Global financial flows to take greater account of ecological risks

Financial institutions in developing countries should pay better attention to ecological diversity when financing economic activities. It also wants to support Switzerland in this, as it confirmed at CBD COP-15.

The State Secretariat for Economic Affairs (SECO) is supporting the "Nature Finance" project with five million Swiss francs. The project is linked to the 15th Conference on Biological Diversity (CBD COP-15), which has just ended. Within the framework of this conference, Switzerland and other countries committed themselves to counteracting the loss of biological diversity. To this end, a total of 30% of the global area is to be made biodiverse by 2030. ("30 by 30").

Ecological risks are to be assessed

The project will be implemented in SECO's priority countries Peru, Colombia, South Africa and Indonesia. These countries have great ecological diversity and are therefore well suited as pilot countries. The project aims to ensure that financial institutions take greater account of environmental risks and opportunities in their financing decisions. The aim is to increase the flow of funds into sustainable sectors and companies. To this end, instruments and methods for assessing environmental risks are being further developed, and financial institutions are being trained to apply them. Global standards are then to be established on this basis. SECO is supporting the project, which is being implemented by international partners, with CHF 5 million over the next four years.

Biodiversity loss threatens the global economy

The loss of natural capital - such as minerals, soils, biodiversity - has accelerated at an unprecedented rate over the past decade. According to a study by the World Economic Forum, half of the world's gross domestic product (GDP), about $44 trillion, is highly or moderately dependent on nature. Its loss can therefore lead to consequential impacts on the global economy. Rapid and comprehensive action is essential to halt the decline of natural capital and create new incentives for biodiversity conservation.

Financial institutions play a key role

The financial sector has a key role to play here. Through their financing and investment decisions, financial institutions influence which companies receive capital and how their economic activities affect nature. The loss of natural capital also poses a risk for financial institutions. They run the risk of losing their investments if they finance companies that depend on natural capital.

Most financial institutions still lack methods and knowledge to include natural capital in their credit analyses. SECO wants to help close this gap with the "Nature Finance" project.