Nature risk, including physical, transition and systemic risk as a result of biodiversity loss, is a material risk for our global financial system. The ability or inability of our financial systems to respond to nature-related risks can have considerable macro-economic implications, as well as having a direct impact on human well-being and quality of life.
The increasing level of understanding of such risk has prompted the financial sector to act through a wide spectrum of initiatives, including the recent call to action urging central banks and financial supervisors to manage climate and biodiversity related financial risks as part of their primary mandates.
However, this landscape is complex and ever expanding , and to those new to the field, the breadth of initiatives can feel overwhelming. Therefore, this article aims to help you navigate through this complexity.
Overview of existing nature-based initiatives
The table below provides an overview of the existing nature-based initiatives that are either market-led or public-led. Initiatives are classified as supporting impact measurement, or are a new/improved standard or framework to guide measurement and action.
A guide to the acronyms above:
United Nations Environment Programme Finance Initiative (UNEP FI)
United Nations Principles for Responsible Banking (UN PRB)
Partnership for Biodiversity Accounting Financials (PBAF)
Taskforce on Nature-related Financial Disclosures (TNFD)
Aligning Accounting Approaches for Nature (Align)
Science Based Targets Network (SBTN)
Global Reporting Initiative (GRI)
European Financial Reporting Advisory Group (EFRAG)
From the forest floor — deep dive into the PBAF
The Partnership for Biodiversity Accounting Financials (PBAF) and the Taskforce on Nature-related Financial Disclosures (TNFD) are two initiatives helping to align financial flows with the conservation and sustainable use of biodiversity, whereas the Aligning Accounting Approaches for Nature (Align project) helps support the measurement aspect of PBAF and TNFD. They are distinct, but complimentary, and help the sector to harmonise its approach to identification and management of nature related risks.
The Partnership for Biodiversity Accounting Financials (PBAF)
The PBAF can be considered to be the same as the Partnership for Climate Accounting Financials (PCAF), but with a focus on biodiversity. PBAF and PCAF are industry-led, with PBAF bringing together 40 financial institutions from 11 countries, including banks, investors and insurance members. Both PBAF and PCAF use pressure-impact models, based on the best available science, to understand drivers of climate change (PCAF) and biodiversity loss (PBAF). This provides investors with insights of the interdependencies between different drivers of these issues.
The PBAF ultimately aims to standardise and mainstream biodiversity data and impact measurement through the creation of the PBAF standard. This standard defines what information is required in order to accurately assess the impact of financial institutions on biodiversity. In the past few months, the PBAF Standard v2022 has been released, focussing mainly on biodiversity impact assessment in the financial sector. Building on the output of cross-sector working groups, the PBAF v2023 (to be released next year) will also include guidance on:
- The assessment of dependencies
- Loans and investments in the agricultural sector
- The interaction with existing and upcoming regulation (for example the EU Taxonomy and the Sustainable Financial Disclosure Regulation (SFRD))
- Nature-positive impact
Interested in joining this work?
Get in touch with one of our contacts:
- UNEP FI, Romie Goedicke, Project and Technical Manager Nature, UNEP FI
- PBAF, Wijnand Broer, Program Manager PBAF
- TNFD, Emily McKenzie, Technical Director
- Align, Sharon Brooks, Align Advisory Board Co-chair