For years, sustainable finance has mostly spoken of carbon: net-zero targets, green bonds, transition plans. Meanwhile, another risk has gone from quiet to critical biodiversity loss.
Nature isn’t just nice-to-have; it’s the economy’s hidden infrastructure. Over half of global GDP leans on healthy ecosystems from forests that regulate water to pollinators that keep food systems running (World Economic Forum, Global Risks Report 2023). Yet we’re drawing down those systems faster than they can recover. The World Bank puts the value of ecosystem services in the trillions every year, but that value rarely shows up on balance sheets.
That’s starting to change. Investors and policymakers are beginning to treat biodiversity and natural capital as measurable, financially material assets. Frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) and the 2022 Kunming–Montreal Global Biodiversity Framework are laying the groundwork for a new paradigm: protecting nature as a core part of protecting value. So the question isn’t whether finance can afford to care about nature, it’s whether it can afford not to.
Every economic system is underpinned by a natural system. Forests, soils, oceans and species comprise the living infrastructure that keeps societies and markets active. Biodiversity creates the conditions for growth, yet it rarely features in economic indicators. Forests sequester carbon and retain rainfall, wetlands purify water and mitigate flooding, oceans stabilise the climate and support fisheries, and even the smallest pollinators maintain global food systems. These processes operate silently; without them, every industry that depends on them would collapse.
The OECD has warned that the loss of nature threatens economic growth and financial stability, a risk that is still on the periphery of corporate planning. The World Bank has estimated that the collapse of key ecosystems could reduce global GDP by over two percent each year. In practice, biodiversity loss increases production costs, suppresses trade flows and heightens exposure to shocks such as droughts or natural disasters. The impacts extend far beyond agriculture and tourism, affecting raw material prices, insurance market stability and credit prices. The economy is not defined by its relationship to nature; rather, nature is one of the most valuable assets it possesses.
Financial institutions are beginning to recognise this interdependence. Deteriorating ecosystems pose physical risks when supply chains break down or diminished resources affect productivity. There are also regulatory risks, as governments introduce stricter conservation policies and investors demand greater transparency. Frameworks such as the Taskforce on Nature-related Financial Disclosures help firms identify how their activities depend on and impact natural systems. In short, the “ignorance is bliss” approach is no longer viable: companies that do not take action may face increasingly unfavourable financing conditions and reputational damage.
Biodiversity loss is not just an environmental issue for the future, but a financial issue for the present. Embracing the value of nature and translating this understanding into effective decision-making is not just about rehabilitating the planet, but also about enabling the resilience of the foundations of our economy.
Over the past decade, the financial world has learned to speak ESG, measuring carbon footprints, tracking supply-chain emissions, and publishing glossy sustainability reports. But as biodiversity rises on the global agenda, investors are realizing that ESG, as it stands, isn’t enough. Climate metrics capture only part of the picture. A company can be low-carbon and still devastate ecosystems through deforestation, water depletion, or habitat loss. That’s where the idea of “nature-positive” investing comes in an evolution of ESG that aims not just to reduce harm, but to restore the natural systems we depend on. It’s about moving from doing less damage to creating more natural value.
The Taskforce on Nature-related Financial Disclosures (TNFD) is making that shift real. Like TCFD did for climate, it gives companies and investors a clear playbook to spot, manage, and report how they depend on and impact nature. Early movers such as HSBC Asset Management and BNP Paribas are already baking biodiversity metrics into their risk models and investment decisions.
Governments are also moving. The EU Taxonomy for Sustainable Activities now includes criteria for biodiversity protection, and global coalitions such as Nature Action 100 are pushing large corporations to align with the Kunming–Montreal Global Biodiversity Framework.
The momentum is clear: nature is becoming a measurable financial factor. And as data, disclosure, and investor demand improve, “nature-positive” could soon become the new baseline just as “net zero” did for climate.
The shift won’t happen overnight. Measuring biodiversity is far more complex than counting tonnes of CO₂. But the direction of travel is unmistakable: the future of responsible investing lies not just in avoiding environmental damage, but in active regeneration.
