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Biodiversity and Finance : A Preliminary Assessment of Physical Risks for the BankingSector in Emerging Markets

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  • Calice,Pietro
  • Diaz Kalan,Federico Alfonso
  • Dunz,Nepomuk Max Ferdinand
  • Miguel Liriano,Faruk

Abstract

Economic activity depends on a flourishing biodiversity and intact environment through theprovision of ecosystem services. The depletion of these services poses physical risks for the financial sector. Thispaper attempts to measure the potential exposure of the banking systems in 20 emerging markets to nature lossthrough their lending portfolio. The results show that banks in emerging markets allocate around half of their creditportfolio to firms whose business processes are highly or very highly dependent on one or more ecosystem services. Theresults also provide initial and preliminary evidence that points to a negative correlation between country incomelevel and dependency on ecosystem services. Accounting for indirect dependencies on ecosystem services via supplychains and trade could change this observed relationship, however. Furthermore, the highest dependencies on ecosystemservices across countries tend to be on climate regulation and flood and storm protection, indicating theinterconnectedness of climate change and nature loss.

Suggested Citation

  • Calice,Pietro & Diaz Kalan,Federico Alfonso & Dunz,Nepomuk Max Ferdinand & Miguel Liriano,Faruk, 2023. "Biodiversity and Finance : A Preliminary Assessment of Physical Risks for the BankingSector in Emerging Markets," Policy Research Working Paper Series 10432, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10432
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    References listed on IDEAS

    as
    1. Julien CALAS & Etienne ESPAGNE & Antoine GODIN & Julie MAURIN, 2022. "Global biodiversity scenarios: what do they tell us for Biodiversity-Related Financial Risks?," Working Paper df49be12-6355-45d6-84e3-4, Agence française de développement.
    2. Julien CALAS & Antoine GODIN & Julie MAURIN (AFD) & and Etienne ESPAGNE (World Bank), 2022. "Global biodiversity scenarios: what do they tell us for biodiversity-related socioeconomic impacts?," Working Paper 1a39419b-ef1d-4b82-a7be-d, Agence française de développement.
    3. Calice,Pietro & Miguel Liriano,Faruk, 2021. "Climate-Related and Environmental Risks for the Banking Sector in Latin America and the Caribbean : A Preliminary Assessment," Policy Research Working Paper Series 9694, The World Bank.
    4. Romain Svartzman & Etienne Espagne & Julien Gauthey & Paul Hadji-Lazaro & Mathilde Salin & Thomas Allen & Joshua Berger & Julien Calas & Antoine Godin & Antoine Vallier, 2021. "A Silent Spring for the Financial System? Exploring Biodiversity-Related Financial Risks in France," Working papers 826, Banque de France.
    5. World Bank & Bank Negara Malaysia (BNM), 2022. "An Exploration of Nature-Related Financial Risks in Malaysia," World Bank Publications - Reports 37314, The World Bank Group.
    6. David Leclère & Michael Obersteiner & Mike Barrett & Stuart H. M. Butchart & Abhishek Chaudhary & Adriana Palma & Fabrice A. J. DeClerck & Moreno Marco & Jonathan C. Doelman & Martina Dürauer & Robin , 2020. "Bending the curve of terrestrial biodiversity needs an integrated strategy," Nature, Nature, vol. 585(7826), pages 551-556, September.
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