse2 . Apart from the societal impacts, this entails a financial and economic

catastrophe. The European Commission has estimated the economic value of wildlife diversity at as much as 40 trillion euros a year – that’s more than half of global GDP. The fragile relationship between the ecology and economics is starting to hit home for all of us. conceivable form of life on earth, including variations within species, between species and between ecosystems. CAUSES of biodiversity loss are: changes in land use, overexploitation, pollution, introduction of exotic

In recent months some twenty bee hotels were set up around the district as part of the Zuidas Amsterdam Development Office’s Building the Future project. But even as bees got buzzing outside, inside the offices buzzing started as well – about the financial sector and the potential impacts of biodiversity loss. What’s going on?

species and climate change. THE FINANCIAL RISKS OF BIODIVERSITY LOSS

The Dutch national bank (DNB) and the PBL Netherlands Environmental Assessment Agency reported last summer that Dutch banks, insurance companies and pension funds have a combined 510 billion euros in outstanding loans to organizations with high or very high ecosystem dependency3 . This capital – constituting a third of their portfolios – is exposed to direct risk as a result of biodiversity loss.

Physical risk The report distinguishes between three categories of risk. The first is physical risk, which affects companies whose continuity would be threatened by loss

CIRCL This information is provided in association with Circl. Circl was created by ABN AMRO as a place to share knowledge about circularity and provide clients with sound, reliable advice. As a circular platform in Zuidas, Circl is also where the forces powering society, business and finance work together to take action for a sustainable world.

of biodiversity. These physical risks arise from dependency on what are known as ecosystem services derived from wildlife. A good example is insects, which pollinate roughly three-quarters of all global crops and represent an economic value of 200500 billion dollars annually4 .

Transition risk The second risk category is transition risk. This risk applies to organizations that are unable to adapt their operational activities to changing statutory rules, or to do so fast enough. The problems with nitrogen in the Netherlands count as a good example that we’re witnessing now, but EU legislation is also coming our way. The European Commission has mapped out a biodiversity strategy for 2030, which sets ambitious targets – including protection for 30% of EU land and seas – and that will have implications for numerous industries, like the mandatory 50% reduction in pesticide use in farming. Organizations that are able to adapt in time will run the lowest risk.

Reputation risk The third and final risk category is reputation risk. Going forward, and especially as financial (and other) institutions are expected to be more transparent, there will be increasing risks for any involvement in activities such as deforestation and pollution.

FINANCE FOR BIODIVERSITY PLEDGE The good news is that de financial sector is starting to take first steps. A few months ago, 26 banks and asset managers around the world (representing a combined 3,000 billion dollars in managed assets) signed the Finance for Biodiversity Pledge. The aim is shared development and application of uniform methods to measure and report biodiversity losses. DNB has also advocated for this and is advising financial institutions to step up integration of biodiversity risks in their strategies and processes.

THE NEED FOR SYSTEMIC CHANGE Nice as it is to see all those bee hotels going up in Zuidas, the real task facing us entails a systemic change. It encompasses cooperation between authorities, industry, financial services and science - not only to mitigate the risks, but above all to create a positive future for all creatures on this planet. That’s a worthwhile sentiment to ponder next time we pass a buzzing bee hotel.

LEILA JASPERS

CELINE PESSERS

MORE INFORMATION Read the extended version of this article on the website of Circl. (Circl.nl) If you’re seeing the effects of biodiversity loss in your day to day work, or want to join in discussing the issues raised in this article, please get in touch. Leila Jaspers and Céline Pessers work at ABN AMRO’s Sustainable Finance Desk and analyse how biodiversity loss affects the bank’s commercial clients.

Leila.jaspers@nl.abnamro.com Celine.pessers@nl.abnamro.com

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4 5 WWF Living Planet Report 2020 The Guardian: Nations at risk of ecosystem Persbericht: DNB en PBL: Biodiversiteitsverlies leidt tot financiële risico’s Factsheet Business Case Biodiversity Finance for biodiversity