The idea that nature can be considered an asset class represents a fundamental shift in financial thinking. For decades, forests, oceans and soils were considered resources to be harvested rather than assets to be preserved. However, every ecosystem provides measurable benefits, such as storing carbon, filtering water, protecting shorelines and supporting livelihoods. When an ecosystem loses these functions, the economy suffers. Treating nature as a form of capital recognises that conservation is a prerequisite for long-term progress.
Natural capital is defined as the stock of natural resources that provides a continuous flow of goods and services to people and businesses. Economists use a variety of approaches to quantify its value. Some assess the cost of replacing an ecosystem service with a human-made substitute, while others calculate the value of avoided costs due to conserved land.
Mangroves, for instance, provide natural erosion control and water security at a lower cost than engineered systems. Attributing a monetary value to these functions bridges the gap between ecology and finance, revealing something that has been overlooked.
The financial sector is currently investigating practical mechanisms for incorporating nature into investment portfolios. Biodiversity-linked bonds and loans aim to align financial and ecological performance. New biodiversity credit markets are emerging to fund restoration projects alongside carbon markets. Nature-based solutions, such as reforestation, regenerative agriculture and coral reef restoration, are increasingly recognised as investments that mitigate risk and generate stable returns. Investors have the opportunity to invest in measurable impact alongside economic opportunity. However, protecting biodiversity as an asset class requires caution. Measuring biodiversity is fraught with challenges, and data is still lacking. Similarly, ownership and equity issues are highly sensitive: who benefits when nature becomes an asset, and who is excluded? Without governance and ethics, financial innovations could exacerbate inequity or become platforms for greenwashing. Ultimately, if nature is to be an asset class, financial tools must protect it, not exploit it. We want to protect nature as a legitimate asset, not just to put a price on every tree or river, but to ensure that the value of natural systems is reflected in the economy.
If biodiversity is to become a real part of finance, it can’t stay on the sidelines of sustainability teams; it has to move into the heart of risk management and capital allocation. That shift is already under way, as banks, asset managers and insurers are now starting to recognise that nature risk is financial risk.
Major institutions are leading the charge. BNP Paribas, for instance, now integrates biodiversity criteria into leading policies for sectors such as agriculture and mining. AXA Investment Managers has launched a “Natural Capital” strategy that channels funds into companies helping to restore ecosystems. Even large pension funds, from Norges Bank Investment Management to the UK’s Aviva Investors, are assessing their portfolios through a biodiversity lens asking not only what they emit, but what they depend on.
Regulators are catching up fast. The European Central Bank has warned that biodiversity loss poses systemic risks to the financial system, comparable to climate change. The Network for Greening the Financial System (NGFS), a coalition of central banks and supervisors, is now developing models to assess how ecosystem collapse could affect macroeconomic stability.
Policy frameworks are also converging. The Kunming–Montreal Global Biodiversity Framework (2022) sets a global target to align all financial flows with nature-positive outcomes by 2030. Meanwhile, disclosure requirements like the TNFD are helping institutions understand and report their exposure to nature-related risks.
These are early steps, but they matter. Financial institutions hold the levers that can redirect trillions towards regeneration from sustainable agriculture and reforestation to blue-economy projects and ecosystem restoration. When the cost of destroying nature is finally reflected in balance sheets, protecting it will no longer be charity, it will be good business.
While the increased focus on nature-positive finance is a step forward, it also raises some concerns. When ecosystems are given a financial value, this can stimulate investment and innovation. However, in doing so, we risk treating nature as something we trade rather than something we care for. The key question is whether conservation can be supported by financial markets without becoming distorted. If biodiversity is valued only for its financial returns, its many other roles as a shared public good could be overlooked.
Therefore, any nature-related financial agenda must incorporate ethical responsibility. Many of the world’s richest ecosystems are managed by Indigenous and local communities who have cared for them for generations. Any financial model that excludes local communities from decision-making processes is unfair and ineffective. Nature-positive finance must ensure that local communities participate, that organisations share benefits equitably, and that traditional knowledge is respected. Only then will economic incentives align with social and ecological integrity.
