Embedded in Nature: Nature-Related Economic and Financial Risks and Policy Considerations
Staff Climate Notes, October 3, 2024
Source details
- Canonical URL
- Embedded in Nature: Nature-Related Economic and Financial Risks and Policy Considerations
Other formats
Bibliographic details
- Authors: Charlotte Gardes-Landolfini, William Oman, Jamie Fraser, Mariza Montes de Oca Leon, Bella Yao
- Published: October 3, 2024
- Series: Staff Climate Notes
- DOI: https://doi.org/10.5089/9798400288548.066
Executive summary
- The economy is embedded in, and dependent on, nature; economic activity is degrading nature at an unprecedented pace.
- Interacting with climate change, nature loss and transformation generates significant threats to the global economy and financial system.
- Work on the implications of nature-related risks for macroeconomic and financial sector policies remains at an early stage.
- This note seeks to contribute to this emerging policy space in three main ways:
- It proposes a conceptual framework for understanding nature-related risks by mapping out macroeconomic transmission channels, emphasizing their impact on the economy and financial systems through “double materiality.”
- It conducts empirical analysis, finding that nearly 38 percent of bank loans of the 100 largest global banks are to harmful subsidies-dependent sectors and 44 percent are exposed to conservation areas under the Global Biodiversity Framework, and that industries most exposed to nature degradation are not well prepared to manage these risks.
- It discusses takeaways for macroeconomic and financial sector policies and frameworks.
Key empirical findings
- Nearly 38 percent of bank loans of the 100 largest global banks are to harmful subsidies-dependent sectors.
- 44 percent of bank loans of the 100 largest global banks are exposed to conservation areas under the Global Biodiversity Framework.
- Industries most exposed to nature degradation are not well prepared to manage these risks (as identified in the empirical analysis).
Conceptual contributions
- Presents a framework mapping macroeconomic transmission channels of nature-related risks.
- Emphasizes “double materiality” — impacts on the economy and how economic activity affects nature — as central to understanding nature-related economic and financial risks.
Policy relevance
- The note highlights significant threats to the global economy and financial system arising from the interaction of nature loss and climate change.
- It examines implications for macroeconomic and financial sector policies and frameworks and provides discussion of takeaways for policymakers (the note “discusses takeaways for macroeconomic and financial sector policies and frameworks”).
Publication and metadata
- Authors: Charlotte Gardes-Landolfini, William Oman, Jamie Fraser, Mariza Montes de Oca Leon, Bella Yao
- Date: October 3, 2024
- Series: Staff Climate Note No 2024/002
- Issue: 002
- Volume: 2024
- Pages: 75
- DOI: https://doi.org/10.5089/9798400288548.066
- Stock No: CLNEA2024002
- ISBN: 9798400288548
- ISSN: 2789-0600
- Subject: Climate change; Environment; Environmental policy; Financial sector policy; Financial sector policy and analysis; Natural resources
- Keywords: banks, biodiversity conservation, biodiversity hotspot, biodiversity loss, Climate change, ecosystem service, ecosystem services, environment, Environmental policy, financial regulation, Financial sector policy, financial stability, financial supervision, Global, IMF staff climate note, macroeconomic policies, macroeconomics, Minsky moment, Natural resources, nature, nature-related risks, planetary boundaries
Embedded in Nature: Nature-Related Economic and Financial Risks and Policy Considerations, Staff Climate Notes 2024, 002.
Content in this bundle
- Embedded in Nature: Nature-Related Economic and Financial Risks and Policy Considerations