Integrating biodiversity into financial decision‐making: Challenges and four principles

Abstract

Many financing decisions continue to exacerbate global biodiversity loss, despite a growing understanding of the economic and financial risks of biodiversity loss. Applying Coase's financial decision-making theory based on cost, revenues, and risks, the article analyzes literature and current developments of biodiversity finance and green finance to evaluate why financial decision-making is incentivized to ignore biodiversity risks and mostly fails to maximize biodiversity conservation or nature-positive finance. Based on the identified gaps, the article develops four principles to integrate biodiversity into financial decision-making: (1) regulation must set limits on nature's exploitation, as finance only values limited aspects of nature as "bankable," while the destruction of other parts are without negative or positive value to the investor;(2) biodiversity-related financial risk evaluation needs focus on local risks due to the local nature of biodiversity impacts and dependencies (in comparison, e.g., to climate finance's global risks); (3) scale biodiversity finance utilizing its secondary benefits, particularly in conjunction with climate finance; (4) biodiversity finance development needs to be co-led and championed by financial decision-makers. This article contributes to the emerging literature on biodiversity finance and green finance for sustainable development with implications for policy makers and standard setters.

Can Green Finance Mitigate China’s Carbon Emissions and Air Pollution? An Analysis of Spatial Spillover and Mediation Pathways

“…Second, the GF development level index was recalculated using the CRITIC-TOPSIS method (see the Supporting Information, S1), and the specific results of the model were estimated accordingly (shown in Columns (3) and ( 4)). Finally, the spatial weight matrix was replaced by the economic distance spatial weight matrix W2, and the results are presented in Columns ( 5) and (6). All the results prove that, although the values of the direct, indirect, and total effects of GF are different, the direction of influence of GF is consistent, which verifies the robustness of the results.…”

“…In theory, GF can significantly reduce carbon emissions and AP. First, GF provides financial support for green projects, including forest and grassland carbon sinks, environmental infrastructure, pollution control, and biodiversity conservation [6]. Second, heavily polluting enterprises must carry out industrial upgrading and transformation owing to strict constraints on financing scales [7] and financing costs [8] caused by GF.…”

Biodiversity management and stock price crash risk

“…Therefore, the objective of this study is to investigate whether financial markets are aware of the biodiversity risks that companies face. In contrast to climate change, which receives significant attention from both investors and the financial research community (Krueger et al, 2020; Stroebel & Wurgler, 2021), biodiversity issues are not an area of importance for corporate reporting (Adler et al, 2018, 2017), firms' financial decisions (Nedopil, 2022), or firms' overall sustainability practices (Schaltegger et al, 2022). This is despite the fact that an estimated 20% of the largest publicly traded companies face material risks associated with biodiversity loss and its impacts (de Carvalho et al, 2022).…”

Dalihan Na Tolu's Indigenous People's Perception Of Islamic Bank

“…In that case, this will influence their choice of using the service. As a community, the indigenous people of Dalihan Na Tolu have considerations over the social and economic impacts of using the financial system (Nedopil 2023). If they see that the financial system contributes positively to local economic development and community welfare, it usually reinforces a positive perception of the financial system.…”