There is a valid concern about greenwashing here, given that biodiversity is difficult to quantify. Businesses may either inflate their claims or rely on weak metrics. To prevent this, science and independent accountability are essential for preserving trust. Without robust verification methods and clear accountability, the potential of sustainable finance could be quickly lost.
There are operational risks, too. Ecosystem services are constantly changing and can be influenced by climate shocks and changes in land use. Additionality, permanence and leakage mean it is impossible to know for certain whether changes will be long-lasting. Once again, monitoring is key, as is a pragmatic recognition of what finance can and cannot do.
Ultimately, finance can accelerate the restoration of ecosystems and build resilience, but only when guided by integrity. The goal is not to own or commodify nature, but to embed an unwavering respect for the limits of our ecosystems into the principles of economic decision-making. Only then will capital truly serve the people and planet that sustain it.
The story of sustainable finance is shifting from counting carbon to counting life. What started as a push to decarbonize is becoming something bigger: finance that works with nature, not against it. In this model, capital funds regeneration. Investors are realizing that protecting biodiversity isn’t just the right thing to do; it’s a long-term resilience play. Healthy ecosystems stabilize food systems, lower disaster risk, and unlock new markets, from green infrastructure to nature-based carbon removal. As natural assets show up on balance sheets, the logic of growth changes: preservation becomes profitability.
Getting there will take courage and collaboration. Financial institutions, governments and communities need to build markets that reward restoration over extraction and real transparency over box-ticking. Measuring nature is hard; pretending it doesn’t matter is far costlier.
The future of finance won’t be defined by how efficiently we exploit resources, but by how effectively we sustain them. As economics and ecology converge, one simple truth comes into focus: investing in nature is investing in our shared future, the only economy built to last, a living one.
Written by Simone Chiarion and Aurora Fontana
References
World Economic Forum. 2023. Global Risks Report 2023. https://www.weforum.org/publications/global-risks-report-2023
Taskforce on Nature-related Financial Disclosures (TNFD). 2023. TNFD releases fourth and final beta framework. https://tnfd.global/tnfd-releases-fourth-final-beta-framework-v0-4
Convention on Biological Diversity. Kunming-Montreal Global Biodiversity Framework (GBF). https://www.cbd.int/gbf
TNFD. Taskforce on Nature-related Financial Disclosures – Home. https://tnfd.global
Nature Action 100. Supporting greater corporate ambition and action on tackling nature and biodiversity loss. https://www.natureaction100.org/
European Central Bank. ECB – Home. https://www.ecb.europa.eu/home/html/index.en.html
Network for Greening the Financial System (NGFS). NGFS – Home. https://www.ngfs.net/en
BNP Paribas Group. Banque BNP Paribas | La banque d’un monde qui change. https://group.bnpparibas
AXA Investment Managers. AXA IM Corporate. https://www.axa-im.com
OECD (2023). Biodiversity, Natural Capital and the Economy. OECD Publishing, Paris. https://www.oecd.org/environment/resources/biodiversity-natural-capital-and-the-economy-1a1ae114-en.htm
World Bank (2023). The Economic Case for Nature: A Global Earth-Economy Model to Assess Development Policy Pathways. https://www.worldbank.org/en/topic/environment/publication/the-economic-case-for-nature
Taskforce on Nature-related Financial Disclosures (2023). Recommendations of the TNFD. https://tnfd.global/recommendations
European Central Bank (2024). Economic and Financial Impacts of Nature Degradation and Biodiversity Loss.ECB Economic Bulletin, Issue 4/2024. https://www.ecb.europa.eu/pub/economic-bulletin/articles/2024/html/ecb.ebart202406_87ac450e.en.html02~ae
BloombergNEF (2022). One Trillion to Protect Biodiversity Is Cheaper Than the Cost of Inaction. https://about.bnef.com/insights/finance/1-trillion-to-protect-biodiversity-is-cheaper-than-the-cost-of-inaction
Earth.Org (2023). Explainer: The TNFD and Nature-Related Disclosures. https://earth.org/spotlight-a-deep-dive-into-tnfd-and-nature-related-disclosures/
