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Biodiversity-related Financial Risks - why it matters and how can we measure them?

Author

Listed:
  • Elene Nikuradze

    (Sustainable Finance Division, National Bank of Georgia)

  • Salome Tvalodze

    (Head of Sustainable Finance Division, National Bank of Georgia)

Abstract

The potential consequences of biodiversity and ecosystem services loss can have a significant impact on the stability of economies and financial systems. The following research paper contributes to a growing body of literature that seeks to analyze the connections between biodiversity loss and financial stability. The study focuses on the assessment of biodiversity-related financial risks (BRFR) in Georgia and provides quantitative estimates of the dependencies and impacts of the financial system on biodiversity and ecosystem services. The findings reveal that around 46 percent of Georgian commercial banks' lending portfolio to legal entities could be exposed to biodiversity-related physical risk, being moderately or highly/very highly dependent on one or more ecosystem services. Additionally, around 54 percent of Georgian banks’ business lending portfolio could be exposed to sectors that strongly impact ecosystem services and, thus, may face a high transition risk.

Suggested Citation

  • Elene Nikuradze & Salome Tvalodze, 2023. "Biodiversity-related Financial Risks - why it matters and how can we measure them?," NBG Working Papers 02/2023, National Bank of Georgia.
    • Handle: RePEc:aez:wpaper:2023-02
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    File URL: https://nbg.gov.ge/fm/wp/nbg-wp-2023-02.pdf
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    More about this item

    Keywords

    Biodiversity; Biodiversity-related Financial Risks; Ecosystem Services; ENCORE;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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