Bonn/Frankfurt: The loss of biodiversity is increasingly becoming a financial risk for banks and companies. At the same time, regulatory pressure on financial institutions to systematically record nature-related risks is growing. A new publication by the Global Nature Fund (GNF) and the Association for Environmental Management and Sustainability in Financial Institutions (VfU) shows how biodiversity can be specifically taken into account in lending.
The publication “Biodiversity in lending – A practice-oriented approach to the identification and application of KPIs in three selected sectors” was produced as part of the Enterprise Biodiversity (UBi) project. It is aimed at banks that want to systematically integrate biodiversity risks and opportunities into their core business. For the first time, the guide presents a practical approach to developing biodiversity-related key performance indicators (KPIs) for the lending business.
Loss of nature hits bank balance sheets
Studies by the European Central Bank (ECB) show that the majority of companies financed by banks in the eurozone are heavily dependent on ecosystem services. At the same time, the Kunming-Montréal Global Biodiversity Framework adopted as part of the Convention on Biological Diversity calls for greater transparency regarding nature-related risks in financial portfolios.
“Biodiversity is no longer just a sustainability issue – it is financially relevant for financial institutions and the companies they finance. It affects credit risks, business models and the future viability of entire industries,” explains Andrea Reuter, Project Manager at GNF. “Banks have enormous leverage here – through their financing decisions.”
Concrete KPIs instead of abstract targets
The publication focuses on the lending business as a central management tool. Specific, applicable KPIs were developed for three sectors that are particularly relevant to biodiversity:
– Agriculture and food industry
– Real estate
– Chemistry
The approach developed identifies significant biodiversity-related impacts in these sectors and classifies them according to key drivers of biodiversity loss. The basis is the so-called state-pressure-response model. At the same time, the key figures are linked to the mitigation hierarchy – i.e. the principle of “prevention before reduction before restoration”.
The proposed KPIs are suitable for sustainability-linked loans (SLLs), i.e. loans whose interest conditions are linked to previously defined sustainability targets. They can also be used for portfolio analyses, sector guidelines or transformation guidelines.
“Many institutions know that they have to deal with biodiversity – but there is a lack of practicable instruments,” says Patrick Weltin, Sustainable Finance Officer at VfU. “This is exactly where we come in: with measurable, verifiable and industry-relevant key figures.”
Anchoring biodiversity in the financial system
The publication is intended as a basis for discussion and a source of inspiration. It shows how banks can gradually develop practicable performance indicators despite limited data availability and changing regulation.
Despite regulatory adjustments, sustainable finance remains a central component of the European transformation path. Alongside the climate issue, biodiversity is increasingly coming into focus as the second major ecological dimension of financial market transformation.
“Those who integrate biodiversity into their credit processes at an early stage not only reduce risks, but also position themselves strategically in the transformation process,” emphasizes Weltin.
The publication “Biodiversity in Lending” and the associated KPI collection are now available on the following website: https://www.unternehmen-biologische-vielfalt.de/ressourcen/downloads/#down-finanzen
About “Unternehmen Biologische Vielfalt – UBi”
The aim of the “Unternehmen Biologische Vielfalt – UBi” project is to support the implementation of the National Biodiversity Strategy (NBS) and to activate companies for the topic of biodiversity. The project is funded by the Federal Agency for Nature Conservation (BfN) as part of the Federal Program on Biological Diversity with funds from the Federal Ministry for the Environment, Climate Protection, Nature Conservation and Nuclear Safety (BMUKN).
The UBi project is being carried out by five project partners: Biodiversity in Good Company, Bodensee-Stiftung, DIHK Service GmbH, Global Nature Fund and Collaborating Center on Sustainable Consumption and Production (CSCP).
Further information on the project is available online at unternehmen-biologische-vielfalt.de.
Press contact Company Biological Diversity – UBi
Collaborating Center on Sustainable Consumption and Production gGmbH (CSCP)
Katrin Hüttepohl, Communication Manager
Phone: +49 202 459 58 – 17
E-mail: info@unternehmen-biologische-vielfalt.de
About the Global Nature Fund
The Global Nature Fund (GNF) is an international foundation registered in Germany with many years of experience in the implementation of water projects. The GNF is committed to sustainable global development within planetary boundaries through worldwide nature and environmental protection projects. The aim is to promote a healthy planet and intact biodiversity as the basis of life for people and nature. The GNF focuses on nature conservation, climate protection, water protection and business & sustainability. www.globalnature.org
Contact Global Nature Fund
Global Nature Fund
Andrea Reuter, Project Manager Enterprise & Biodiversity
Phone: +49 (0)228 1848694 14
E-mail: reuter@globalnature.org
About the VfU
Founded in 1995, the VfU is a network of sustainable finance professionals from over 70 financial companies (banks, insurance companies, investment companies and corresponding associations). The central concern of the VfU is the promotion and dissemination of sustainable finance, understood – in accordance with the definition of the UN Environment Programme (UNEP) – as “a comprehensive approach to managing the economic, social and environmental dimensions of finance to enable substantial progress towards sustainable development” (UNEP, 2017). https://vfu.de/
Contact VfU
VfU
Patrick Weltin, Sustainable Finance Officer
Phone: +49 (0)151 51303542
E-mail: weltin@vfu.de
